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High Court of Australia |
MALLET v. MALLET [1984] HCA 21; (1984) 156 CLR 605
Matrimonial Causes
High Court of Australia
Gibbs C.J.(1), Mason(2), Wilson(3), Deane(4) and Dawson(5) JJ.
CATCHWORDS
Matrimonial Causes - Proceedings with respect to the property of the parties - Interests - Alteration - Judicail discretion - Principles - Whether equality of division to be presumed - Function of appellate court on appeal from exercise of discretion - Valuation of assets for division in matrimonial proceedings - Shares in proprietary company - Family Law Act 1975 (Cth),s. 79.
HEARING
1983, October 14; 1984, April 10. 10:4:1984DECISION
GIBBS C.J. This appeal is brought by special leave from a judgment of the Full Court of the Family Court which varied an order made by a judge of that Court (Bell J.) on an application by a divorced wife under s.79 of the Family Law Act 1975 (Cth), as amended, for an order altering the interests of the parties to the marriage in the property which they owned either jointly or individually. The appeal raises for consideration the principles which govern the manner in which a judge at first instance should exercise his discretion in deciding upon an application under s.79, and the manner in which an appellate court should proceed in determining an appeal from a judgment made on such an application. The amendments made to the Family Law Act by the Family Law Amendment Act 1983 were not in force at any material time, although to say that is not to suggest that the result would have been different under the legislation as it now stands.2. The Family Law Act was passed at a time when great changes had occurred, and were continuing to occur, in the attitudes of many members of society to marriage and divorce, but when it was (as it is now) difficult, if not impossible, to say that any one set of values or ideas is commonly accepted, or approved by a majority of the members of society. Conflicting opinions continue to be strongly held as to the nature of marriage, the economic consequences of divorce and the effect, if any, that should be given to the fault or misconduct of a party when a court is making the financial adjustments that divorce entails. It is not surprising that given this diversity of opinions the Parliament did not require the power conferred by s.79 to be exercised in accordance with fixed rules. On the contrary, it has conferred on the court a very wide discretion to make such order as it thinks fit when it is satisfied that it is just and equitable that an order should be made (see sub-ss.1 and 2 of s.79) although there are some broad principles to which the court is required to give effect, and some circumstances which it is required to take into account. A principle which the court is expressly required to apply, so far as practicable, is that it will make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them: s.81. A second principle, which is implicit in many of the sections contained in Part VIII of the Family Law Act, is that the parties to a marriage are equal in status. The circumstances which the court is specifically required to take into account may be regarded as falling within two main classes. First, the court must consider the extent to which either party has in the past contributed to the acquisition, conservation or improvement of the property; the contribution need not have been financial, but may include "any contribution made in the capacity of homemaker or parent": see s.79(4)(a) and (b). Secondly, the court must consider all those circumstances which relate to the present and future needs, and to the means, resources and earning capacity, actual and potential, of the parties: see s.79(4)(d) and s.75(2)(a)-(m); these circumstances include "the need to protect the position of a woman who wishes only to continue her role as a wife and mother" (s.75(2)(l)) and "the effect of any proposed order upon the earning capacity of either party": see s.79(4)(c). In addition, the court may take into account "any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account": s.75(2)(o) and s.79(4)(d). It is not necessary in the present case to consider whether this includes the fault or misconduct of either party. The Act does not indicate the relative weight that should be given to different circumstances, or how a conflict between opposing considerations should be resolved - those things are left to the court's discretion, which must, of course, be exercised judicially.
3. It is proper, and indeed often necessary, for the Family Court, in dealing with the circumstances of a particular case, to discuss the weight which it considers should be given, in that case, to one factor rather than another. It is understandable that practitioners, desirous of finding rules, or even formulae, which may assist them in advising their clients as to the possible outcome of litigation, should treat the remarks of the court in such cases as expressing binding principles, and that judges, seeking certainty, or consistency, should sometimes do so. Decisions in particular cases of that kind can, however, do no more than provide a guide; they cannot put fetters on the discretionary power which the Parliament has left largely unfettered. It is necessary for the court, in each case, after having had regard to the matters which the Act requires it to consider, to do what is just and equitable in all the circumstances of the particular case.
4. In some cases, the Family Court, rightly starting with the proposition that the contribution made by the wife as a homemaker and parent should be recognized "not in a token way but in a substantial way" (Rolfe and Rolfe (1979) FLC 90-629, at p.78,273) has gone on to conclude that, at least in ordinary circumstances, such a contribution "ought to be equally equated to the efforts of the husband who is thus freed to pursue his direct outside employment." (Wardman and Hudson (1978) FLC 90-466, at p.77,385; and see Rolfe and Rolfe, at p.78,273 and Crawford and Crawford (1979) FLC 90-647, at pp.78,410-1). Even if it were assumed that the contribution made by one party to the home and family should be regarded as of equal value to the financial contribution made by the other, it would not necessarily follow that an equal division of property should be made by the order of the court (see Albany and Albany (1980) FLC 90-905, at pp.75,720-1). However, it has been said there is a "general rule ... that where the parties have been married for a substantial time, and there have been contributions by each of the parties, there should be an equal division": Racine and Hemmett (1982) FLC 91-277, at p.77,574. In other judgments, the matter has been stated more circumspectly; it has been said that "after a long marriage, where both parties have worked together and built up such an asset as the matrimonial home by their joint efforts, even if the efforts of one were that of homemaker alone, equality should be considered the normal starting point": Zdravkovic and Zdravkovic (1982) FLC 91-220, at p.77,207 and see Potthoff and Potthoff (1978) FLC 90-475, at p.77,446; Aroney and Aroney (1979) FLC 90-709, at p.78,789; Dupont and Dupont (No. 3) (1981) FLC 91-103, at p.76,765 and Pickard and Pickard (1981) FLC 91-034, at p.76,314. However the Parliament has not provided, expressly or by implication, that the contribution of one party as a homemaker or parent and the financial contribution made by the other party are deemed to be equal, or that there should, on divorce, either generally, or in certain circumstances, be an equal division of property, or that equality of division should be the normal or proper starting point for the exercise of the court's discretion. Even to say that in some circumstances equality should be the normal starting point is to require the courts to act on a presumption which is unauthorized by the legislation. The respective values of the contributions made by the parties must depend entirely on the facts of the case and the nature of the final order made by the court must result from a proper exercise of the wide discretionary power whose nature I have discussed, unfettered by the application of supposed rules for which the Family Law Act provides no warrant.
5. When an appeal is brought from an order of a judge made under s.79 the Full Court of the Family Court must decide the appeal in accordance with the established principles which apply when an appellate court is hearing an appeal against an exercise of discretion. I have referred, in De Winter v. De Winter (1979) 23 ALR 211, at pp 216-7, to the well known authorities which state those principles.
6. In the present case, the marriage had lasted for some twenty-nine years
before its dissolution in 1979. Bell J. found that "the
parties originally
suffered financial difficulties, but as a result of the hard work of the
husband (the present appellant) and his
ability, as well as to an extent the
assistance of the wife to the husband, the parties by 1974 found themselves in
a much better
financial position, and from about 1974 until the date of
separation, both the parties lived at a very high standard." At the trial
much of the evidence and argument concerned the value of the property of the
parties, including the value of shares in a family company.
Each party held
twenty-six ordinary shares in that company and a further forty-eight shares
were held by or on trust for the three
children of the marriage (all of whom
are adult and self-supporting). In 1973 the articles of association of the
company were amended
so that the shares held by the husband carried 76% of the
voting power in the company and the husband was appointed governing director.
It was apparently suggested at the trial that this action taken in 1973 was
invalid, since one of the children was then under age,
and Bell J. said that
he did not take into consideration the resolution passed in 1973. However, he
did proceed on the footing that
the husband would "control the destiny of (the
family company) completely", once the husband had purchased the wife's shares
under
an order which Bell J. proposed to make. According to the judgment of
the Full Court, counsel for the husband "conceded" at the commencement
of the
appeal to that court that all shares should be valued as if they had equal
rights. It is not clear why this should have been
regarded as a concession,
since the fact that the husband had complete control of the company would, if
anything, increase the value
of his shares, although it might at the same time
depreciate the value of the wife's shares. However, it was submitted to the
Full
Court that it was a disadvantage to the wife to value the shares as if
all had equal rights. This submission was rejected. The Full
Court said:
"This group of companies was a family business
built up over the years by the parties and of
latter years particularly by the husband. The
group was asset rich but cash poor and it had been
so controlled that ultimately there would be
capital gains. There was very little likelihood
that the husband would in all of the circumstances
wind up the group or, unless he was forced to
dispose of assets to obtain cash, any part of the
group."
7. After considering the evidence, Bell J. held that the value of the
property of the parties was as follows:
Property jointly owned $240,662He concluded that the wife should receive one-half of the value of the jointly owned property and twenty per cent of the value of the property owned solely by the husband and that she should transfer her interest in the shares in the family company to her husband on payment of $86,996. He accordingly ordered that the wife should, on payment to her by the husband of $260,000, transfer to him her interest in the jointly owned property and her twenty-six shares in the family company. He further ordered that the husband should indemnify the wife for all or any indebtedness she might have to the family company and to the Commonwealth Savings Bank and the Commonwealth Trading Bank. It is now agreed that the value of the indemnity against the indebtedness to the banks was about $25,000; the value of the indemnity against the indebtedness to the family company was not satisfactorily proved.
Property owned solely by the 261,077
husband (excluding his
26 shares)
Property owned solely by the 5,700
wife (excluding her
26 shares)
Value of 26 shares owned by the 86,996
husband
Value of 26 shares owned by the 86,996
wife
________
$681,431
8. On appeal the Full Court said that none of the findings made by Bell J. as to values were attacked except his valuation of the shares. Their Honours analysed the way in which Bell J. made his valuation of the shares and concluded that it could not be said that he was in error in rejecting the valuations made by Messrs Bottomer and Millard, the two valuers called by the wife, or in accepting the method of valuation proposed by a third valuer, Mr Downing. They went on to say that "the method of assessment of the value of shares adopted by (Bell J.) in this case should be upheld", and they apparently also held that it had not been shown that the method had been wrongly applied, for they said, "we find his Honour to be correct in his approach to the share valuation problem". In their final statement of the value of the property of the parties, they attributed to the shares the value which Bell J. had placed upon them.
9. However, their Honours indicated that they had some difficulty in
following the reasons which led Bell J. to allow the wife
only twenty per
cent of the value of the assets owned separately by the husband when he
allowed her fifty per cent of the value of
the jointly owned property. They
said:
"It appears on the facts that these assets inThey concluded that "a just and equitable result would be to adopt the 50% figure overall". They varied the order of Bell J. by substituting $335,000 for $260,000.
the husband's name alone were acquired in exactly
the same manner as were the jointly owned assets,
namely from the profits, both income and capital
gains, of the businesses conducted by the parties
over the years. His Honour in this assessment
appears to have given no real weight to the way in
which the assets of the parties were built up and
the financial contribution made by the wife
particularly in the earlier period, her
contribution as a wife over 29 years of
cohabitation and her care of the three children of
the marriage. There is also to be considered the
far greater potential as to financial improvement
of the husband compared to that of the wife. It
should not be lost sight of that, although the
shares are not of high value at the present time,
the potential of the company structure is high and
in particular as to non-taxable capital growth.
