Wednesday, 6 March 2013

Amazing property settlement judgment: the Little Red Hen rocks!

Most of the time as a lawyer I read cases that seem as dry as dust, but on occasion out leap cases that combine amazing features. Such a case was the recent Federal Magistrates Court case of Hoffman and Hoffman, concerning contributions on property settlement, which had me laughing in parts, and gasping at others.

The case concerned the old argument that if a husband and wife manage to get wealthy through their marriage due to good luck and management, that must be due to one party, almost invariably the husband, having some special skills.

This special skills argument is  usuallyonly raised in cases of people who are wealthy.

In this case Federal Magistrate Jim Brewster combined the following amazing elements in rejecting the special skills argument:

  • gender bias (including when some High Court judges were born)
  • apples and pears v apples and carrots
  • zeitgeist
  • Jessie Street
  • Eleanor Roosevelt
  • Churchill
  • a clanking ghost
  • and of course the Little Red Hen
Here we go on the rollercoaster:

Debunking Mallett

The first leading case on point was the High Court 1984 decision of Mallett. His Honour said :

  1. There are two fundamental problems with Mallet. The first is that it assumes that there is some meaningful way in which financial contributions and non-financial contributions can be compared. In my opinion there is no way in which this exercise can be meaningfully conducted. It is like comparing apples and pears. Indeed that is not an ideal analogy as both these items are fruit. A better analogy might be comparing apples and carrots.
  2. Linked with this is that it appeared to be assumed that one could usefully engage in an exercise of assessing the value to be attributed to non-financial contributions. Wilson J said as follows:
  3. The contribution (that is a contribution as a homemaker and parent) must be assessed, not in any merely token way, but in terms of its true worth to the building up of the assets. However, equality will be the measure, other things being equal, only if the quality of the respective contributions of husband and wife, each judged by reference to their own sphere, are equal. The quality of the contribution made by a wife as home maker or parent may vary enormously, from the inadequate to the adequate to the exceptionally good. She may be an admirable housewife in every way or she may fulfil little more than minimal requirements. Similarly the contribution of the breadwinner may vary enormously and deserves to be evaluated in comparison with that of the other party. It follows that it cannot be said of every case where the parties reside together that equal value must be attributed to the contribution of each. That will be appropriate only to the extent that the respective contributions of the parties are each made to an equivalent degree.
  4. In my opinion the reasoning behind this passage bristles with problems. Take for example an extremely wealthy family where a nanny is employed to do the routine work associated with caring for the children, a cook to prepare the food and a housekeeper to attend to the housework. If Wilson J’s views were followed to their logical conclusion the wife would have marks deducted when it came to a contribution based assessment. Also, fortunately, the profession has, with very few exceptions, not taken up his Honour’s invitation to explore the quality of a homemaker’s contribution.
  5. I have seen cases and articles concerning high flying husbands (I cannot recall the details) where reference has been made to a wife fulfilling what was “expected” of her during a marriage. Thus the wife might be “expected” to be a gracious hostess entertaining the husband’s business clients and to otherwise be an adornment to him. Presumably therefore a wife who is shy and awkward and lacks the gift of “small talk” would be marked down. Presumably also an outspoken wife such as a Jessie Street or an Eleanor Roosevelt, who might embarrass her husband with her radical views, would also lose points.
  6. The second problem is that, in my opinion, Mallet is infected by gender bias. This is not a criticism of the justices in the case. They were born between 1917 and 1933. The zeitgeist of the era when they grew up, and the zeitgeist in 1984 when Mallet was decided, was vastly different to the zeitgeist today. Under the approach taken in Mallet the dice was loaded against a wife who performed a role as homemaker and parent. One might ask how she could compete with a high flying businessman. Clean the floors such that one could eat off them? Iron her husband’s shirts to within an inch of their lives? Make the bathroom tiles sparkle such that one has to put on sunglasses to take a shower?
Debunking Ferraro
 
The other leading case about special skills was the Full Court of the Family Court case of Ferraro.
 
This is what the trial judge said, followed by Federal Magistrate Brewster's caustic comments:
 
  • The parties’ property empire blossomed because the husband had the innate drive, skills and abilities to enable him to succeed in his chosen occupation, whereas the wife’s contribution was neither greater nor less than when the husband had been a carpenter. To equalize the parties’ contributions is akin to comparing the contribution of the creator of Sissinghurst Gardens, whose breadth of vision and imagination, talent, drive and endeavours led to the creation of the most beautiful garden in England, with that of the gardener who assisted with the tilling of the soil and the weeding of the beds.
  • Considering, and contrasting, the contribution of the husband and wife, I assess the parties’ contribution to all the items of property as follows: 70% the husband: 30% the wife.
  • One can see that in these circumstances the wife had no chance. The comments I have earlier made in relation to the zeitgeist in Mallet are apposite. Even allowing for this however I find the comparison where the entrepreneurial efforts of the husband are likened to a top line landscape architect and the wife’s contributions as a homemaker and parent as being the equivalent of the menial nature of the work of a gardener who tills the soil and weeds the beds to be quite offensive.
  •  
    His Honour went on to say about the Full Court:
     
    1. where one would get the impression that the Full Court was proposing to order an equal division of the parties’ assets. However what it said and what it did were not congruent. It was prepared to wound but afraid to strike. In the result, whilst it allowed the wife’s appeal, it simply increased her share of property from 30% to 37.5%. The reason for this was that, by reason of the husband’s working long hours she performed the domestic duties without any real assistance from him. The Court found therefore that the trial judge had undervalued the wife’s contributions. One wonders what the result would have been if she had domestic help to assist. If the Full Court’s reasoning is taken to its logical conclusion presumably the trial judge’s 40% differential would have remained undisturbed.
    1. I will not dilate further on Ferraro save to say that, when analysing why the Court did not grasp the nettle and order an equal division, it is apparent that Mallet played a crucial role.

