Assessment of contributions is not maths

Assessment of contributions is not a mathematical or accounting exercise

Kirkland & Gorman [2016] FCCA 104 (17 March 2016)

The following is annotated. For full case: http://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/FCCA/2016/104.html?stem=0&synonyms=0&query=family%20law%20act

56. In Bevan & Bevan [2013] FamCAFC 116, the Full Court of the Family Court of Australia considered the High Court’s decision in Stanford & Stanford [2012] HCA 52, which provided guidance on how s79 was to be interpreted and implemented. Bevan endorsed the continuing application of the four-step approach articulated by the Full Court in Hickey & Hickey & Attorney General for the Commonwealth of Australia [2003] FamCA395, but on the basis that it is a shorthand distillation of the words of s.79, as opposed to being a statutory edict. The four steps articulated in Hickey at paragraph 39 are:
    1. Identify and value the property, liabilities and financial resources of the parties; and
    2. Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
    100. Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
    4. Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
57. The decisions in Stanford and Bevan also emphasise the importance of making findings that any order is just and equitable for the purposes of s.79(2), independent of the s.79(4) process. In most cases, such as the present one, it makes no difference to the outcome of the alteration of property interests exercise. Even if the just and equitable consideration were treated as a threshold issue in this case the parties have, by their actions (separation, and re-ordering of their financial lives since then), and claims (divergent claims about their property under s.79 of the Act), indicated that they themselves consider it just and equitable that some order be made under s.79 adjusting their property interests as presently held. It is clearly just and equitable in this case to make an order.
58. Both decisions also emphasise the importance of identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. This is not inconsistent with step one in Hickey.
59. Another issue in this case is how, precisely, the Court should weigh and assess the initial contribution made by the parties. In this regard, the Court needs to consider the decision of the Full Court in Pierce v Pierce (1998) FLC 92-844. A useful recent decision of the Full Court examines its earlier decision in Pierce v Pierce together with a later case. In Williams & Williams [2007] FamCA 313, the Full Court states as follows at paragraphs 26, 27, 28, 29 and 32:
    <li “=””>

    26. We think there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution between the parties Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing of the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in doing so it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.

<li “=””>

27. In Pierce v Pierce when speaking of the relevance to be paid to initial contributions the Full Court (Ellis, Baker and O’Ryan JJ) referred to Fogarty J in Money v Money (1994) FLC 92-485 at 81,054; (1994) 17 Fam LR 814 at 816:

<li “=””>

…respective contributions of the parties over a long period of marriage “offset” the significance which might otherwise be attached to a greater initial contribution by one party…ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be latter factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.

<li “=””>

28. The Full Court (Ellis, Baker and O’Ryan JJ) then said at [28]:

<li “=””>

In our opinion it is … a question of what weight is to be attached, in all the circumstances, to the initial contributions. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.

<li “=””>

29. Pierce v Pierce was a case in which the husband brought in $200,000 cash into the relationship. He applied that money towards the purchase of a matrimonial home. He was employed throughout the marriage and supported the wife who, whilst in some paid employment primarily attended to domestic tasks and taking care of the children. The Full Court assessed the parties’ respective contributions to a pool of $320,000 as 70 per cent in favour of the husband and 30 per cent in favour of the wife at the end of a 10 year relationship.

<li “=””>

32. In Hunt v Zuryn [2005] FamCA 287; (2005) FLC 93-226; (2005) 34 Fam LR 169 the Full Court (Kay, May and Boland JJ) allowed an appeal in a property case where a pool of assets of $1.12million had been assessed for contribution purposes as 75 per cent in favour of the husband and 25 per cent in favour of the wife. The Court in allowing the appeal indicated that an assessment of 75:25 fell outside the realms of an acceptable range saying at 79,730; 170:

<li “=””>

Such an assessment ought adequately recognise that much of the parties’ wealth can be attributed to the capital growth in the assets introduced by the husband at the commencement of the marriage but at the same time bringing into consideration a myriad of other contributions each made in the course of their relationship.