In addressing his attention to the principal
assets separately rather than taking an overall
view of all of the relevant matters, while it
cannot be said that his approach was wrong, his
Honour in our view failed to give proper weight to
the matters referred to in the previous paragraph
and little if any weight to the relative future
financial potential of the parties. In our view
the more appropriate and safer approach is to make
an overall assessment."
10. The fact that Bell J. allowed the wife fifty per cent of the value of the
jointly owned property and only twenty per cent of
the value of the property
owned solely by the husband in itself provided no reason for the Full Court to
interfere with the order
made at first instance. Bell J. was quite entitled
to take the view that the wife should retain the half interest to which she
was
legally entitled in the absence of any order made under s.79, and to
decide what proportion of the remaining assets she should take
in addition.
He explained the course which he took in relation
to the husband's solely
owned property as follows:
"I am clearly of the opinion that the acquisitionThe decision to allow the wife twenty per cent was within the bounds of the judge's discretion. It seems that one consideration that prompted the Full Court to interfere with it was the notion that an equal division of assets was a convenient starting point. Their Honours said:
of these properties was brought about as a result
of the husband's association with the (family)
companies and the properties were acquired through
his own efforts in the management of the companies
and in an endeavour to increase the profitability
of the companies. Notwithstanding this, I consider
that the wife is entitled to a reasonable
percentage of the value of such properties. She
has throughout her married life acted as a hostess,
reared children and generally assisted the husband
by allowing him to have more time to devote his
obvious energetic endeavours in the management of
the companies. I do not think however that I
should find she is entitled to anything more than
20% of the value of these amounts ..."
"It is appropriate to point out again that there isAs I have already indicated, it is not right for a judge to start with the assumption that the property should be divided between the parties in any pre-determined proportions.
no 'principle' in family law that equality is
equity. In the first instance with respect to
sections such as Sections 72 and 79 where the court
is given a discretion it cannot lay down principles
for to do so would be to fetter its own discretion.
In the second place the cases which refer to
equality do not lay it down as a principle but
merely as a convenient starting point where the
matter at issue involves a long marriage."
11. However, it appears from an analysis of the passage from the judgment of
the Full Court which I have earlier cited, and from
later statements in the
judgment, that their Honours further considered that Bell J. had not given
sufficient weight to a number
of factors which they considered relevant to the
decision. Those factors were:
1) the fact that the assets in the husband's name wereauthorities that an appellate court may interfere with an exercise of discretion when it reaches the clear conclusion that no weight, or no sufficient weight, has been given to relevant considerations was explained by Latham C.J. in Lovell v. Lovell [1950] HCA 52; (1950) 81 CLR 513, at p 519, as follows:
acquired in exactly the same manner as the jointly
owned assets, namely from the profits and capital
gains of the businesses conducted by the parties;
2) the financial contribution made by the wife
particularly in the earlier period, her
contribution as a wife over twenty-nine years of
cohabitation and her care of the three children of
the marriage;
3) the fact that the wife had to spend $24,000 to
maintain herself and the youngest child during the
period after the separation;
4) the far greater potential for financial improvement
of the husband compared with that of the wife,
having particular regard to the potential of the
family company for non-taxable capital growth, and
to the fact that the wife would not be able to
share in the benefits arising from that growth.
The meaning of the statement which is found in the
"If completely irrelevant considerations have beenIn Gronow v. Gronow [1979] HCA 63; (1979) 144 CLR 513, the principle was similarly expressed by Stephen J., at pp 519-520, and Aickin J., at pp.534, 537-8; see also per Mason and Wilson JJ., at p.525. In the present case it was clear that Bell J. did not overlook any of the factors to which the Full Court referred. He said nothing to indicate that he did not give them adequate weight. The conclusion reached by the Full Court that he had failed to give them proper weight can only be explained by the fact that their Honours disagreed with his conclusion. However the mere fact that they themselves would have made a more liberal provision for the wife was no justification for substituting their own exercise of discretion for that of the primary judge.
taken into account and they have really affected
the decision the case is clear, and the order,
though made in the exercise of a discretion, should
be set aside. Similarly, if relevant
considerations are plainly ignored the same result
follows. But when the appellate tribunal is
considering questions of weight it should not
regard itself as being in the same position as the
learned trial judge. In the absence of exclusion
of relevant considerations or the admission of
irrelevant considerations an appellate tribunal
should not set aside an order made in the exercise
of a judicial discretion ... unless the failure to
give adequate weight to relevant considerations
really amounts to a failure to exercise the
discretion actually entrusted to the court."
(See also per Kitto J., at pp.533-4.)
12. There is however one further aspect of the matter that requires mention.
As has been shown, although the Full Court accepted
the correctness of the
valuation placed on the shares by Bell J., their Honours were impressed by the
potential for growth of the
assets of the company. In relation to these
questions, their Honours dealt with some particular grounds stated in the
wife's Notice
of Appeal to that court. It is sufficient to refer to grounds
1(b), (c) and (d) which were as follows:
"(b) His Honour wrongly adopted, as the exclusiveAs to par.(b) their Honours said that "we hold the firm view that it was open to his Honour to adopt the method he did and it cannot be said that in that he erred." As to par.(c) their Honours said that both Bell J. and the valuer, Mr Downing, had taken the matters mentioned into account and they pointed out that Bell J. had increased Mr Downing's valuation because he believed that insufficient weight had been given in that valuation to the assets. However they added: "Future capital growth was taken into account in the share valuation but was given no or no sufficient weight in the overall assessment." It is difficult to understand what was meant by this statement or by an earlier observation made by their Honours that "In our view the more appropriate and safer approach is to make an overall assessment." It is plain that Bell J., after discussing the assets separately, considered their total value in reaching his conclusion. If the future capital growth of the assets of the company was properly taken into account in the valuation of the shares, it is impossible to say that it was not properly taken into account in an overall assessment which was based on the sum of the value of all the property, including the shares. As to par.(d), the Full Court said that it was not necessary for Bell J. to calculate or assess with precision the value of the assets of the company, that he did not "guess" at a capital rate but made a proper assessment on the information put before him, that there was no basis on which a Full Court could upset his assessment and that his approach was well within his discretion and his result not unreasonable.
method of determining the said financial
resources, a method of valuing the
respondent's present shareholdings in the
(family company) by capitalisation of that
company's predicted future profits.
(c) His Honour, in adopting such method, made no
or no proper allowance for the following :-
(i) The said company and its subsidiaries had
become the repository of family earnings,
savings and investments over many years;
and
(ii) In consequence the said company and its
subsidiaries had very substantial assets
which in value (and especially in terms
of predicted future capital growth) far
exceeded what would be reasonable in a
commercial trading company which was not
a 'family holding company'; and
(iii)The future prospects of the said company
both as to income (and the amount thereof
under the control of the respondent) and
as to capital growth.
(d) (i) His Honour failed to determine accurately
or with sufficient accuracy the value of
the assets of the said company and its
subsidiaries which were assumed by
Mr Downing (the respondent's accountant
and share valuer). His Honour found to
the effect that they were closer to
$700,000.00 than $560,000.00 (the latter
figure being that assumed by Mr Downing);
and
(ii) His Honour made no sufficient use of his
limited finding referred to in the
preceding paragraph hereof in that he
merely 'guessed' that Mr Downing's
capitalisation rate should be increased
by 5 percent; and
(iii)The result of his Honour's findings was
that the appellant's shareholdings were
ordered to be transferred to the
respondent for $86,996.00. The appellant
holds 26 percent of the shares in (the
family company). On his Honour's
findings as to the assets of that company
the appellant has been ordered to
transfer 26 percent of the shares for
13 percent of the value of the assets
backing for such shares."
13. It might at first sight seem surprising that the shares in a company whose assets are valued at close to $700,000 should have a total value of only $334,600, the value which the judgment of Bell J. would place on them. In determining the value of shares it is necessary to take into account both the earning power of the company and the value of its capital assets: Commissioner of Succession Duties (S.A.) v. Executor Trustee and Agency Co. of South Australia Limited [1947] HCA 10; (1947) 74 CLR 358, at p 362 and see Gregory v. Federal Commissioner of Taxation [1971] HCA 2; (1971) 123 CLR 547, at pp 564-570. In many cases the real value of the shares will depend more on the former than on the latter item. Where, however, the company is merely a convenient means of holding the assets, and the person who owns the shareholding in question is able to put the company into liquidation at will, the real value of the shares will be likely to be the amount which the holder would receive if the company were voluntarily wound up. And since the purpose for which a valuation is made may affect the court's attitude (Commissioner of Succession Duties (S.A.) v. Executor Trustee and Agency Co. of South Australia Limited, at pp 373-4), there is much to be said for the view that the court will be more ready to value shares on a liquidation basis in a case such as the present than in a revenue or even in a compensation case.
14. However, in my opinion, it is not possible to sustain the judgment of the Full Court on the basis that the shares were valued by Bell J. at far too low an amount. The Full Court repeatedly affirmed both the method and the result of Bell J.'s valuation. To enable us to decide whether a valuation on a liquidation basis would be appropriate, and if so what result such a valuation would produce, it would be necessary to determine a number of questions of fact upon which no findings have been made. Although the husband has power to wind up the company, that power must be exercised, not solely in his own interest, but in that of the shareholders as a whole (in other words, not neglecting the interests of the three children). There is no finding on the question whether a winding up would be in the interests of the children. The Full Court considered that a winding up was in fact unlikely, and nothing has been shown to cast doubt on the correctness of that view. No precise finding has been made of the value of the assets; it appears that the approximate estimate of $700,000 was of their gross value and no findings have been made to enable us to estimate their probable nett value, except any that may be implicit in the valuation which Bell J. placed on the shares. We were not referred in argument to evidence which would enable us to decide for ourselves such questions as whether the assets are capable of ready realization, whether it would be prudent to realize them, and what the proceeds of realization would be likely to be. In short, we cannot, in my opinion, uphold the decision of the Full Court for reasons which that Court itself rejected and which depend on questions of fact which we cannot resolve.
15. For these reasons in my opinion the Full Court was wrong to vary the order made by Bell J. and that order should be restored.
16. The husband also appeals against the decision of the Full Court in so far as it declined to interfere with the decision of Bell J. to award costs of $30,000 to the wife. In relation to this aspect of the matter I have read and agree with the judgment of my brother Wilson, to which I could not usefully add anything.
