Bain and Bain (No 3)
[2013] FamCA 970
•12 December 2013
FAMILY COURT OF AUSTRALIA
| BAIN & BAIN (NO 3) | [2013] FamCA 970 |
| FAMILY LAW – PROPERTY – Interim – Where the wife seeks the transfer of life insurance policies held by each party over the life of the other – Where the husband opposes the transfer – Where the husband contends that the intent of taking out the policies was to use the benefit to reduce matrimonial debt – Where there is significant matrimonial debt – Where it is the wife’s intention to make her children the beneficiary of the policy over her life – Where the wife is terminally ill. |
| Family Law Act 1975 (Cth) s4, s4(1), s79, s80(1)(h), s114(1)(e), s114(3), Life Insurance Act 1995 (Cth) s10(2), s200, s200(2). |
| Brown & Brown [2002] FamCA 259. |
| APPLICANT: | Ms Bain |
| RESPONDENT: | Mr Bain |
| FILE NUMBER: | BRC | 2481 | of | 2010 |
| DATE DELIVERED: | 12 December 2013 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Hogan J |
| HEARING DATE: | 12 November 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Baston by way of direct access brief |
| SOLICITOR FOR THE APPLICANT: |
| COUNSEL FOR THE RESPONDENT: | Mr Dick |
| SOLICITOR FOR THE RESPONDENT: | Blackston Lawyers |
Orders
UPON THE UNDERTAKING of the husband to hold any payment received by him under the life insurance component of MLC Life Policy … in his solicitor’s trust account pending further order of the Court
IT IS ORDERED
That the wife’s Interim application for the transfer of MLC life policy … and MLC life policy … is dismissed.
In the event that the Respondent seeks an order that the Applicant pay his costs of and incidental to her interim application for the transfer of MLC life policy … and MLC life policy …:
(a)the Respondent file and serve brief written submissions in support of such application for costs within 14 days of the date hereof;
(b)the Applicant file and serve any brief written submissions in answer to any submission filed and served by the Respondent within a further 14 days thereafter;
(c)the Respondent file and serve any brief further written submissions strictly in reply to the submission served by the Applicant within seven (7) days of its service,
and such application for costs shall be determined in Chambers.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bain & Bain (No 3) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 2481 of 2010
| Ms Bain |
Applicant
And
| Mr Bain |
Respondent
REASONS FOR JUDGMENT
The wife seeks, by way of interim order, that the husband transfer to her that part of a MLC life policy … ( “the husband’s policy”) which insures her life and that she transfer to him that part of a MLC life policy … (“the wife’s policy”) which insures his life.
There being no additional evidence as to the wife’s likely life expectancy, the wife’s application for interim orders occurs in circumstances I summarised in the Reasons for Judgment delivered on 26 July 2013:[1]
(1)The wife was born in 1961. She is a retired teacher having being discharged medically unfit as a consequence of the development of ovarian cancer and subsequent difficulties.
(2)The husband was born in 1957. He is a self-employed solicitor operating his own firm.
(3)The husband says that the parties were in a relationship for 30 years. They married in 1985 and, after 24 years of cohabitation, separated on 8 October 2009. They divorced on 21 December 2010. There are two adult children of the marriage, one of whom, aged 18 years, lives with the wife.
(4)In 2007 the wife developed metastatic ovarian carcinoma which required extensive surgery and chemotherapy. Despite this treatment, the carcinoma returned in 2009 and the wife required more surgery and further chemotherapy.
(5)In or about July 2009, the wife received a lump sum payment of $251,775.25 as a consequence of her having been deemed to be totally and permanently disabled (“the lump sum”).
(6)In late January 2010, the wife’s treating medical practitioner of some 10 years or so informed that she suffered from persistent complications secondary to the treatments for ovarian cancer: namely, abdominal pain, diarrhoea, significant fatigue, persistent anxiety, and problems with bending.
(7)In mid-June 2013, the same treating practitioner informed that the wife is still suffering the effects of the ovarian cancer, had continued to require chemotherapy which has had a significant impact on her general health, and has developed insulin-dependent diabetes as a consequence of her treatments. His evidence is that she remains unfit for any employment and requires ongoing monitoring, treatment and attendance upon specialists on a regular basis.