60. Accordingly, the Court must not only identify the contributions of each party, but also assess the weight to be attributed to these contributions having regard to many factors, including what has occurred afterwards.
61. The Father made a number of important submissions about the law to be applied in property cases, and it is necessary to deal with those submissions here. The Father submitted that the High Court’s decision in Stanford, and subsequent Full Court decisions including Bevan (both referred to above), go much further than has hitherto been reflected in the jurisprudence after those cases. The Father contended that Stanford in particular was authority for the proposition that alteration of property interests under ss.79 and 75 now have to be conducted strictly in accordance with the rules of equity and common law, and not in accordance with the “palm tree justice” that he, inferentially, submitted was reflected in the case law. This meant, for example, that the Court needed to look at actual contribution and, in effect, to adopt a mathematical approach to assess the contribution that each party to a relationship has made. He submitted that the exercise became an accounting exercise, whilst not ignoring non-financial contribution. A corollary of his interpretation of Stanford was that the length of the relationship was largely irrelevant to the assessment of contribution.
62. The Court pressed the Father to refer to those paragraphs in the High Court’s judgment in Stanford, or indeed any subsequent case law at all, that supported his submissions. He was unable to do so.
63. The Court rejects the Father’s interesting interpretation of the contemporary law. As recently as 2 October 2014, the Full Court in Eufrosin, & Eufrosin [2014] Fam CAFC 191 specifically rejected the contention that assessment of contributions is a mathematical exercise, and discussed at length the significance and reasoning for this: paragraphs 25-28:
    <li “=””>

    As this Court has reiterated on a number of occasions, the assessment of contributions is not a “mathematical exercise”. We consider the following extract from this Court’s decision in Bolger & Headon [2014] FamCAFC 27 to be apposite:

    <li “=””>

    23. This Court said some 20 years ago in Aleksovski v Aleksovski (1996) FLC 92-705, per Baker and Rowlands JJ at 83,437:

    <li “=””>

    It is therefore necessary that trial Judges weigh and assess the contributions of all kinds and from all sources made by each of the parties throughout the period of their cohabitation and then translate such assessment into a percentage of the overall property of the parties or provide for a transfer of property in specie in accordance with that assessment.

<li “=””>

It really comes down to questions of weight. Whilst weight would and must be given to a contribution which a party makes shortly before the separation, less weight may be given to a contribution made by one of the parties to a marriage early in the cohabitation period of a long marriage, particularly in circumstances where the contribution has gone into the parties’ assets or been used up in the payment of family expenses.

<li “=””>

24. Kay J held at 83,443:

<li “=””>

What is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship. Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportional weight because of those other elements.

<li “=””>

25. Of considerable significance to the approach of the trial Judge, this Court said in Dickons & Dickons [2012] FamCAFC 154:

<li “=””>

23. We wish also to refer to the approach of the Federal Magistrate in attributing percentages to differing periods within the relationship, or types of contribution made. There is in our view little to be gained, and much to be said against, approaching the task of assessing contributions by attaching percentages to components of it. (The same, it might be said, applies to attributing a percentage to each of the relevant s 75(2) factors).

<li “=””>

24. There can be little doubt that the classification of contributions by reference to terms such as “initial contributions”, “contributions during the relationship”, and “post-separation contributions”, can be helpful as a convenient means of giving coherent expression to the evidence in a s 79 case and to giving coherence to the nature, form and extent of the parties’ respective contributions. However, the task of assessing contributions is holistic and but part of a yet further holistic determination of what orders, if any, represent justice and equity in the particular circumstances of this particular relationship. So much is clear from the terms of s 79itself and, in particular, s 79(2). The essential task is to assess the nature, form and extent of the contributions of all types made by each of the parties within the context of an analysis of their particular relationship.

<li “=””>

26. In passages which resonate with the arguments in this appeal and the trial Judge’s reasons to which they relate, this Court went on to say:

<li “=””>

25. Doing so is also consistent with the demands of authority that the ultimate assessment of contributions should be made without “…giving over-zealous attention to the ascertainment of the parties’ contributions…” (Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 at 524) and the well-established recognition in the authorities (acknowledged specifically by her Honour in this case) that the process required of the Court by s 79 is the exercise of a wide discretion, not the performance of a mathematical or accounting exercise.

<li “=””>

26. The necessarily imprecise “wide discretion” inherent in what is required by the section is made no more precise or coherent by attributing percentage figures to arbitrary time frames or categorisations of contributions within the relationship. Indeed, we consider that doing so is contrary to the holistic analysis required by the section and, in the usual course of events, should be avoided.