17. I would accordingly allow the appeal and restore the judgment of Bell J.
MASON J. This appeal by the appellant husband is brought by special leave from an order of the Full Court of the Family Court made on 16 February 1983 allowing in part an appeal by the respondent wife against an order made on 8 July 1982 by Bell J. sitting at first instance. By his order Bell J. resolved the property questions that had arisen between the parties on the dissolution of their marriage. By another order made on 16 February 1983, the Full Court on an appeal by the husband varied an order made by Bell J. on 20 September 1982 relating to the terms on which the husband was to make payments to the wife in respect of property ordered to be transferred by her to him. There is no appeal from this order of the Full Court.
2. On 8 July 1982 Bell J. ordered -
(1) That as and by way of property settlement the wife
should, upon payment to her by the husband of the sum of(2) That the husband indemnify the wife in respect of any
$260,000, transfer to the husband the whole of her
right, title and interest in certain designated
property. That property included her twenty-six shares
in Mallet Holdings Pty. Ltd. ("the Company"), and
certain jointly owned property consisting of real
estate, the former matrimonial home, an interest bearing
deposit, shares held by the parties in public companies,
cattle on the property upon which the former matrimonial
home was situated and cheque accounts in the name of the
husband and the wife;
indebtedness she might have to Mallet Holdings Pty. Ltd.(3) That the wife's application for maintenance be
and the Commonwealth Savings and Trading Bank of
Australia Ltd.;
dismissed; and(4) That the question of costs be adjourned.
3. The primary judge arrived at the round figure of $260,000 by placing a value of $120,300 on the wife's interest in the jointly owned property which she was required to transfer to her husband, and by valuing her shares in the Company at $86,996 and her interest in certain property owned solely by the husband at $52,200.
4. A further order was made by his Honour on 27 July 1982, varying the indemnity contained in par.(2) of the earlier order. It is not material to the present appeal.
5. By its order made on 16 February 1983 on the wife's appeal the Full Court substituted the sum of $335,000 for the sum of $260,000 appearing in par.(1) of the order made by Bell J. on 8 July 1982.
6. The appellant's challenge to the correctness of this order is largely based on the chain of reasoning by which the Full Court arrived at its conclusion that the husband should be required to pay a larger sum for the transfer by the wife of her interest in the properties mentioned. It is appropriate therefore to summarize, as briefly as may be, the reasons of the Full Court in so far as they relate to this question.
7. Critical to the dispute between the parties was the valuation of the
shares in the Company which, with its subsidiary companies,
was engaged in a
variety of business activities. The ordinary shareholding in the Company was
as follows:
Husband 26 shares
Wife 26 shares
Lester (son) 16 shares
Paul (son) 16 shares
Trust for Celia (daughter) 16 shares
Three expert witnesses were called to give evidence of the value of the
shares, Mr Bottomer and Mr Millard, experienced accountants,
for the wife, and
Mr Downing for the husband. Mr Downing had acted for a number of years as the
accountant for the Mallet group of
companies. Mr Bottomer placed a value of
either $5,718 or $8,175 on each ordinary share. The variation in his values
was attributable
to the possible difference in the value of freehold property
and plant and equipment owned by the companies. Bell J. rejected Mr
Bottomer's valuation on the footing that it was based on the ultimate
liquidation or winding up of the companies and on his concession
in
cross-examination that the only person who would pay anything like $7,800 per
share was the husband. The Full Court agreed with
his Honour's rejection of Mr
Bottomer's valuation.
8. Mr Millard assessed the value of the shares at $7,906. Again, his valuation was rejected by the primary judge. This rejection was accepted by the Full Court and it is unnecessary for me to set out the reasons for it.
9. Mr Downing was the only valuer to value the shares on the footing of
capitalization of future maintainable profits. Adopting
this method he
assigned a value of $2,435 for each ordinary share. In arriving at this
figure he selected a capitalization rate
of 20 per cent, justifying this by
reference
"... to the group's sound future prospects, to the
very high asset backing of ordinary shares, to the
poor past and equally poor future payment
performance dividend, to the restrictions contained
in the Articles of Association and to the high
yields that are currently obtainable on interest
bearing securities with reasonable risk
protection".
10. However, Bell J. thought that Mr Downing had failed to give sufficient emphasis to the assets backing of the ordinary shares, placing too low a valuation on the assets of the Company, and had given too much emphasis to the restrictions on transfer in the articles of association, ignoring the fact that the husband would as a result of the proceedings obtain 52 per cent of the ordinary capital of the Company. In the result his Honour increased the capitalization rate by 5 per cent. This produced a corresponding increase in the valuation of each ordinary share from $2,435 to $3,346, raising the total value of the ordinary share capital to $334,600, the value of the shares of each party being $86,996. The Full Court upheld the method of valuation of shares in the Company adopted by the primary judge.
11. Although the Full Court expressed its agreement with the primary judge's
assessment of the value of the assets of each party,
it disagreed with his
estimate of the provision which should be made for the wife. In particular
the Full Court criticised his approach
to the property which was owned solely
by the husband. His Honour had concluded that, having regard to the husband's
contribution
to the management of the Company and its subsidiary companies,
the wife was not entitled to more than 20 per cent of the value of
these
assets, a percentage which entitled her to $52,200. The Full Court thought
that these assets had been acquired from the income
and profits of the
businesses conducted by the parties over the years in the same fashion as the
jointly owned assets. The Court
went on to say:
"His Honour in this assessment appears to haveThe importance which the Full Court attached to prospects of future capital growth was illustrated by the further comment: "Future capital growth was taken into account in the share valuation but was given no or no sufficient weight in the overall assessment."
given no real weight to the way in which the assets
of the parties were built up and the financial
contribution made by the wife particularly in the
earlier period, her contribution as a wife over 29
years of cohabitation and her care of the three
children of the marriage. There is also to be
considered the far greater potential as to
financial improvement of the husband compared to
that of the wife. It should not be lost sight of
that, although the shares are not of a high value
at the present time, the potential of the company
structure is high and in particular as to
non-taxable capital growth.
In addressing his attention to the principal
assets separately rather than taking an overall
view of all of the relevant matters, while it
cannot be said that his approach was wrong, His
Honour in our view failed to give proper weight to
the matters referred to in the previous paragraph
and little if any weight to the relative future
financial potential of the parties. In our view
the more appropriate and safer approach is to make
an overall assessment."
12. Their Honours then concluded:
"Agreeing that His Honour was correct in hisAt a later stage, in response to an argument advanced on behalf of the wife, their Honours had this to say about the proposition that in family law equality is equity:
assessment of what assets should be transferred to
the husband and taking into account what he will
then have, his then liabilities and the then
financial position of the wife it appears that a
just and equitable result would be to adopt the 50%
figure overall."
"It is appropriate to point out again that there isThe order made by the Full Court in the wife's appeal is explained, albeit insufficiently, by the following calculation which appears at the end of the judgment:
no 'principle' in family law that equality is
equity. In the first instance with respect to
sections such as Sections 72 and 79 where the Court
is given a discretion it cannot lay down principles
for to do so would be to fetter its own discretion.
In the second place the cases which refer to
equality do not lay it down as a principle but
merely as a convenient starting point where the
matter at issue involves a long marriage."
"The total assets were:The figure of 5,700 represents the value of a motor car solely owned by the wife which was not included in the property otherwise taken into account.
Joint property $240,662
Husband's assets 261,077
Wife's assets 5,700
Shares - Mallet Holdings
Pty. Ltd. 173,992
Total $681,431
Half share 340,715
Less 5,700
________
Balance to wife $335,000
"
13. It has been accepted, at least since the judgment of Gibbs J. in De
Winter and De Winter (1979) FLC 90-605, that a judgment
of the Family Court in
determining what order should be made under s.79 of the Family Law Act 1975
(Cth), as amended, is exercising
a judicial discretion and that the well
settled principle governing an appeal from the exercise
of that discretion
applies to the
Full Court of the Family Court when it hears and determines an
appeal from the making of an order
under the section. The Full Court,
in
determining the appeal cannot substitute its opinion for that of the primary
judge unless
it is shown that he made some error
in exercising the discretion,
i.e., by acting on a wrong principle, by allowing extraneous or
irrelevant
factors to influence him,
by failing to take into account some material
consideration or by mistaking the facts (House
v. The King [1936] HCA 40; (1936) 55 CLR 499,
at pp
504-505; Australian Coal and Shale Employees' Federation v. The
Commonwealth
(1953) 94 CLR 621, at p 627). And in some cases the
exercise of
the discretion may be vitiated by the primary judge's
failure to give
sufficient weight
to a relevant factor. However,
an appellate court needs to
view this ground of appeal with considerable
caution, as Stephen J. noted
in
Gronow v. Gronow [1979] HCA 63; (1979)
144 CLR 513, at pp 519-520:
"The constant emphasis of the cases is that
before reversal an appellate court must be well
satisfied that the primary judge was plainly wrong,
his decision being no proper exercise of his
judicial discretion. While authority teaches that
error in the proper weight to be given to
particular matters may justify reversal on appeal,
it is also well established that it is never enough
that an appellate court, left to itself, would have
arrived at a different conclusion. When no error
of law or mistake of fact is present, to arrive at
a different conclusion which does not of itself
justify reversal can be due to little else but a
difference of view as to weight: it follows that
disagreement only on matters of weight by no means
necessarily justifies a reversal of the trial
judge. Because of this and because the assessment
of weight is particularly liable to be affected by
seeing and hearing the parties, which only the
trial judge can do, an appellate court should be
slow to overturn a primary judge's discretionary
decision on grounds which only involve conflicting
assessments of matters of weight."
14. On its face the judgment of the Full Court proceeds in accordance with the approach commended by Stephen J. The Full Court, as we have seen, expressly concluded that the primary judge had given (a) "no real weight" to the way in which the assets were built up, the financial contribution of the wife and her contribution as homemaker and parent; and (b) "little if any weight" to the relative future financial potential of the parties. However, the Full Court's conclusion, when it is closely examined, is seen to rest on (1) an erroneous understanding of the operation of s.79(4) of the Act expressed in the Court's proposition that "equality ... is a convenient starting point where the matter at issue involves a long marriage" and (2) an imperfect view of the primary judge's review of the parties' contributions.
15. The significance of the concept that equality is a convenient starting
point in the case of a long marriage has been expounded
in a series of
decisions in the Family Court. The Family Court has stated - and in my view
correctly stated - that the purpose of
s.79(4)(b) is to give recognition to
the position of the housewife who, by her attention to the home and the
children, frees her
husband to
earn income and acquire assets (Rolfe and Rolfe
(1979) FLC 90-629, at pp.78,272-78,273; Wardman and Hudson (1978) FLC
90-466;
Crawford
and Crawford (1979) FLC 90-647, at p.78,411; Aroney and Aroney
(1979) FLC 90-709, at p.78,785; Albany and Albany
(1980) FLC 90-905,
at
p.75,721; Dupont and Dupont (No. 3) (1981) FLC 91-103; Mahon and Mahon (1982)
FLC 91-242; and Racine and
Hemmett (1982) FLC
91-277, at p.77,574). And it
has been held, again correctly in my view, that the Act intends that the
wife's
contribution as homemaker
should be recognized in a substantial and not
merely in a token way. However, the judges of the Family
Court have gone a
step further
by saying that the contribution of the wife as homemaker is to be
equated to the contribution of the
husband as income earner. Thus,
in Rolfe,
Evatt C.J. said (at p.78,273):
"While the parties reside together, the one earning
and the other fulfilling responsibilities in the
home, there is no reason to attach greater value to
the contribution of one than to that of the other.
