22 Oct 2014

Up until recently, it has been possible to argue in family law property matters that one party has made contributions to the asset pool by way of “special” contributions”.  Such “special” contributions were typically regarded as contributions made, for example, by way of the creation of a successful business particularly through exceptional business acumen or skill.  Arguments in support of “special contributions” were largely along the lines of the party being entitled to a greater proportion of the asset pool because his or her specific and particular skills had been solely or mostly responsible for a substantial increase in the size of the asset pool.  It followed from this, therefore, that should be entitled to a greater proportion of the asset pool.

 

Special contributions have always been a contentious area of family law property matters.  This controversy has been largely to do with the fact that special contributions seemed to be applicable only to financial contributions rather than contributions to homemaking and parenting.  Further difficulties arose as a result of the following issues:

 

  • There was nothing in the Family Law Act to support the idea of special contributions (that is, no legislative basis for the doctrine of special contributions)
  • There was no reason why the idea of special contributions couldn’t be applied to homemaker and parenting contributions but in reality, this never occurred;
  • It was hard to know when the doctrine should apply and when it shouldn’t – usually it was argued in cases where there was a large asset pool, but again, there was no legislative basis for this and the decision was largely arbitrary;
  • Usually the husband reaped financial rewards as a result of the application of the doctrine.  In reality, both parties usually bore the risk of investments made with joint funds, and both parties suffered financial loss if the investment failed.

 

The doctrine of ‘”special” contributions was recently rejected by the Full Court of the Family Court in Kane v Kane [2013] FamCAFC 205.  In this case the parties had been married for almost 30 years. The issue on appeal was whether the trial judge’s treatment of the parties’ contributions towards the self-managed fund was just and equitable. In 2008, the Husband had decided (without the support of the Wife) to invest $539,500 to purchase shares in a company of his choosing. At the time of the trial at first instance, the shares were worth $1,850,000. The trial judge gave the Husband credit for ‘special skills’ in increasing the value of the superannuation funds, and treated the contributions of the parties to the super fund in equal thirds.

 

On appeal, it was argued by the Wife that the trial judge had decided the matter outside of the wide discretion afforded by s79, and had erred in finding that there is a doctrine of “special contributions”  On cross appeal the Husband argued his investment skills, and specifically his contribution to the increase in value of the super fund, justified a 75%/25% division of the fund in his favour. In deciding the appeal, The Full Court of the Family Court held that there was no doctrine of ‘special skills or contributions’ and that the trial judge’s decision to allocate 63.55% of the superannuation pool to the husband gave excessive weight to his contribution to the super fund, and resulted in orders that were not just and equitable in the circumstances.

 

In the recent decision of Hoffman and Hoffman [2014] FamCAFC 92, the Full Court reaffirmed that there is no legislative principal under s 79 of the Family Law Act 1975 (Cth) that supports an argument that financial contributions are more important than other contributions.  At first instance, Brewster FM determined that the property of the parties be divided equally.  The parties had cohabited for 36 years, and the

property pool had a net value of almost $10 million.  Brewster FM had not applied any doctrine of “special contributions” in determining the property division, and had in fact explicitly stated that “(p)ut shortly I do not accept the principle (if it be a principle) of special contributions.”

On appeal the Husband argued that his “special skills and entrepreneurial flair” in property “acquisition, development and value adding” were crucial to the parties accumulation of assets.  On that basis, he argued that he ought to receive a greater percentage of the property pool. The Full Court disagreed, stating that the trial judge was not required to take into account special contributions and that there was no binding rule that renders the direct contributions of income or capital more important or ‘special’ when compared against indirect contributions and, in particular contributions to the home or the welfare of the family.  The Full Court dismissed the Husband’s appeal and ordered that he pay the Wife’s costs.

 

This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.

 

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