<li “=””>

27. In the same year, in Lovine & Connor and Anor (2012) FLC 93-515, this Court said:

<li “=””>

42. As part of the process of ultimately determining just and equitable orders under s 79 there is included a complex of discretionary assessments and judgments of many components of contribution, only some of which are capable of measurement in money terms and then often only in historical, rather than present, money terms. Any dictate to the effect that in the course of assessment each disparate component part or kind of contribution must be assigned a discrete and identifiable value or percentage is antithetical to the nature of the discretion involved.

<li “=””>

28. We seek to respectfully repeat and emphasise the reference in Lovine to such an approach being “antithetical to the nature of the discretion involved” and the reference in Dickons to such an approach being avoided in the usual course of events. Doing so, we repeat, is not consistent with a holistic assessment of the parties’ contributions which is what s 79(4) requires.

<li “=””>

In our view, the arguments advanced on behalf of the husband (primarily, a weighting in favour of specific initial contributions) suggest an approach to assessing contributions which, as the authorities just quoted make plain, is at the least “…antithetical to the nature of the discretion involved” and “…should be avoided”.

<li “=””>

Her Honour plainly had regard to the fact that the husband had interests in a number of real properties as well as an interest in a corporate entity (Eufrosin Pty Ltd) at the commencement of the marriage (at [97]). It was open to her Honour to find that he had little equity in those properties as at the date of marriage (at [99]). Her Honour similarly had regard to the fact that at least some of those properties were used to secure borrowings which were, in turn, used to purchase further properties, including the former matrimonial home (at [26]) and that the parties used the sale proceeds from at least one of those properties for the purposes of the marriage, including to purchase investment properties (at [32], [37]-[38] and [105]).

<li “=””>

With respect to the husband, we consider that her Honour properly recognised the contributions of each party and, more specifically, her Honour “…weigh[ed] and assess[ed] the contributions of all kinds and from all sources made by each of the parties throughout the period of their cohabitation…” As this Court opined in Aleksovski (1996) FLC 92-705 at 83,437 “…less weight may be given to a contribution made by one of the parties to a marriage early in the cohabitation period of a long marriage, particularly in circumstances where the contribution has gone into the parties’ assets or been used up in the payment of family expenses” (emphasis added).

64. Even more recently, in Singerson & Joan [2014] Fam CAFC 238, at 61 the Full Court said, “distilling contributions by means of a calculation or mathematical equation is generally unhelpful.” Moreover, at paragraph 66 they said:
    <li “=””>

    Section 79(4) of the Act is clear. There is nothing to suggest that any category of contributions needs to be quarantined and applied solely to particular assets. The court is mandated to look at the totality of what the parties have contributed in a financial and non-financial sense, including contributions to the welfare of the family and to the acquisition, conservation and improvement of assets. The court is required to evaluate the significance of all the various contributions to the property, notwithstanding there may be different categories of that property.

65. The other important submission the Father made, and which needs to be dealt with firmly at this early stage in these reasons for judgment, is the submission he made about the Full Court’s decision in Kennon & Kennon [1997] FamCA 27. To put this in context, the Father’s submission was that he declined the appointment to the District Court of Queensland, thus losing $360,000 per annum, due to the Mother’s conduct.
66. As it turns out, and as will be dealt with briefly below, the Father’s argument fails because he has not established to the satisfaction of the Court what, exactly, the Mother’s conduct was, let alone that the conduct was causative of anything, making his contribution more arduous. The Court has already made findings that this was an unhappy relationship which caused both parents to suffer depressive-type disorders, but that falls well short of the “course of violent conduct by one party towards the other during the marriage” that was contemplated by the Full Court in Kennon.
67. Moreover, the Father ignores those other passages in the Full Court’s decision where it warns that, “it is important to consider the ‘floodgates’ argument”. That is, these principles which should only apply to exceptional cases, may become common coinage in property cases and be used inappropriately as tactical weapons or for personal attacks and so return this Court to fault and misconduct, a circumstance which proved so debilitating in the past. In addition, there is the risk of substantial additional time and cost. The Court rejects the Father’s claim based on Kennon, or that somehow the Full Court’s decision supports the contention he makes.