This is the way they arrange their affairs and the
contribution of each should be given equal value."
16. This approach has led to the enunciation of the proposition that after a long marriage where both parties have worked together and built up such an asset as the matrimonial home by their joint efforts, even if the efforts of one were that of homemaker alone, equality should be considered the normal starting point, though the particular facts of a case may justify a finding of greater contribution by one than the other - see the cases cited above.
17. It seems that the proposition has been accorded the status of a legal
presumption though some attempt has been made to confine
its area of
operation. Thus in Aroney, Nygh J. (at p.78,789), after referring to a number
of decisions of the Full Court of the Family
Court including Crawford in which
the proposition has been referred to, stated that "... it was never intended
by the Full Court
to put this guideline forward as a rule of law or as a
presumption applicable in all cases." His Honour went on to say:
"The principle is appropriate to a situation whereHis Honour's remarks were endorsed by the Full Court of the Family Court in Albany (at p.75,720), where the Court (Evatt C.J., Fogarty and Joske JJ.) observed that "in the case of business assets the contributions of the parties, direct or indirect, may be unequal." Their Honours went on to say (at p.75,721) that:
the assets of the parties consist of the
matrimonial home together with ancillary assets
such as the proceeds of superannuation or insurance
policies which were gained through savings with a
view to support both parties in retirement. It
would also be applicable in a case where the
spouses had worked in a business as a joint
venture. But it is of no use in a case such as the
present where the wife was never involved in the
husband's business. She is admittedly entitled to
a share in the property which he built up, but not
as an equal partner. In a case such as this, the
Court must weigh the various factors and come to a
conclusion independently of any starting point."
"... the contribution that a wife makes as aTheir Honours later said:
homemaker or parent relates to the totality of the
assets acquired by the parties during the course of
that marriage and whilst the wife was engaged in
that role. It cannot, however, apply to assets
acquired by inheritance or by the efforts of the
parties before marriage (or cohabitation)...".
"... a spouse may be entitled, by virtue alone of a
contribution as homemaker or parent, to share in
the totality of the assets acquired by the parties'
efforts during the marriage, including business
assets held by the other spouse to which the
applicant has made no direct or indirect financial
contribution. The extent of the applicant's
entitlement so to share will vary according to the
circumstances of each case, but it ought to be
regarded as something of significance independently
of the question of need."
18. This exposition of the proposition that equality is a convenient starting point proceeds upon a misconception of s.79. The section contemplates that an order will not be made unless the court is satisfied that it is just and equitable to make the order (s.79(2)), after taking into account the factors mentioned in (a) to (e) of s.79(4). The requirement that the court "shall take into account" these factors imposes a duty on the court to evaluate them. Thus, the court must in a given case evaluate the respective contributions of husband and wife under pars.(a) and (b) of sub-s.(4), difficult though that may be in some cases. In undertaking this task it is open to the court to conclude on the materials before it that the indirect contribution of one party as homemaker or parent is equal to the financial contributions made to the acquisition of the matrimonial home on the footing that that party's efforts as homemaker and parent have enabled the other to earn an income by means of which the home was acquired and financed during the marriage. To sustain this conclusion the materials before the Court will need to show an equality of contribution - that the efforts of the wife in her role were the equal of the husband in his.
19. No doubt a conclusion in favour of equality of contribution will be more readily reached where the property in issue is the matrimonial home or superannuation benefits or pension entitlements and the marriage is of long standing. It will be otherwise when the property in issue consists of assets acquired by one party whose ability and energy has enabled the establishment or conduct of an extensive business enterprise to which the other party has made no financial contribution and where that other party's role does not extend beyond that of homemaker and parent.
20. The proposition developed by the Family Court and applied by the Full Court in the present case has two flaws. The first is that it has been elevated to the status of a legal presumption; the second is that it obscures the need to make an evaluation of the respective contributions of husband and wife by arbitrarily equating the direct financial contribution of one to the indirect contribution of the other as homemaker and parent.
21. It is apparent that the Full Court's adherence to the concept of equality
played a fundamental part in the process of reasoning
by which it reached the
conclusion that the primary judge failed to give adequate weight to the wife's
indirect contribution and
consequently to the way in which the assets were
built up. But, quite apart from this element in the reasoning, it was wrong
to
say that the primary judge had given no real weight to the way in which the
assets were built up, to the financial contribution of
the wife and to her
general contribution as a wife. In his careful and comprehensive judgment
Bell J. had recounted in some detail
the part played by the wife in the
marriage and the extent, limited though it was, to which she had provided
financial and other
assistance in connexion with the businesses and the
properties. He clearly took into account her contribution as a wife. In
concluding
that she should be credited with 20 per cent of the property solely
owned by the husband, not including shares in the Company, the
Judge said:
"She has throughout her married life acted as a
hostess, reared children and generally assisted the
husband by allowing him to have more time to devote
his obvious energetic endeavours in the management
of the companies."
22. The Full Court attached much significance to its comment that the assets in the husband's sole name had been acquired in exactly the same manner as the jointly owned assets, apparently from the business or businesses which was or were carried on by them jointly. It seems that the wife did not claim that the assets in question were held on trust for the parties in equal shares, as she might have done if the assets were in truth acquired with funds which were the property of both parties. And the Full Court overlooked the circumstance that in the case of the wife's interest in the jointly owned assets which was to be transferred to the husband it was a question of valuing her half-interest, whereas in the case of the assets solely owned by the husband it was a question of ascertaining whether the wife should receive some pecuniary payment in respect of her contribution to those assets and if so in what amount. Nevertheless in evaluating the wife's contribution in this respect the primary judge treated it as indirect only, without making any allowance for the existence of a direct financial contribution arising from the use of funds of the businesses in which she had an interest. Accordingly, the fixing of her interest in the assets so purchased at 20% is vulnerable to the criticism that account was not taken of her financial contribution.
23. The next criticism offered by the Full Court was the statement that the husband had far greater potential for capital improvement than the wife. This was to say that because he became, by virtue of the court order, the owner and controller of the Company structure and other income earning assets, he would, unlike the wife, participate in future capital growth. This potential for future capital growth should have been reflected in the valuations placed upon the properties including the shares in the Company. Although the valuations were acknowledged by the Full Court to be correct, it seems that the Full Court considered that the valuation placed by the primary judge on the shares did not sufficiently reflect the prospects of future capital growth, possibly because the valuation was based on a capitalization of future maintainable profits and was very substantially less than the net assets backing of the shares.
24. What is the most appropriate method of estimating the value of shares in a proprietary company depends upon a variety of factors. They include the purpose for which the valuation is made, the nature of the shareholding, the character of the company's business, its capacity to earn profits and the net value of its assets. It has been said that a valuation based on earning capacity is generally most appropriate because the hypothetical purchaser of shares in a company which is a going concern is looking, not to a winding up, but to the profits which will ensue from the company continuing to trade (McCathie v. Federal Commissioner of Taxation [1944] HCA 9; (1944) 69 CLR 1; Abrahams v. Federal Commissioner of Taxation [1944] HCA 32; (1944) 70 CLR 23; Commissioner of Succession Duties (S.A.) v. Executor Trustee and Agency Co. of South Australia Ltd. [1947] HCA 10; (1947) 74 CLR 358, at pp 361-362). But it has been recognized that valuation by reference to assets backing or a liquidation basis will be appropriate where earning capacity provides no real measure of the true share value (The Commissioner of Stamp Duties (N.S.W.) v. Pearse [1951] HCA 43; (1951) 84 CLR 490) or presents overwhelming difficulties (Elder's Trustee and Executor Co. Ltd. v. Federal Commissioner of Taxation [1951] HCA 65; (1951) 96 CLR 563; Jekyll v. Commissioner of Stamp Duties (Q.) [1962] HCA 9; (1962) 106 CLR 353) or where the shareholding is such as to enable the holder to bring about liquidation of the company (New Zealand Insurance Co. Ltd. v. Commissioner of Inland Revenue (1956) NZLR 501). See generally the judgment of Gibbs J. in Gregory v. Federal Commissioner of Taxation [1971] HCA 2; (1971) 123 CLR 547.
25. There is always the risk that in examining methods of valuation attention is diverted from the object of the exercise, namely the ascertainment of the real value of the shares, to the means by which the object is to be achieved. As a general proposition the valuation by means of capitalization of profits is appropriate to those cases in which the likely purchasers will be looking to the profits which the company will earn as a going concern. Where, however, the valuation of the shares as calculated by reference to their assets backing substantially exceeds their valuation as calculated on a capitalization of profits, the former is to be preferred, subject to a discount for the expenses of winding up and distribution, unless there is some good reason for preferring the latter, as, for example, where the shareholding to be valued is a minority of shareholding and those in control of the company intend to carry on its business because that course has advantages for them. Even in such a case it will be proper to take some account of the assets backing of the shares in order to reflect the possibility that those in control of the company might be minded in the future to sell their shares or to realize the value of the assets of the company.
26. In the present case, the purpose of valuing the wife's shares was to ascertain the price which she should be allowed for them. The wife's interest was a minority holding of ordinary shares. The result of the transaction was to give the husband a majority of the ordinary capital and of the voting power in the company and to free him from any action which the wife might take on the ground that his conduct of the company was oppressive or otherwise not in the interests of the shareholders taken as a whole. There was, accordingly, a strong case for saying that an acceptable value should have reflected to a fairly substantial extent the assets backing of the shares. According to Mr Downing, the assets backing was between $560,000 and $700,000, giving a value of $5,600 to $7,000 per ordinary share. Mr Downing expressed his preference for the lower figure but the primary judge thought that it was too low. None the less the value he fixed was only $3,346 per share. True it is that he made no allowance for the expenses of liquidation and distribution. But there can be little doubt that had allowance been made for these expenses the assets backing valuation would have substantially exceeded the value fixed by the primary judge.
27. The appellant submits that the Full Court failed to make any allowance in respect of the husband's indemnity in respect of the wife's state of liabilities amounting to $25,000 in respect of a mortgage on the matrimonial home and debts owing to the company. This issue was not important before the primary judge, because he dealt with the properties separately and not on an overall basis, and it seems not to have been argued before the Full Court. Perhaps its relevance first became apparent after the Full Court delivered judgment, adopting an overall, instead of an individual, approach to the parties' property interests. However that may be, the Full Court failed to take into account this benefit conferred on the wife by the making of the order and allowance must be made for it.
