The Full Court of the Federal Circuit and Family Court of Australia has recently considered its role in drafting binding Orders, as well as fundamental and obvious matters to an application requiring one party to ‘buy out’ the interest of the other in an entity. As such, Aitken v Aitken represents the Court’s consideration of its judicial function, and a confirmation of the factors it must take into account when making discretionary decisions of this kind.

Facts

The parties were Directors and equal shareholders in the company ‘D Pty Ltd’. Through their joint efforts, the parties accumulated $80 million in wealth. D Pty Ltd was separately valued at $45,514,742 excluding cash at bank, indebtedness, and potential taxation liabilities at the time of the trial.

At first instance, the wife submitted that the husband should buy out her shareholding in the business. Opposing, the husband argued that the entity should be sold, and the net proceeds be equally divided between the parties. Wilson J found in favour of the wife, that the husband should ‘buy her out’ for her shareholding (totalling $26,751,023).

The husband appealed on the basis that the trial judge failed to address his capacity to make this payment to the wife. Consequentially, the husband argued that the primary judge failed to explain why, in light of his lack of capacity, his proposal to sell D Pty Ltd and equally divide the proceeds was rejected. The wife argued that the husband’s capacity to pay was not an issue in the proceedings, due to him failing to draw attention to the matter at trial. It was also argued that the husband’s capacity to pay was not a ‘fundamental and obvious issue’ requiring consideration, in accordance with Macedonian Orthodox Community Church [2008] HCA 42.

Decision

Their Honours McClelland DCJ, Austin and Altobelli JJ found, in essence, that the husband’s capacity to buy out the wife’s shareholding was a fundamental and obvious issue that required consideration by the primary judge. More specifically:

• Although the husband did not give evidence in chief as to his capacity to pay, he nonetheless indicated that he lacked financial capacity. His assets amounted to a sum far less than required to pay the sum required by the Orders;
• Capacity to pay is a ‘fundamental and obvious issue’. The Court upheld the joint judgement of Gummow ACJ, Kirby, Hayne and Heydon JJ in Macedonian Orthodox Community Church which articulated that an appellant is required to show that the primary judge was alerted to the matters which they claim were not provided consideration, unless those matters are ‘fundamental and obvious’. Applying this reasoning, capacity to pay was deemed ‘fundamental and obvious’, such that the husband was not required to explicitly alert His Honour to the matter at trial;
• The Order was impractical due to contingencies which apply to the valuation, such as taxation liabilities and potential for Capital Gains Tax to be paid on liquidation;
• Without any admissible evidence as to capacity, no inference that this was considered can be drawn from the reasons.

Their Honours also considered an ancillary issue, that is the Court’s role in drafting binding Orders. On this point, the Court opined that ‘repeatedly delegating responsibility to the parties to conceive the nature and form of the orders required to quell the controversy between them arguably amounted to an abdication of judicial duty…’. Indeed, at first instance His Honour stated that “it’s not my job to draft the Orders, it’s the representatives’ jobs, providing the opportunity for the Court to reflect on its role in directing parties to provide Orders or minutes of Orders.

Implications

The implications of the decision in Aitken can be considered two-fold. Firstly, the Court has upheld the stance espoused in Macedonian Orthodox Community Church, affirming that an appellant is not required to show that the primary judge was alerted to a matter they argue should be afforded consideration if that matter is ‘fundamental and obvious’ to the dispute. Secondly, the Court has commented on its inherent judicial function to apply discretion in implementing binding Orders, ensuring that these Orders are appropriate, just and equitable, and sufficient in severing financial relations between the parties.