[1]Bain & Bain [2013] FamCA 554.
The policies
Neither the husband’s policy nor the wife’s policy has, or will ever have, a surrender or cash value. Both are described by MLC (“the issuer “) as being ‘designed purely for protection’.
The husband’s policy is owned by the husband and insures the wife’s life. It was taken out by the parties on 20 March 1996. According to the 2013 Review Schedule[2], benefits under this policy of $350,831.00 (referable to Life Cover Plus) and $85,155.00 (referable to Life Cover Standard) will be paid to the husband upon the wife’s death. The husband’s policy also contains Income Protection cover for the husband and, as I understand it, no order is sought by the wife in respect of this cover. In any event, the evidence is that the issuer would not permit the transfer of the Income Protection component of the husband’s policy to anyone else.
[2]Affidavit of the Wife filed 4 November 2013, Annexure “DAB-2”.
The total monthly premium of $286.22 payable in respect of the husband’s policy comprises a payment of $83.74 for the Life Plus cover (in respect of the wife’s life) and $195.42 for the Income Protection Plus cover which relates to cover for loss of the husband’s income.
The wife’s policy is owned by the wife and insures the husband’s life. It too was taken out by the parties on 20 March 1996. According to the 2013 Review Schedule[3], benefits under this policy of $438,539.00 (referable to Life Cover Plus) and $87,709.00 (referable to Critical Illness Plus) will be paid to the wife upon the husband’s death or terminal illness. The total monthly premium of $359.69 payable in respect of the wife’s policy comprises a payment of $204.02 for the Life Plus cover (in respect of the husband’s life) and $148.61 in respect of Critical Illness cover for the husband.
[3]Affidavit of the Wife filed 4 November 2013, Annexure “DAB-2”.
The policies are life policies for the purpose of the Life Insurance Act1995 (Cth) (“the Life Insurance Act”).[4] For the purpose of that Act, the owner of the policy is the person to whom it is issued or, if the rights of that person under the policy have been assigned under the Act or transferred by the operation of the policy, the person who has those rights: s 10(2) of the Life Insurance Act. The rights of a person as owner of a policy may only be assigned at law under s 200 of the Life Insurance Act and an assignment is not effective at law unless those matters, which include registration of assignment or transfer by the issuer, prescribed by s 200(2) of the Life Insurance Act have been satisfied.
[4] Section 9.
Despite the submissions made in support of the proposition that the policies are not ‘property’ for the purpose of the Family Law Act 1975 (Cth) (“the Act”), I did not understand it to be disputed that ownership of the policies can be assigned or transferred by each party to the other (or to any other nominated person). Nor was it disputed that, upon the policy document being returned to the issuer with a completed Memorandum of Transfer form, the issuer can, upon presenting the policy to the Commissioner of Stamp Duty, change the ownership of the policy.
What is the parties’ current financial situation?
The husband says that there are significant liabilities in respect of which the parties are either principal borrowers and/or guarantors. He says that, at present, the sum of $4,109,814.00 is secured against the former matrimonial home in which the wife continues to reside. According to information provided to the husband by the Statutory Trustee appointed to sell the former matrimonial home, [5] it is possible that the sale of this property will only realise about $2,700,000.00.
[5] by Order made 18 December 2012.
In these circumstances, the husband expresses a concern that, in the event that the former matrimonial home is not sold, the National Australia Bank might seek to pursue him pursuant to the various guarantees he has provided. The husband also says that, because the wife gives evidence of her desire to nominate the parties’ children as beneficiaries under the policy, the purpose of it – namely, to pay matrimonial liabilities – would be defeated in the event that an interim order was made transferring ownership of the respective policies in the manner that the wife seeks.