28. Accordingly, the Full Court was entitled to conclude that the primary judge did not make adequate allowance for the wife's contribution to those assets of the husband of which he was sole owner. Moreover, although I do not agree that the primary judge failed to have regard to the husband's greater potential for capital growth, the value placed upon the wife's shares in the company appears to have been lower than that justified by the evidence. In these circumstances the Full Court was correct in interfering with the order of the primary judge and there is no reason for thinking that the Full Court was wrong in increasing the amount ordered to be paid by the husband from $260,000 to $335,000, save that it failed to make allowance for the value to the wife of the indemnity, $25,000. Had it done so, the amount to be paid by the husband would have been reduced to $310,000.
29. For the reasons given by Wilson J. I would reject the appellant's argument that the order in favour of the wife for the payment of costs assessed at $30,000 should be set aside.
30. Since writing this judgment I have had the advantage of reading the judgment prepared by Dawson J. where the view is expressed that it is not open to this Court to question the valuation of the shares arrived at by the primary judge. As we have seen, the Full Court of the Family Court considered that the valuation did not sufficiently reflect the prospects for future capital growth. This finding by the Full Court was challenged by the appellant in its grounds of appeal and in its submissions to this Court. Moreover, during the course of argument the question whether the valuation placed by the primary judge on the shares sufficiently reflected their net assets backing was specifically raised. In these circumstances this Court is entitled to conclude that the valuation was insufficient and to take that insufficiency into account. It is well settled that the respondent to an appeal is entitled to support the correctness of the judgment appealed from by an argument not presented below, at least when that argument does not depend on an issue of fact not litigated in the lower courts (N.R.M.A Insurance Ltd. v. B. & B. Shipping & Marine Co. (1947) 47 SR(NSW) 273, at p 282; Suttor v. Gundowda Pty. Ltd. (1950) 81 CLR 418, at p 438).
31. I would allow the appeal but only to the extent of substituting the amount of $310,000 for the amount of $335,000 ordered to be paid by the husband to the wife.
WILSON J. This is an appeal by special leave from a decision of a Full Court of the Family Court of Australia (Emery, Simpson and Ross-Jones JJ.). The decision varied orders made by Bell J. in proceedings with respect to the property of the parties pursuant to s. 79 of the Family Law Act 1975 (Cth) as amended prior to the enactment of Act No. 72 of 1983 ("the Act").
2. The parties were married on 22 October 1949. They separated in 1978 and
the marriage was dissolved in November 1979. The learned
primary judge
described the history of the marriage in the following way:
"In summary, this marriage which lasted someThere are three children of the marriage. They are now aged approximately 33 years, 32 years and 20 years respectively and each is independent.
twentynine years, was a marriage in which the
parties originally suffered financial difficulties
but as a result of the hard work of the husband and
his ability, as well as to an extent the assistance
of the wife to the husband, the parties by 1974
found themselves in a much better financial
position, and from about 1974 until the date of
separation, both the parties lived at a very high
standard. The wife has had the responsibilities of
looking after the children in their formative years
when the parties were in straightened financial
circumstances."
3. Bell J. valued the total assets of the parties as follows:
Joint property .. .. .. .. .. $240,662In the result, his Honour determined the property issues by making orders to the following effect:
Husband's assets .. .. .. .. .. 261,077
Shares in Mallet Holdings Pty. Ltd. .. 173,992
Wife's assets (approximately) .. .. 5,700
________
Total $681,431
1. The husband pay to the wife the sum of
$260,000.
2. The wife transfer to the husband her interest
in the jointly-owned property, and also the
shares she held in Mallet Holdings Pty. Ltd.
3. The husband indemnify the wife against any
liabilities existing in respect of the shares
and in respect of mortgages on the
jointly-owned property (said to amount to a
total of approximately $50,000).
4. The husband pay to the wife $30,000 towards
her costs.
4. He dismissed the wife's application for maintenance.
5. There followed an appeal and cross appeal to the Full Court. The wife appealed on many grounds but it is sufficient for present purposes to mention that the primary thrust of the appeal was two-fold. She attacked the valuation which Bell J. had made of the shares in Mallet Holdings Pty. Ltd. She also attacked the award of $260,000 to her by asserting that "His Honour wrongly departed without justification from the principle that equality is equity". For his part, the husband cross appealed against the order in favour of the wife for costs.
6. A great deal of attention was given in the hearing of the appeal to the Full Court, as it had been in the proceedings before Bell J., to the question of the valuation of the shares. Their Honours upheld the primary judge in this respect and in the present proceedings there is no challenge to that decision. With respect to the appeal by the wife on the quantum of the cash award to her, the Full Court upheld the appeal and increased the amount of the award from $260,000 to $335,000. The husband appeals from this decision and also from the refusal of the Full Court to disturb the order for costs made against him.
7. It is convenient to deal first with the question of costs. It was a long
and complex hearing and the wife's handling of the
case came in for some
criticism from Bell J. Both sides sought to have costs awarded to them.
Speaking of the husband's application,
his Honour said:
"It is a very strong argument, particularly inbut he then continued -
relation to the fact of the failure of the wife to
convince me of those matters to which he has
referred"
"However, I do feel the wife is in a much less
powerful position financially than the husband.
... It might be said by the husband that the
order I am going to make is plainly unreasonable,
but I consider, particularly as a result of the
difference in the net financial position, that he
should pay some amount of costs towards the wife's
costs, and I propose to fix the figure at $30,000."
8. Section 117 of the Act deals with the question of costs. So far as
material, it reads:
"(1) Subject to sub-section (2) ..., eachThese provisions were examined by this Court in Penfold v. Penfold [1980] HCA 4; (1980) 28 ALR 213. In a joint judgment, Stephen, Mason, Aickin and Wilson JJ. said, at p 216:
party to proceedings under this Act shall bear his
own costs.
(2) If the court is of opinion in a
particular case that there are circumstances that
justify it in doing so, the court may, subject to
the regulations, make such orders as to costs and
security for costs, whether by way of interlocutory
order or otherwise, as the court thinks just."
"It is an accurate description of s. 117(1) toWith respect, I agree with their Honours in the Full Court in rejecting the appeal against the order for costs. The decision was plainly within the range of a sound discretionary judgment and the reasoning of the learned judge shows a proper understanding of s. 117 of the Act.
say that it expresses a general rule, provided that
it is firmly understood that the sub-section is not
paramount to s. 117(2). As sub-s. (1) is expressed
to be subject to sub-s. (2), the former must yield
whenever a judge finds in a particular case that
there are circumstances justifying the making of an
order for costs.
Sub-section (2) requires a finding of
justifying circumstances as an essential
preliminary to the making of an order. Beyond this
there is nothing in the subject matter or in the
interrelationship of the two provisions which
imposes any additional or special onus on an
applicant for an order for costs. Consequently,
with respect to their Honours in the Family Court,
we do not agree with the suggestion made in the
judgment under appeal that an order can only be
made under s. 117(2) in 'a clear case'.
Sub-section (2) does not, in our view, as a
matter of law require the judge to specify the
circumstances which justify the making of an order.
It does not expressly say so, and in the context of
the making of an order for costs there is no
sufficient basis for making an implication."
9. The real difficulty in the case lies in the variation by the Full Court of
the sum of money which Bell J. ordered the husband
to pay to the wife. I
begin with an examination of the way in which Bell J. arrived at the figure of
$260,000. He valued the property
which was owned jointly by the parties,
including the former matrimonial home, at $240,662. It had been submitted by
the husband
that the wife should receive the equivalent of her legal interest
in such property and the learned judge adopted that approach, requiring
her to
transfer her interest in the property to the husband and allowing her in that
regard the sum of $120,300. His Honour found
the shares in Mallet Holdings
Pty. Ltd. to have a value of $3,346 per share and required the husband to
acquire at that price the
twenty six shares owned by the wife at a cost of
$86,996. This left the judge to consider the wife's entitlement, if any, to a
share
of the property owned wholly by the husband of a total value, including
his superannuation and life assurance policies, of $261,077.
As to this
category of assets, his Honour said:
"These are considerable in amount ... I amThe sums so arrived at totalled $259,496, which his Honour then rounded off to $260,000. He recognized that the award was enhanced by the requirement that the husband assume responsibility for all or any indebtedness of the wife to Mallet Holdings Pty. Ltd. and the Commonwealth Bank.
clearly of the opinion that the acquisition of
these properties was brought about as a result of
the husband's association with the Mallet companies
and the properties were acquired through his own
efforts in the management of the companies and in
an endeavour to increase the profitability of the
companies. Notwithstanding this, I consider that
the wife is entitled to a reasonable percentage of
the value of such properties. She has throughout
her married life acted as a hostess, reared
children and generally assisted the husband by
allowing him to have more time to devote his
obvious energetic endeavours in the management of
the companies. I do not think however that I
should find she is entitled to anything more than
20% of the value of these amounts and such amounts
to $52,200 (rounded off)."
10. The Full Court had some difficulty in understanding how Bell J. came to
award the wife only a 20% share in the property owned
solely by the husband.
Their Honours explained their difficulty in the following passage of their
reasons:
"It appears on the facts that these assets inLater in their reasons, their Honours referred to the wife's ground of appeal based on an asserted principle that "equality is equity" and said:
the husband's name alone were acquired in exactly
the same manner as were the jointly owned assets
namely from the profits, both income and capital
gains, of the businesses conducted by the parties
over the years. His Honour in this assessment
appears to have given no real weight to the way in
which the assets of the parties were built up and
the financial contribution made by the wife
particularly in the earlier period, her
contribution as a wife over 29 years of
cohabitation and her care of the three children of
the marriage. There is also to be considered the
far greater potential as to financial improvement
of the husband compared to that of the wife. It
should not be lost sight of that, although the
shares are not of a high value at the present time,
the potential of the company structure is high and
in particular as to non-taxable capital growth.
In addressing his attention to the principal
assets separately rather than taking an overall
view of all of the relevant matters, while it
cannot be said that his approach was wrong, his
Honour in our view failed to give proper weight to
the matters referred to in the previous paragraph
and little if any weight to the relative future
financial potential of the parties. In our view
the more appropriate and safer approach is to make
an overall assessment.
...
Agreeing that his Honour was correct in his
assessment of what assets should be transferred to
the husband and taking into account what he will
then have, his then liabilities and the then
financial position of the wife it appears that a
just and equitable result would be to adopt the 50%
figure overall."
"It is appropriate to point out again that there is
no 'principle' in family law that equality is
equity. In the first instance with respect to
sections such as Sections 72 and 79 where the Court
is given a discretion it cannot lay down principles
for to do so would be to fetter its own discretion.
In the second place the cases which refer to
equality do not lay it down as a principle but
merely as a convenient starting point where the
matter at issue involves a long marriage.
