In the Marriage of Mallet [1984] HCA 21

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.

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").

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 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 straitened financial circumstances. There are three children of the marriage. They are now aged approximately thirty-three years, thirty-two years and twenty years respectively and each is independent.

Bell J. valued the total assets of the parties as follows:

Joint property $240,662 Husband's assets 261,077 Shares in Mallet Holdings Pty. Ltd. 173,992 Wife's assets (approximately) 5,700 Total $681,431

In the result, his Honour determined the property issues by making orders to the following effect:

(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.

He dismissed the wife's application for maintenance.

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 twofold. 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.

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.

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 in relation to the fact of the failure of the wife to convince me of those matters to which he has referred but he then continued - 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.

Section 117 of the Act deals with the question of costs. So far as material, it reads:

(1) Subject to sub-section (2) , each 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.

These provisions were examined by this Court in Penfold v. Penfold [49] . In a joint judgment, Stephen, Mason, Aickin and Wilson JJ. said [50] : It is an accurate description of s. 117(1) to 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.

With 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. 1. (1980) 144 C.L.R. 311. 2. (1980) 144 C.L.R., at p. 315.

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 am 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 per cent of the value of these amounts and such amounts to $52,200 (rounded off). The 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.

The Full Court had some difficulty in understanding how Bell J. came to award the wife only a 20 per cent 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 in 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 twenty-nine 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 per cent figure overall.

Later in their reasons, their Honours referred to the wife's ground of appeal based on an asserted principle that "equality is equity" and said: 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 ss. 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.

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.

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 [51] , 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 [52] . 1. (1953) 94 C.L.R. 621, at p. 627. 2. (1936) 55 C.L.R. 499, at pp. 504, 505.

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.

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."

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 homemaker 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 In the Marriage of Racine and Hemmett [53] ; In the Marriage of Wardman and Hudson [54] ; In the Marriage of Potthoff [55] ; In the Marriage of Crawford [56] ; In the Marriage of Rolfe [57] ; In the Marriage of Zdravkovic [58] ; In the Marriage of Mahon [59] . In the earliest of these cases, Rolfe [57] , reported in 1979 but in which judgment was delivered on 28 April 1977, Evatt C.J. referred to s. 79(4)(b), saying:

The purpose of s. 79(4)(b), in my opinion, is to ensure just and equitable treatment of a wife who has not earned income during the marriage, but who has contributed as a homemaker 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 responsibility 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 recognized 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. With 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 homemaker 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 homemaker 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. 1. (1982) 8 Fam. L.R. 716, at p. 717; [1982] F.L.C. 77,572, at p. 77,574. 2. (1978) 33 F.L.R. 196; 5 Fam. L.R. 889; [1978] F.L.C. 77,380. 3. (1978) 30 F.L.R. 571n.; 4 Fam. L.R. 267; [1978] F.L.C. 77,443. 4. (1979) 35 F.L.R. 489, at pp. 495-496; 25 A.L.R. 82, at p. 87; 5 Fam. L.R. 106, at p. 110; [1979] F.L.C. 78,407, at p. 78,411. 5. (1978) 25 A.L.R., at p. 219; 5 Fam. L.R., at p. 148; [1979] F.L.C., at pp. 78,272-78,273. 6. (1982) 8 Fam. L.R. 97, at p. 103; [1982] F.L.C. 77,202, at p. 77,207. 7. [1982] F.L.C. 77,331, at p. 77,333. 8. (1978) 25 A.L.R., at p. 219; 5 Fam. L.R., at p. 148; [1979] F.L.C., at pp. 78,272-78,273.

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 per cent of the former but only 20 per cent 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 homemaker 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 per cent of such assets. It is clear that his Honour also had present to his mind the award of 50 per cent 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 per cent 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.

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 per cent 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 [60] ) 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 money 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.

1. (1974) 49 A.L.J.R., at p. 5; 5 A.L.R. 38, at p. 45.

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 equalize the financial strengths of the parties. It is to empower the court, following a dissolution of a marriage, to effect a redistribution 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.

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.

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.

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 $335,000 to $310,000. 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.

