Special contributions

Every now and then a family law case makes it to the news headlines. Most often these cases involve parenting matters – such as the ‘Italian case’ which was sensationally splashed across the front pages of the papers last year. But, as indicated in my post last week on the ‘Pole Dancer case’ sometimes the complexities of property division matters will garner some attention as well.

Late last week an appeal decision from the Family Court did just that – the case of Kane & Kane [2013] FamCAFC 205.

This case was an appeal from a decision of a Judge who found that the husband’s contributions to the parties’ superannuation fund were substantially greater than that of the wife due to his acumen and successful investment and therefore the husband was entitled to a greater division of the superannuation fund upon separation.

The parties began living together in 1980 and separated in June 2009 – a relationship of almost 30 years. There were four children of the relationship – the youngest was 18 at the time of the hearing.

In 1993 the parties established a company (known as “K Company in the proceedings) which was involved in a number of successful businesses. The parties sold the assets of the K Company in 2008 and received net proceeds of $1,650,000. They then established a family superannuation fund (known as “R Investments”) – and from the $1,650,000 proceeds of sale of K Company the parties paid $979,400 into R Investments.

After the establishment of R Investments, the husband decided, after researching, to invest a large proportion of the superannuation funds in purchasing shares in a company (known as Company 1). The wife did not agree but despite this the husband used $539,500 from R Investments to purchase the shares in Company 1. At the hearing the shares were worth $1,850,000. 

At the hearing the parties agreed that the contributions they each made during the marriage were equal save for the contributions to R Investments.

The Judge found that the parties had contributed equally to the funds that were used to purchase the shares in Company 1; the increase in value of the parties shares in Company 1 was beyond ordinary market forces; the husband’s investment and subsequent increase in the value of the parties superannuation fund was a “special contribution” on behalf of the husband; and the husband was therefore entitled to a higher percentage of the parties assets. The Judge ordered that the superannuation fund, R Investments, be divided two-thirds to the husband and one-third to the wife – meaning that the husband received around $1,000,000 more than the wife. All of the other assets, worth about $800,000, were divided equally.

The wife appealed that decision – and on 18 December 2013 won the appeal.

In the judgement of the Full Court of the Family Court, Justice May and Justice Johnston said:

“We accept that his Honour was entitled, as part of the overall process, to conclude that the husband’s contributions to the superannuation fund were greater than those of the wife by reason of his diligence, effort and judgment in the purchase of the shares.

We would pause here to observe the obvious, that had this investment decision caused the loss of a substantial part of the parties’ superannuation funds it is unlikely that the husband would have been claiming such a contribution. It is also notable that the husband did not have any professional qualifications nor did he have any special knowledge of the business in which he had invested although it must be acknowledged, the husband had been a successful business man. The husband took a calculated risk with the parties’ money, which fortunately proved correct.”

But of wider interest is that the Full Court of the Family Court concluded, as stated by Deputy Chief Justice Faulks that:

“To the extent that the trial judge believed himself to be obliged by authority to determine the division of the property of the parties by reference to some doctrine acknowledging 'special skills' in my opinion ... he was mistaken. The act does not require and in my opinion the authorities do not mandate, any such doctrine and if judgments of the Full Court of this court might be thought to have espoused such a principle in my opinion, they should no longer be regarded as binding.”

The Kane & Kane case is thus said to have significantly challenged the “special contribution” doctrine which has previously seen one party claim a significant portion of the assets if they could show their special skill contributed to the acquisition or maintenance of the asset/s.

This “special contribution” doctrine has been in and around Family Law cases for the past 10-20 years and in some cases recognition of a contribution of a special or exceptional nature has resulted in the husband (the one who made the special contribution) receiving significantly more of the asset pool – sometimes +75%.

 

The Kane & Kane decision is said to mean that more cases are going to be more equal – if the assets were all acquired, maintained or built up during the relationship than the contributions are more likely to be equal. But it is important to note that the  Kane & Kane decision does not mean that at some time there wont be a case where the one party has, through a unique skill, contributed more than the other – just that Judges are no longer obliged to follow any “special contribution doctrine” and each case has to be examined on its own facts.