11. It is submitted for the husband that there was no justification for the Full Court to interfere with the decision of Bell J. as to the manner in which the total assets of the parties should be shared because the discretion which his Honour had exercised in making his decision was not shown to have miscarried.
12. There is no doubt, of course, that a decision made pursuant to s. 79 of
the Act calls for the exercise of discretion. The court
is authorized to make
"such order as it thinks fit altering the interests of the parties in the
property" provided that "it is satisfied
that, in all the circumstances, it is
just and equitable to make the order" (s. 79(1) and (2)). It follows that,
consistently with
established principle, an appellate court is not entitled to
substitute its own decision for that which is the subject of the appeal
merely
because it prefers a different result or even merely because it thinks that a
different result would be more just and equitable.
Before it intervenes, it
must be satisfied that the decision is clearly wrong. In Australian Coal and
Shale Employees' Federation
v. The Commonwealth [1953] HCA 25; (1953) 94 CLR 621, at p 627,
Kitto J. succinctly stated the principle in the following terms:
"... the true principle limiting the manner in
which appellate jurisdiction is exercised in
respect of decisions involving discretionary
judgment is that there is a strong presumption in
favour of the correctness of the decision appealed
from, and that that decision should therefore be
affirmed unless the court of appeal is satisfied
that it is clearly wrong. A degree of satisfaction
sufficient to overcome the strength of the
presumption may exist where there has been an error
which consists in acting upon a wrong principle, or
giving weight to extraneous or irrelevant matters,
or failing to give weight or sufficient weight to
relevant considerations, or making a mistake as to
the facts. Again, the nature of the error may not
be discoverable, but even so it is sufficient that
the result is so unreasonable or plainly unjust
that the appellate court may infer that there has
been a failure properly to exercise the discretion
which the law reposes in the court of first
instance: House v. The King [1936] HCA 40; (1936) 55 CLR 499,
at pp 504, 505."
13. The Act does not leave the discretion at large. Section 79(4) provides,
so far as material,
"In considering what order should be made
under this section the court shall take into
account -
(a) the financial contribution made directly
or indirectly by or on behalf of a party
... to the acquisition, conservation or
improvement of the property, or otherwise
in relation to the property;
(b) the contribution made directly or
indirectly to the acquisition,
conservation or improvement of the
property by either party, including any
contribution made in the capacity of
homemaker or parent;
(c) the effect of any proposed order upon the
earning capacity of either party;"
14. The Full Court took the view that Bell J. failed to give proper weight to the way in which the assets of the parties had been built up, the financial contribution made by the wife particularly in the earlier period, and her contribution as a wife and mother. In their view he also gave "little if any weight" to the relative future financial potential of the parties. So far as concerns any financial contribution by the wife it would seem to have been limited to the practical assistance she provided in the conduct of the various businesses, largely unsuccessful, which attracted the efforts of the parties in the earlier years of the marriage. Apart from a purely factual description of the various ways in which she helped her husband, Bell J. states that "During this time the wife was of some assistance to the husband".
15. The approach that s. 79(4)(b) requires a Family Court to take to the
contribution made by a party in the capacity of a home
maker or parent calls
for some consideration. It is mostly in this context that successive Family
Courts have referred to the notion
of "equality is equity" as a convenient
starting point in the consideration of the respective contributions of husband
and wife where
there has been a long period of married life: see Racine v.
Hemmett (1982) FLC 91-277 at p 77,574; Wardman v. Hudson (1978) FLC
90-466;
Potthoff v. Potthoff (1978) FLC 90-475; Crawford v. Crawford (1979) FLC
90-647, at p 78,411; Rolfe v. Rolfe (1979) FLC 90-629,
at p 78,272; Zdravkovic
v. Zdravkovic (1982) FLC 91-220, at p 77,207; Mahon v. Mahon (1982) FLC
91-242, at p 77,333. In the earliest
of these cases, Rolfe v. Rolfe, reported
in 1979 but delivered on 28 April 1977, Evatt C.J. referred to s. 79(4)(b),
saying:
"The purpose of sec. 79(4)(b), in my opinion, is toWith all respect, I agree with her Honour's exposition of the purpose of the paragraph subject to one reservation. The Act requires that the contribution of a wife as a home maker and parent be seen as an indirect contribution to the acquisition, conservation or improvement of the property of the parties regardless of where the legal ownership resides. The contribution must be assessed, not in any merely token way, but in terms of its true worth to the building up of the assets. However, equality will be the measure, other things being equal, only if the quality of the respective contributions of husband and wife, each judged by reference to their own sphere, are equal. The quality of the contribution made by a wife as home maker or parent may vary enormously, from the inadequate to the adequate to the exceptionally good. She may be an admirable housewife in every way or she may fulfil little more than the minimum requirements. Similarly, the contribution of the breadwinner may vary enormously and deserves to be evaluated in comparison with that of the other party. It follows that it cannot be said of every case where the parties reside together that equal value must be attributed to the contribution of each. That will be appropriate only to the extent that the respective contributions of the parties are each made to an equivalent degree. What the Act requires is that in considering an order that is just and equitable the court shall "take into account" any contribution made by a party in the capacity of homemaker or parent. It is a wide discretion which requires the court to assess the value of that contribution in terms of what is just and equitable in all the circumstances of a particular case. There can be no fixed rule of general application.
ensure just and equitable treatment of a wife who
has not earned income during the marriage, but who
has contributed as a home maker and parent to the
property. A husband and father is free to earn
income, purchase property and pay off the mortgage
so long as his wife assumes the responsibility for
the home and the children. Because of that
reponsibility she may earn no income or have only
small earnings, but provided she makes her
contribution to the home and to the family the Act
clearly intends that her contribution should be
recognised not in a token way but in a substantial
way. While the parties reside together, the one
earning and the other fulfilling responsibilities
in the home, there is no reason to attach greater
value to the contribution of one than to that of
the other. This is the way they arrange their
affairs and the contribution of each should be
given equal value."
16. It appears that the Full Court was influenced in its view of the judgment under appeal by the distinction which Bell J. drew between the property which was owned jointly by the parties and that which was owned solely by the husband. His Honour allowed to the wife a sum equivalent to 50% of the former but only 20% of the latter, notwithstanding that the assets comprised in the latter category were acquired in the same manner as were the assets in the former category, namely, from the profits of the businesses conducted by the parties over the years. But his Honour was entitled to pay some regard to the fact that the assets in the former category constituted property in which the wife already owned a half interest. The husband submitted only that he be permitted to purchase his wife's legal interest in the property and his Honour accepted that approach. To that extent it was not necessary to invoke s. 79 at all because the proportionate interests of the parties were not being altered at all. Having taken that step, it remained for his Honour to determine what proportion of the value of the husband's solely-owned property justice and equity required him to award to the wife. The recognition of the wife's legal interest in the former property did not oblige him to award to her a similar proportion of the latter property. His Honour was obviously impressed by the ability and hard work that the husband had contributed to building up the assets associated with the business of the companies, including the assets that were held solely in his name. On the other hand he recognized the contribution of the wife as home maker and parent and considered that she was entitled to a reasonable percentage of the value of such assets. His conclusion was expressed in very deliberate terms to the effect that she was not entitled to anything more than 20% of such assets. It is clear that his Honour also had present to his mind the award of 50% of the value of the other properties, including the former matrimonial home and the financial relief afforded to her by the indemnity against outstanding liabilities which the husband was to provide. No doubt it would have been more helpful if Bell J. had spelt out a little more the reasons why he concluded that 20% was the appropriate figure but unless the result in its entirety is so unreasonable or plainly unjust as to lead the Full Court to infer that there has been a failure properly to exercise the discretion it should not interfere. With all respect to their Honours but remembering that there is a strong presumption in favour of the correctness of a discretionary judgment, I am unable to see how it can be said that the primary judge failed to give "proper weight" to these matters.
17. It remains to consider another aspect of the matter. The Full Court considered that by taking a piecemeal approach to the division of the assets Bell J. had given little if any weight to the relative future financial potential of the parties. Section 79(4)(c) requires the court to take into account "the effect of any proposed order upon the earning capacity of either party". The order made by Bell J. had the effect of giving the husband a 52% interest in Mallet Holdings Pty. Ltd., a result which as his Honour recognized may well enhance his capacity further to develop the company's assets and income in the future. On the other hand, there are many imponderables in forecasting the future success of commercial undertakings. It remained a family undertaking with whatever strengths or weaknesses that might imply. The children retained a substantial interest in the company. It is clear that the strong asset backing of the shares in the company with whatever promise of future profit that may convey led Bell J. by an "intelligent guess" (cf. Stephen J. in Crane v. Federal Commissioner of Taxation (1974) 5 ALR 38, at p 45) to increase the value of those shares from $2,435 per share to $3,346 per share. Furthermore, it must be remembered that the wife receives a substantial cash sum over and above that required for the provision of a home which is available for investment as she may be advised. It obviously has an income-earning potential. Bell J. referred to the wife's expectation that she would gain enough from the marriage which would enable her to live without the necessity of having to work, meaning thereby a home and sufficient moneys to give her an adequate income. There is nothing to suggest that his Honour thought that expectation unreasonable or that he believed other than that his orders fairly accommodated it.
18. When all is said and done in this regard, however, it is true, as Bell J. acknowledged when deciding to award the wife $30,000 towards her costs that "she is in a much less powerful position financially than the husband". But such a statement of fact does not lead of itself to the conclusion that the primary order under s. 79 which allows such a state of affairs to remain must therefore be plainly unjust or inequitable. The objective of the section is not to equalise the financial strengths of the parties. It is to empower the court, following a dissolution of a marriage, to effect a re-distribution of the property of the parties if it be just and equitable to do so having regard, inter alia, to the respective contributions of the parties.
19. For these reasons I conclude that the Full Court was not justified in holding that Bell J. erred in the exercise of his discretion. This conclusion makes it unnecessary to consider an argument advanced for the husband directed to showing that in any event in making its decision the Full Court overlooked the value of the indemnity which Bell J. ordered the husband to give in favour of the wife.
20. The appeal should be allowed and the award of $260,000 restored. The order for $30,000 for costs in favour of the wife should remain.
DEANE J. The facts and issues involved in this appeal appear from other judgments. I refrain from repeating them. The value to the respondent wife of the appellant husband's indemnity in her favour would appear to have been overlooked in the Full Court of the Family Court. Accordingly, the amount which the husband was required to pay to the wife under the Full Court's order should be reduced from $335,OOO to $3lO,OOO. Apart from that, there is, in my view, no proper basis for interfering with the substantive order made by the Full Court in the wife's favour. Subject to the comments on two specific matters which are made hereunder, I agree with the reasons for that conclusion expressed in the judgment of Mason J.
2. The first of the matters upon which I would make separate comment relates
to the reference to the notion of equality in the judgment
of the Full Court
of the Family Court. The second concerns the appropriate approach to the
valuation of the shares held by the wife
in Mallet Holdings Pty. Limited.
