Wednesday 9 July 2014

'Special contributions' concept "a terrible mistake"

Earlier in the year I wrote a post on the case of Kane & Kane, a big money property division case that made the headlines when the adjustment that had been made in favour of the husband for "special contributions" by the trial judge was overturned by the Appeal Court: http://lawyerfamily.blogspot.com.au/2014/01/special-contributions.html. Now another "special contribution" case has wound its way through the appeals process: Hoffman & Hoffman 2014 FamCAFC 92.

On 11 January 2013 Federal Magistrate Brewster made property division orders between Mr and Mrs Hoffman in relation to their 36 year marriage. His Honour divided the property and superannuation of about $10,000,000 between the parties equally.

Mr Hoffman appealed those Orders.

Mr Hoffman, who represented himself at the Appeal, argued that the Federal Magistrate erred in law by failing to have regard to his "special contributions" to the marriage or alternatively that the Federal Magistrate failed to place sufficient weight on his "special contributions".

In the first instance decision Federal Magistrate Brewster found that there was "nothing unusual about the parties contributions during their relationship. They commenced their relationship a long time ago. Each brought property into the relationship.… The difference in the values of these properties is no longer relevant. During a long marriage they each earned income.… The parties raised four children."

His Honour then went on to say "where the court is dealing with a situation where there is a long marriage with children and where the parties have made contributions in different spheres it is usually inappropriate to give greater weight to one party's contribution than those of the other…. There have been exceptions to this approach however. These have been in what have been called "big money" cases. In cases in the past where the parties have acquired a very substantial fortune and this has been due to the particular skills of the husband (in all the cases of which I'm aware it has been the husband) then adjustment has sometimes been made to reflect what is often termed the "special contribution" he has made."

Mr Hoffman had argued that the couple's asset should be split 70:30 in his favour in recognition of his "skill" and "entrepreneurial flair"- in particular in relation to selecting, maintaining and trading shares.

His Honour rejected the husband's assertion that he should be given an adjustment based upon his "special contributions".

Indeed the Judge went on to say that "… I do not accept the principal (if it be a principle) of special contributions". His Honour reviewed the decision of the High Court in Mallet v Mallet [1984] and said that the decision "need not and should not be followed" as the decision is "infected by gender bias" and "the zeitgeist in 1984 when Mallet was decided was vastly different to the zeitgeist today".

The Appeal Court (constituted by Deputy Chief Justice John Faulks, Justice Peter Murphy and Justice Garry Watts) said "to the extent that His Honour's judgement is to the effect that there is no binding rule of law relating to "special contributions" His Honour is, in our view, correct." The Appeal Court went on to say "we do not consider that there is any "legitimate guideline" of "special contributions" or any such guideline pertaining to particular contributions containing "special" factors or features…"

Indeed the Appeal Court said "we consider that the true position is, with respect, put correctly and succinctly by Justice O'Ryan in D & D [2005]: "… The notion of special contribution has all been a terrible mistake… What I have to do is identify and assess the contributions made by each of the parties without any presumption of entitlement."

The Appeal Court dismissed the husband's appeal and ordered that he pay the costs of the wife for the appeal.

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