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. Ltd.

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 1975 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.

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., In the Marriage of Racine and Hemmett [61] ) 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., In the Marriage of Wardman and Hudson [62] . 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., In the Marriage of Aroney [63] ), there is no such legal rule or presumption.

1. (1982) 8 Fam. L.R. 716, at p. 717; [1982] F.L.C. 77,572, at p. 77,547. 2. (1978) 33 F.L.R. 196, at p. 204; 5 Fam. L.R. 889, at p. 894; [1978] F.L.C. 77,380, at p. 77,385. 3. (1979) 5 Fam. L.R. 535, at p. 544; [1979] F.L.C. 78,780, at p. 78,789.

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 is no "principle" in family law that equality is equity. In the first instance with respect to sections such as ss. 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. Nor, 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.

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 expertize 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.

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.

Mallet Holdings Pty. Ltd. ("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 100 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) 16 shares Husband as trustee for Paul (son) 16 shares Husband and wife as trustees for Celia (daughter) 16 shares

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 her or his shares will commonly have foregone a real likelihood of having been 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.

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".

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.

The primary judge's order in favour of the wife for the payment of costs assessed at $30,000 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 $30,000 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.

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).

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 $335,000 to $310,000. Otherwise, I would dismiss the appeal with costs.

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.

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.

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 per cent 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 per cent of its value.

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.

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.

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 per cent 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 per cent overall of the value of both the jointly owned assets and those owned solely by the husband.

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.

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":In the Marriage of Potthoff [64] ; In the Marriage of Rolfe [65] ; In the Marriage of Wardman and Hudson [66] ; In the Marriage of Crawford [67] ; In the Marriage of Aroney [68] ; In the Marriage of Albany [69] ; In the Marriage of Dupont [No. 3] [70] ; In the Marriage of Mahon [71] ; In the Marriage of Zdravkovic [72] ; In the Marriage of Racine and Hemmett [73] . 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.

1. (1978) 30 F.L.R. 571n.; 4 Fam. L.R. 267, at p. 271; [1978] F.L.C. 77,443, at p. 77,446. 2. (1977) 25 A.L.R., at p. 219; 5 Fam. L.R., at p. 148; [1979] F.L.C., at pp. 78,272-78,273. 3. (1978) 33 F.L.R. 196, at p. 203; [1978] F.L.C. 77,380, at p. 77,384. 4. (1979) 35 F.L.R. 489, at pp. 495-496; 25 A.L.R. 82, at p. 87; 5 F.L.R. 106, at p. 110; [1979] F.L.C. 78,407, at pp. 78,410-78,411. 5. (1979) 5 Fam. L.R. 535, at pp. 539-540; [1979] F.L.C. 78,780, at p. 78,785. 6. (1980) 6 Fam. L.R. 461, at p. 471; [1980] F.L.C. 75,713, at p. 75,721. 7. [1981] F.L.C. 76,756, at p. 76,765. 8. [1982] F.L.C. 77,331, at p. 77,333. 9. (1982) 8 Fam. L.R. 97, at p. 103; [1982] F.L.C. 77,202, at pp. 77,207-77,208. 10. (1982) 8 Fam. L.R. 716, at p. 717; [1982] F.L.C. 77,572, at p. 77,574.

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 In the Marriage of Rolfe [74] Evatt C.J. expressed the view:

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. No 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 In the Marriage of Aroney [75] . 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. 1. (1977) 25 A.L.R., at p. 219; 5 Fam. L.R., at p. 148; [1979] F.L.C., at p. 78,273. 2. (1979) 5 Fam. L.R., at pp. 539-540; [1979] F.L.C., at p. 78,785.

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.

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 is no "principle" in family law that equality is equity. In the first instance with respect to sections such as ss. 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. The 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.: 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 straitened financial circumstances.

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 per cent 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 per cent entitlement which Bell J. found in relation to those assets and the 20 per cent 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.

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.

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.

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 per cent 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.

Upon the question of costs I agree with the conclusion of Wilson J. and with his reasons for reaching that conclusion.

I would allow the appeal and restore the order made by Bell J.