(l) The notion of equality
3. It is clear that the function of the Family Court in determining what order should be made under s.79 of the Family Law Act l975 (Cth) involves the exercise of a judicial discretion. The exercise of that discretion is neither controlled nor fettered by any general rule or presumption of law that an appropriate order under s.79 will effect an equal division between husband and wife of assets acquired during the life of the marriage. In each case, the Family Court must pay regard to the matters specified in s.79(4) and determine whether it is just and equitable that any order be made and, if it is, what represents the appropriate order in the particular circumstances of the case before it. On the other hand, the circumstances of a particular case may well be such as to lead the Family Court to conclude, as a matter of fact, that equality is an appropriate starting point in determining the particular order to be made under s.79.
4. It is possible to point to some statements in judgments in the Family Court which appear to express the view that there is a legal rule either to the effect that "where the parties have been married for a substantial time, and there have been contributions by each of the parties, there should be an equal division" of certain types of property (see, e.g., Racine and Hemmett (l982) FLC 91-277, at p.77,574) or to the effect that, in ordinary circumstances, the contribution of the wife as homemaker "in every way ought to be equally equated to the efforts of the husband" (see, e.g., Wardman and Hudson (l978) FLC 9O-466, at p.77,385). If such statements were intended to lay down a legal rule or presumption requiring or favouring equality in certain classes of circumstances, they were mistaken. As members of the Family Court have been at pains to point out in other cases (see, e.g., Aroney and Aroney (l979) FLC 9O-7O9, at p.78,789), there is no such legal rule or presumption.
5. In the present case, the members of the Full Court emphasized that they
were not proceeding on the basis that there was any "principle"
of family law
requiring "equality" in a particular type of s.79 case. Their Honours said:
"It is appropriate to point out again that there isNor, as I read the judgment of the Full Court, does the reference to equality "as a convenient starting point where the matter at issue involves a long marriage" in the above passage involve the mistaken proposition that there is, in the case of a long marriage, a rule of law that an equal division of assets must be treated as prima facie or presumptively appropriate. What that reference to "equality" involves is the enunciation not of a legal principle or presumption but of a general counsel of experience on the subject of what constitutes, in some types of case, an appropriate starting point for the determination of the particular order which should be made in the particular circumstances of the individual case. That general counsel of experience, derived from decisions in previous cases involving questions of fact, is that, in cases involving a long marriage where the parties have adopted the attitude that their marriage constituted a practical union of both lives and property, the notion of equality is likely to offer an acceptable and useful starting point at least as regards those assets, such as the matrimonial home, ancillary possessions and savings and investments for retirement, which are fairly to be seen as truly representing the fruits of a totality of efforts of wage earning, homemaking and mutual support.
no 'principle' in family law that equality is
equity. In the first instance with respect to
sections such as Sections 72 and 79 where the Court
is given a discretion it cannot lay down principles
for to do so would be to fetter its own discretion.
In the second place the cases which refer to
equality do not lay it down as a principle but
merely as a convenient starting point where the
matter at issue involves a long marriage".
6. It is plainly important that, conformably with the ideal of justice in the individual case, there be general consistency from one case to another of underlying notions of what is just and appropriate in particular circumstances. Otherwise, the law would, in truth, be but the "lawless science" of a "codeless myriad of precedent" and a "wilderness of single instances" of which Lord Tennyson wrote in his poem "Aylmer's Field". It is inevitable and desirable that the need for such consistency should lead the judges of the Family Court to look to what has been said and decided in prior cases for assistance and guidance in determining what is just and appropriate in the differing circumstances of subsequent cases and that shared experience and accumulated expertise should lead to the emergence of generally accepted concepts of what is prima facie just and appropriate in particular types of cases. It is in that context that statements such as the above statement by the Full Court in the present case should be read. So read, they appear to me to reflect no more than sound common sense founded on unrivalled experience and to involve no more than the articulation of a step on the path to conclusion in the exercise of a discretion which essentially relates to factual matters. More particularly, those statements do not involve any proposition of law and are not properly to be subjected to attack or review in this Court on the mistaken assumption that they do.
7. It follows that the judgment of the Full Court in the present case cannot,
in my view, properly be criticized on the ground that
their Honours mistakenly
saw or applied any notion of equality as constituting an overriding general
principle or presumption of
law.
(2) The valuation of the wife's shares.
8. Mallet Holdings Pty. Limited ("the Company") was a family company in which
the shares were held by the husband, the wife, and
the husband or the husband
and wife as trustee or trustees for one or other of the three children of the
marriage. Under the Articles,
the shares held by the husband were entitled to
special voting rights. There was, however, a dispute between the parties
about the
validity of the provisions of the Articles conferring those rights
and it was common ground that they should be disregarded. That
being so,
voting power should be seen as corresponding with the number of shares held.
There were lOO issued shares in the capital
of the Company. They were held as
follows:
Husband 26 shares
Wife 26 shares
Husband as Trustee for
Lester (son) l6 shares
Husband as Trustee for
Paul (son) l6 shares
Husband and wife as
Trustees for Celia
(daughter) l6 shares
9. Special considerations may be relevant to determining the correct method to be followed in valuing shares in a family company for the purposes of s.79 of the Act. Where a family company has been treated by the parties to a marriage as no more than a convenient vehicle for their own commercial activities and investments, it may be quite unjust and inappropriate to treat the corporate structure as having any significance beyond the costs and expenses which would be involved in its removal. This is likely to be so in the case of a true family company holding a diverse collection of assets acquired over the life of the marriage. It is even more likely to be so where the combined shareholdings of husband and wife carry control of the family company and where, in order to sever relationships, it is proposed that either husband or wife acquire the shareholdings of the other. In such a case, the spouse who ends up with the combined shareholdings will ordinarily be able to procure the realization by the company of any of the assets with a realizable value exceeding their value as retained assets and will often have the practical option of receiving the appropriate share of the net proceeds of any such realization, less any costs and expenses involved in liquidation and/or distribution, by one or other of a number of legitimate means. In that regard, it is also relevant to note that the spouse who disposes of his or her shares will commonly have foregone a real likelihood of having being able to procure the liquidation of the company on the grounds that, the marriage having collapsed, it is just and equitable that the company which was a creature of the marriage should be wound up.
10. The Company in the present case had obviously been treated by the parties as a convenient means by which they and the trusts for their children could participate in a diversity of commercial assets and undertakings acquired during the life of the marriage. It would appear to have been common ground that, with the dissolution of the marriage, the husband and wife should cease to be associated as the main shareholders in the Company. If the husband's shares were acquired by the wife or if the wife's shares were acquired by the husband, the purchaser would have effective control of the Company in his or her own right. That control would enable him or her to procure the realization of any of the Company's assets with a realizable value exceeding their value as retained assets. In circumstances where the only other shareholders were the family trusts, the option of liquidation of the Company would also be likely to be available if the value of the shares as shares in a going concern was or became less than the net amount which would be received on realization and liquidation. That being so, the net realizable asset backing of the shares (less a proportion of the costs and expenses of any such liquidation) represented an obvious and important reference point for determining the minimum value of the shares in the hands of whichever spouse acquired the shareholding of the other. In my view, both the primary judge and the members of the Full Court paid insufficient regard to that reference point in assessing the value of the wife's shares in the Company. In the case of the Full Court, the resulting inadequacy in the valuation of the shares was indirectly recognized by their Honours when they went on to conclude that the learned trial judge had given no or no sufficient weight to future capital growth in "the overall assessment" (see below).
11. It is unnecessary, for the purposes of the present appeal, to examine in
detail the evidence in relation to the proper valuation
of the shares in the
Company. It suffices to say that that evidence makes plain that, if adequate
regard is paid to the realizable
asset backing of the shares, the wife's
shares must be valued at least at a figure which would justify the order in
the wife's favour
made by the Full Court once an allowance is made for the
value of the husband's indemnity. In that regard, it is relevant to mention
that the wife did not seek, by way of cross-appeal, to have the Full Court's
order in her favour increased by reason of the undervalue
in the courts below
of her shares in the Company.
(3) General
12. The primary judge's order in favour of the wife for the payment of costs assessed at $3O,OOO has occasioned me some difficulty. While, no doubt, the wife was entitled to insist upon whatever representation and advice she considered desirable, I can see real grounds for arguing that the husband should not be required to share the burden of her indulgence to the extent of costs of $3O,OOO in what should, after all, have been a not unduly complicated matrimonial cause. Ultimately, however, I have come to the view, for the reasons given by Wilson J., that adequate grounds have not been shown to exist for disturbing that order for costs.
13. It should be apparent from the above that I consider that the adequacy of the valuation which the learned trial judge and the Full Court of the Family Court placed upon the shares in the Company was properly open to question on the appeal to this Court. By implication, the judgment and orders of the Full Court were based upon a refusal to accept that valuation as adequate for all purposes in that there lay at the heart of their Honours' decision to increase the amount of the order in favour of the wife a conclusion that "future capital growth was taken into account in the share valuation but was given no or no sufficient weight in the overall assessment". The reference to no or no sufficient weight being given to future capital growth in the overall assessment was plainly a reference either to the value of the shares in the capital of the Company or to the assets held by the Company since, as the judgment of the Full Court makes clear, there were no other assets involved in the case to which that reference could properly be applied. That conclusion of their Honours reflected the fact that the valuation of the shares was greatly below their asset backing. It was expressly challenged in the husband's notice of appeal and in argument and the general question of the correctness of the valuation was specifically canvassed in discussion in the course of argument. There was, of course, no need for the wife to file a notice of cross appeal when all she was seeking to do was to maintain the Full Court's order in her favour (see O.70 r.13(3)).
14. In the result, I would reduce the amount which the husband was required to pay to the wife under the Full Court's order from $335,OOO to $3lO,OOO. Otherwise, I would dismiss the appeal with costs.
DAWSON J. The facts upon which this appeal was argued and the orders made in the courts below are set out in the judgments of Mason J. and Wilson J. and I shall not repeat them.
2. What the dispute now boils down to is whether the primary judge, Bell J., was right in the way in which he treated the property owned by the husband alone (apart from his shares in the family company) in making the order which he did for a settlement of property under s.79(1) of the Family Law Act 1975 (Cth).
3. His Honour ordered that the wife should, upon payment to her of the sum of $260,000, transfer to her husband her shareholding in the family company and her interest in the property which she owned jointly with her husband. In arriving at the figure of $260,000, Bell J. found that the wife should receive no more than 20% of the value of the husband's property (apart from the shares), although he found that her entitlement in respect of the property which she owned jointly with her husband was 50% of its value.