    The ghost of Mallett

    His Honour distinguished Mallett and then said:

    1. in my opinion, Mallet is a decision which need not and should not be followed. To paraphrase Lord Atkin in United Australia v Barclays Bank[7], today, when the ghost of Mallet stands in the path of a just and equitable outcome, clanking its gender biased chains, the proper course for a judge is to pass through it undeterred.
    2. To summarise, in my opinion Mallet can be disregarded and Ferraro likewise. The same can be said of the cases which followed Ferraro. In my opinion Mallet and Ferraro have cast a dark shadow over the jurisprudence in this area. Figgins has, to borrow a phrase from Winston Churchill, pointed the path to sunlit uplands. Lambert followed that path to those uplands. And it did not just follow that path. To use another quotation, this time from Isaiah, it made the crooked straight and the rough places plain. And plain in more than one sense of the word. As I have indicated I respectfully adopt and apply the reasoning in that case.
    3. However if it be felt that I need an additional arrow in my quiver to reject the husband’s special contribution claim I believe I can find one. If I were to adopt the jurisprudence of the Full Court (which I regard as flawed but need not explain why) I believe I can legitimately confine Ferraro and its successors to true “big money” cases and find that the pool in this case, which is less than $10 million, does not put it in that category. I will list the “special contributions” Full Court cases of which I am aware and the approximate pool in each of them.
    Judges shouldn't muse
     
    His Honour said:
    In the case of Smith & Fields[9] to which I was referred by Ms Tonkin who appeared for the wife, Murphy J under the heading of “The Nature of the Matrimonial Relationship” observed that in that case there was a “practical union of both lives and property” (quoting Deane J in Mallet). As I understand the position of the husband he would say that there was no such union in this case nor any “partnership” in the building up of the asset pool. He would maintain that the wife was indifferent when it came to the acquisition or management of the assets that he built up over the years. As he put it she preferred to play mah-jong and read books.
     
    1. For my part I do not find it a useful exercise to engage in philosophical musings as to “The Nature of the Matrimonial Relationship” or to try to categorise or pigeonhole the contributions of a wife in a position of Ms Hoffman when seeking to justify an equal division of assets after a long marriage. It does not appear to me to be productive to explore such questions as whether she was “supportive” of the husband’s ventures or not (in this case the husband would say she was not supportive). If she was not supportive it is not, in my view, helpful to explore whether her lack of support was a result of indifference, disapproval, or simply leaving such matters to the party who had greater skill and knowledge in relation to those ventures. I add that in my opinion, given that the Family Law Courts now have jurisdiction over property disputed involving de facto relationships, they might be painting themselves into a jurisprudential corner by engaging in such an exercise.

    1. Also it is an unusual case where one can really understand the dynamics of a relationship and make confident findings about such matters. Invariably such dynamics are complicated. Each party to a failed relationship inevitably views those dynamics through subjective lenses. The result is that those dynamics are usually described in the parties’ affidavits in a simple black and white way. I have no doubt that Mr Hoffman feels now that his former wife was never supportive of his endeavours. Whether or not that is how it was cannot now be ascertained.
     
    The little Red Hen
     
     
    1. The wife’s case for a 55% share of the asset pool is, as I have indicated, based on a contention that no distinction should be drawn between the contributions made by each up until separation and that had this case been decided shortly after separation an equal division would be appropriate. Her claim for an additional 5% is essentially that the husband has received the bulk of the income derived from the parties’ properties and investments since separation.
     
  • There are a number of answers to this.
  • The first is that whilst the husband has received a substantial income the wife has not been left destitute. She has received a significant income herself and lives rent free in her present residence.
  • As I have indicated the husband has not sat on his hands. He has managed the properties involved and managed the share portfolio. He outlined in evidence the extensive research he undertakes in managing the share portfolio. I have not found that his efforts alone were responsible for the growth of the portfolio but that is not the same as concluding that they did not contribute to that growth.
  • Whilst I have declined to allow the husband to use his special skills and efforts as a sword in these proceedings I believe it would be unjust if he could not use them as a shield. If necessary I will call into aid section 75(2)(o) to justify this. Whilst there may have been elements of luck involved in the amassing of the family fortune I have no doubt that, but for the husband’s skill, dedication and expertise, the parties would never have acquired an asset pool to a value of almost $10 million. The husband is now faced with a claim by the wife that, seeing he has in the period since separation enjoyed the benefits that flow from his efforts, she should receive a greater share of the pool. I believe he would be justifiably aggrieved were I to accede to her application. An analogy might be made to the story of the Little Red Hen. She would doubtless have felt justifiably aggrieved if the owner of her farm had intervened and ordered her to share her bread with the other animals who had played no part in its production and indeed had specifically declined to do so.
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