By Antony Kahn, Principal and Tom Fletcher, Law Clerk
The Full Court considers the weight to be given to the parties’ respective inheritances in assessing contributions, including how each inheritance was applied. The Full Court set aside property orders due to the failure of the primary judge to give adequate reasons.
The parties married in 1983 and separated in January 2016. The parties’ two children were adults by the time the parties separated.
Both parties received an inheritance during the marriage. In 2003, the wife inherited real property worth approximately $50,000. In 2006, the husband inherited real and personal property worth at least $405,000. Between 2007 and 2014, the husband transferred $161,103 of his inherited assets to the Roverati Family Trust. The husband and wife were the trustees and primary beneficiaries of the Trust. The husband’s inheritance was either reinvested or used to meet household expenses. Therefore, it directly benefited the parties. By contrast, the wife’s inheritance was transferred to a trust of which she and her three brothers were the trustees and their respective children were the beneficiaries. The income of this trust was distributed to the parties’ children and to the children of the wife’s siblings. The wife never received a distribution from this trust.
First instance decision
The judge at first instance assessed the parties’ respective contributions made over a marriage of long duration as having been equal, and determined that the assets of the marriage should be divided on a 50/50 basis.
The husband appealed the decision of the primary judge.
The husband’s appeal was determined by the Full Court of the Family Court of Australia comprised of Justices Strickland, Ryan and Austin.
Grounds of appeal
The husband put forward three grounds of appeal:
- The primary judge erred in assessing the contributions of the parties in giving no weight, or insufficient weight, to the inheritance received by the husband.
- The primary judge failed to consider the use to which the parties’ respective inheritances were applied in assessing the parties’ contributions.
- In assessing the contributions of the parties, the primary judge failed to give adequate reasons for his decision.
The primary ground agitated on behalf of the husband on appeal was Ground 3, which was a corollary of Grounds 1 and 2.
Justices Strickland and Ryan, constituting the majority, recognised that assessment of contributions is a holistic undertaking with all of the contributions of the parties of whatsoever nature being taken into account (per Dickons & Dickons (2012) 50 Fam LR 244 at  – ). However, their Honours were unable to discern from the primary judge’s reasons why the significantly greater financial contribution of the husband in the form of his inheritance had not resulted in an apportionment in his favour. There was no recognition that at least 30% of the asset pool had been derived from the husband’s inheritance. A crucial aspect of the husband’s case had been left unanswered by the primary judge. In upholding the husband’s appeal, Strickland and Ryan JJ held that the “leap” from words to figures (percentages) in the primary judge’s reasons was so great, and unsupported by the preceding discussion, as to render the primary judge’s reasoning process defective.
In the same way that the parties’ respective contributions via their inheritances had been overlooked by the trial judge, the majority upheld Ground 2 of the husband’s appeal, noting the apparent failure of the primary judge to consider the use to which each party’s inheritance had been put. The husband’s inheritance had benefited the parties whereas the wife’s inheritance had not.
Dissent of Austin J
In dissent, Justice Austin held that the husband’s appeal ought be dismissed. While His Honour recognised the greater value of the husband’s inheritance, Austin J argued that this factor must be weighed against the multitude of other contributions made by both parties over the 33 years of their marriage. Austin J referred to the wife’s greater capital contribution at marriage, her superior contribution as a parent and homemaker, and her more substantial employment history, as justifying the primary judge’s decision to divide assets equally between the parties. Accordingly, Austin J held that the primary judge’s reasons were adequate and would not have interfered with the first instance decision.
By majority, the Full Court allowed the husband’s appeal and re-exercised the discretion of the primary judge, assessing the parties’ contributions on a 55/45 basis in favour of the husband. It was common ground that there ought be no section 75(2) adjustment, so the ultimate outcome was a 55/45 division of assets in favour of the husband.
This case emphasises the importance of engaging with the quantum and timing of any inheritance received by a party, as well as the use to which that inheritance was put.
The majority held that the husband’s inheritance was too significant not to re-exercise the discretion of the primary judge. The majority suggested they were acutely aware of how inappropriate it would be to “tinker with” the percentages as found by the primary judge, having regard to the well settled principles applicable to appeals from discretionary judgments – yet ultimately only shifted the outcome by 5% in favour of the husband (the 10% differential resulted in the husband receiving approximately $65,000 more on appeal than he had at first instance). In support of his dissent, Austin J suggested the modest differential did not establish that the primary judge’s decision was plainly wrong because it exceeded the generous ambit within which reasonable disagreement is possible – being the standard required for an appellate court to intervene and re-exercise the discretion of the first instance judge.