4. Included in the amount of $260,000 was the value of the wife's shares in the family company, Mallet Holdings Pty. Ltd. The husband and wife each had an equal shareholding in that company. Bell J. valued the shares at $3,346 each. The valuation of the shares was the subject of evidence before the primary judge and took up a substantial part of the hearing of the appeals brought by both the husband and wife to the Full Court of the Family Court from the order made by Bell J. The Full Court upheld Bell J.'s valuation and in the appeal by the husband from the decision of the Full Court, which is the appeal before us, there has been no attack upon that valuation nor is there any cross appeal by the wife.
5. The Full Court took the view that, whilst Bell J. was not wrong in the method which he adopted of looking at the principal assets separately rather than taking an overall view, nevertheless it would have been a more appropriate and safer approach to have made "an overall assessment". The approach adopted by the primary judge led him, so the Full Court thought, to err in treating differently the jointly owned assets and those owned solely by the husband.
6. Both sets of assets, the Full Court points out, were acquired from the profits, both income and capital gains, of the businesses conducted by the husband and wife over the years. To allow the wife an entitlement of only 20% of the value of the assets owned solely by the husband was, in the opinion of the Full Court, to give no real weight to the way in which the assets of the partners were built up, the financial contribution made by the wife in the earlier years, her contribution as a wife over twenty-nine years of cohabitation and her care of the three children of the marriage. It also failed, according to the Full Court, to give sufficient weight to the greater potential for financial improvement of the husband in comparison with that of the wife. To achieve a just and equitable result it was necessary, in the view of the Full Court, to allow the wife an entitlement of 50% overall of the value of both the jointly owned assets and those owned solely by the husband.
7. This approach is to be explained first by reference to s.79(4) of the
Family Law Act, which requires the Court in considering
what order should be
made under s.79 to take into account, amongst other things:
"(a) the financial contribution made directly or
indirectly by or on behalf of a party ...
to the acquisition, conservation or
improvement of the property, or otherwise
in relation to the property;
(b) the contribution made directly or indirectly
to the acquisition, conservation or
improvement of the property by either party,
including any contribution made in the
capacity of homemaker or parent;"
8. It is then necessary to refer to a body of cases in the Family Court which examine what is meant by the expression "any contribution made in the capacity of homemaker or parent": Potthoff (1978) FLC 90-475, at p.77,446; Rolfe (1979) FLC 90-629, at pp.78,272-78,273; Wardman and Hudson (1978) FLC 90-466, at p.77,384; Crawford (1979) FLC 90-647, at pp.78,410-78,411; Aroney (1979) FLC 90-709, at pp. 78,785, 78,789; Albany (1980) FLC 90-905, at p.75,721; Dupont (No.3) (1981) FLC 91-103, at p.76,765; Mahon (1982) FLC 91-242, at p.77,333; Zdravkovic (1982) FLC 91-220, at pp.77,207-77,208; Racine and Hemmett (1982) FLC 91-277, at p.77,574. In those cases it is pointed out that the contribution of a homemaker or parent is to free the other party to the marriage, usually the husband or father, to devote his time and energy to the pursuit of financial gain and so to make a real and substantial contribution to the acquisition, conservation or improvement of property where the moneys gained are used for any of those purposes. There can be no doubt that this is a correct explanation of the policy which lies behind this aspect of the legislation.
9. However, some of the cases may be seen to have gone further and to say
that where the husband is the breadwinner and the wife
has accepted the role
of homemaker and parent, the only just and equitable basis for an order under
s.79 of the Act, or at least
the starting point, is an equal entitlement of
husband and wife to property acquired during the existence
of that
relationship.
For example, in Rolfe, above, at p.78,273 Evatt C.J. expressed
the view:
"While the parties reside together, the one earningNo doubt such an approach is appropriate in those cases where the financial contribution of the husband does not extend beyond the provision of the family home and the acquisition of savings to provide support for both parties to the marriage in retirement. It may well be appropriate in other cases where the husband's contribution extends beyond the matrimonial home and any savings from earnings to the acquisition of property for commercial purposes. There is no necessary distinction between the acquisition of a matrimonial home or savings for retirement and the acquisition of other assets. If the husband is freed to acquire the one he may equally be freed to acquire the other. Indeed, the purchase of a matrimonial home may be avoided or postponed in order to build up assets of a commercial nature. See Aroney, above, at p.78,785. But it does not follow in every case where the husband earns the family income and the wife carries out her responsibilities in the home that the contribution of each to property acquired during cohabitation should be regarded as equal. If, for example, the husband is engaged in conducting a business, the nature of the business, the skills which the husband applies in it, the way in which he applies those skills and the manner in which the business has been built up, are all factors which may indicate that it is inappropriate to assume equality of contribution towards the acquisition, conservation or improvement of property during the subsistence of the marriage.
and the other fulfilling responsibilities in the
home, there is no reason to attach greater value to
the contribution of one than to that of the other.
This is the way they arrange their affairs and the
contribution of each should be given equal value."
10. To say this may amount to no more than a recognition of the requirement of s.79(2) of the Act that the Court shall not make an order under the section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. That is the overriding requirement and it admits of no presumptions in the consideration of the relevant circumstances, including those which s.79(4) requires the Court to take into account. For that reason it is misleading, in my view, to speak, as the cases do, of equality of contribution between husband and wife as the starting point in the consideration of their property interests. A starting point is, in reality, another name for a presumption and to prescribe a starting point is to invite a disregard for the requirements of the section. Of course, in many cases, the circumstances in which the parties to the marriage acquired their property will immediately suggest that the proper principle to be applied to achieve justice and equity is equality of interest, but this will be because of the circumstances themselves and not because of the application of an extrinsic principle or presumption.
11. Against this background, I think that it may be seen how the Full Court
was led to vary the order made by Bell J. as it did.
For it expressed itself
in the following way:
"It is appropriate to point out again that there isThe length of the marriage does not of itself indicate that a convenient starting point for the consideration of property interests is equality of contribution between husband and wife. And when regard is had to the actual circumstances of the marriage in this case it is no guide to the true situation. The financial contribution, direct or indirect, by the wife to the business carried on by the husband was small. It is true that the funds of the business in which the wife had an interest were used to acquire property, but it seems to me that any contribution by the wife in this respect remains an indirect contribution. In any event, the extent of that contribution was ultimately taken into account in the valuation of her shareholding. The business, as Bell J. found, was built up by long hours of work on the part of the husband and by his seizing opportunities as they arose and by careful investment. Eventually what had begun as a one-man plumbing business became a contracting business of a much more sophisticated nature. Except for some assistance at the beginning, the wife played no direct part in the development of the business. The true position is reflected in this passage from the judgment of Bell J.:
no 'principle' in family law that equality is
equity. In the first instance with respect to
sections such as Sections 72 and 79 where the Court
is given a discretion it cannot lay down principles
for to do so would be a fetter to its own
discretion. In the second place the cases which
refer to equality do not lay it down as a principle
but merely as a convenient starting point where the
matter at issue involves a long marriage."
"In summary, this marriage which lasted some
twenty-nine years, was a marriage in which the
parties originally suffered financial difficulties
but as a result of the hard work of the husband and
his ability, as well as to an extent the assistance
of the wife to the husband, the parties by 1974
found themselves in a much better financial
position, and from about 1974 until the date of
separation, both the parties lived at a very high
standard. The wife has had the responsibilities of
looking after the children in their formative years
when the parties were in straightened financial
circumstances."
12. Having regard to the findings made by Bell J. it seems to me that it was well within the proper limits of his discretion to conclude that justice and equity did not require that the wife should have the benefit of more than 20% of the value of the assets acquired by the husband alone. To have reached that conclusion does not indicate a failure on the part of the primary judge to take into account, or to give sufficient weight to, the contribution of the wife, whether as a homemaker or parent or otherwise. No doubt in reaching this conclusion Bell J. had in mind the entitlement of the wife in relation to the jointly owned assets. But no direct comparison can validly be made between the 50% entitlement which Bell J. found in relation to those assets and the 20% entitlement which he found in relation to the assets owned solely by the husband, for in the case of the jointly owned assets the assessment of her entitlement reflects only the true position so far as ownership is concerned and does not of itself effect an alteration of interests which would necessitate the observance of the requirements of s.79.
13. It is difficult to know precisely what the Full Court meant by its observation that Bell J. failed to give sufficient weight to the greater potential for financial improvement of the husband in comparison with that of the wife. To the extent that it is a reference to the future capital growth of Mallet Holdings Pty. Ltd., the amount which Bell J. allowed the wife for her shares in that company took into account its future potential because the method adopted to arrive at the value of the shares was the capitalization of future maintainable earnings. This was recognized by the Full Court and it was not suggested that the rate of capitalization adopted by the primary judge was inappropriate. Rather the Full Court was of the view that future capital growth was given no or not sufficient weight in the overall assessment. But the lump sum which the wife was to receive under the order could be invested by the wife to provide both income and capital growth. Indeed, Bell J. proceeded upon the basis that the wife had no significant earning capacity and found that the amount which he provided for her was sufficient, after the purchase of a house, to produce an adequate income by investment of the residue. The only statutory requirement with respect to earning capacity is that contained in s.79(4)(c), which requires the Court to take into account the effect of any proposed order upon the earning capacity of either party. Even if that can be construed so as to require a comparison of the earning capacities of the parties (and I doubt that that was the intent) there is no reason to suppose that Bell J. did not make the necessary comparison. I am unable to see that there was any error on the part of the primary judge in this aspect of the case.
14. The principles to be applied by an appellate court in reviewing the exercise of a judicial discretion such as that exercised by Bell J. are well established by authority. The cases are discussed in the judgments of Mason J. and Wilson J. and I agree with what they say about them. It is sufficient to remark that in my view there was no error on the part of the primary judge. It has not been demonstrated that he acted upon any incorrect principle or that he failed to take into account those matters which he was required to consider. His findings of fact were not disputed in any relevant respect nor is it apparent that he failed to give sufficient weight to any relevant factor.
15. I should add that in my view it is not open to this Court to question the valuation of the shares in the family company arrived at by the primary judge. In particular, it is not open to conclude that Bell J. should have accorded greater significance to the asset backing of those shares and to reason that his failure to do so justified the conclusion of the Full Court that the allowance to the wife of 20% of the value of the husband's solely owned property was inadequate. The Full Court accepted the primary judge's valuation of the shares. There is no appeal from its conclusion in this regard. That matter was not raised by any ground of appeal and no argument was addressed to us upon the method of valuation adopted or upon the correctness of that valuation. In any event, it does not appear to me to be a sound approach to uphold the conclusion of the Full Court with regard to the husband's solely-owned property by rejecting the trial judge's valuation of shares in the family company when the Full Court's conclusion is based upon an acceptance of that valuation.
16. Upon the question of costs I agree with the conclusion of Wilson J. and with his reasons for reaching that conclusion.
17. I would allow the appeal and restore the order made by Bell J.
ORDER
Appeal allowed.
Judgment of the Full Court of the Family Court set asideand in lieu thereof order that the appeal to that Court be dismissed.
No order as to the costs of the appeal.
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