Source of power relied on
Counsel for the wife identified either s 79 or s 114(1)(e ) of the Act as the source of the power relied on for the making of the interim order sought. Pursuant to s 79 of the Act, the Court may make such order as it considers appropriate in property settlement proceedings[6] provided that it is satisfied that, in all the circumstances, it is just and equitable to make such an order. [7] Considered in this way, then, the question to be answered is whether, on an interim basis, it is just and equitable in all the circumstances to make an order[8] which has the consequence that the parties’ ownership of the respective policies is changed in the manner sought by the wife.
[6] Family Law Act 1975 (Cth) ss 4 and 79(1).
[7]Family Law Act 1975 (Cth) s 79(2); Stanford v Stanford (2012) 247 CLR 108.
[8] Family Law Act 1975 (Cth) ss 79(1)(a), (c), and (d)(i).
Pursuant to s 114(1)(e) of the Act, the Court may make such order or grant such injunction as it considers proper with respect to the matter to which the proceedings relate including an injunction in relation to the property of a party to the marriage. The wife seeks, by way of final order, an order compelling the husband to transfer the policy which insures her life into her ownership. Considered in this way, then, the question to be answered is whether, on an interim basis, it is ‘proper’ that an order be made which has the consequence that the parties’ ownership of the respective policies is changed in the manner sought by the wife.
Are the policies “property” for the purpose of the Act?
The term “property” is relevantly defined in s 4(1) of the Act to mean “property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”
Counsel for the husband initially submitted that the Court would not be persuaded that the policies are ‘property’ for the purpose of the Act. Each policy was, it was submitted, at present no more than a financial resource in the hands of each owner. Counsel submitted that policies were contingent upon death occurring and that this event was required before they could properly be characterised as ‘property’ for the purpose of the Act.
Counsel referred to In the Marriage ofLange and Moores (1979) FLC 90-651 – a decision of Gun J – as authority for the proposition that an insurance policy maturing at a future time may be a financial resource rather than ‘property’ for the purpose of the Act. There the policy was described as an ‘insurance policy which matures’ some 18 or so years into the future. It had what was described as a ‘fairly substantial surrender value’ which appeared to have been “offset”, as at the date of trial, by borrowings which nearly equated to the full amount of the surrender value. Whilst Gun J. said, at p 78,430, that the policy “is of very little, if any, value to the husband at the present time, it nevertheless is a financial resource which I take into account” it seems to me, with respect, that such conclusion was more about recognising the minimal net position (if the policy had then been surrendered) than it was about making any definitive statement of principle.
In Marchant & Marchant (2012) 49 Fam LR 1, the Full Court[9] said, in referring to the definition of ‘property’ contained within s 4(1) of the Act :
This definition is self-evidently a limited or partial definition in terms of identifying specifically the kinds of interests or entitlements that constitute “property” for the purpose of the Act. The jurisprudence that has developed in this court as to whether a particular right or entitlement can or should be characterised as property for the purposes of s 79 reflects the statutory definition being a partial one, and that the kinds of rights or entitlements that are “property” for s 79 purposes are referenced to that jurisprudence.[10]
[9] May, Ainslie-Wallace and Kent JJ.
[10] Marchant & Marchant (2012) 49 Fam LR 1, [56].
A consideration of the jurisprudence that has developed in this Court may conveniently begin with Duff and Duff (1977) FLC 90-217 where the Full Court said at 76,131:
Part VIII of the Act carries the heading “Maintenance and Property” and in that Part there is no further definition of property nor any expressions which can themselves amplify, extend or, for that matter, limit the definition appearing in sec.4.
And further, at 76,132 - 76,133:
It seems unnecessary to attempt to set out a catalogue of what “property” may include in the context of sec. 79. It is sufficient for the purposes of this case to say that “property” means property both real and personal and includes choses in action.
The word “property” has been the subject of a very large volume of judicial interpretation. A compendious description of it is to be found in Halsbury, 3rd ed., Vol. 3, para. 541 with multiple references to cases. It is sufficient for our purposes to refer to that definition which states: —
“Property is that which belongs to a person exclusive of others and can be the subject of bargain and sale. It includes goodwill, trademarks, licences to use a patent, book debts, options to purchase, life policies and the rights under a contract.”
Chitty J. in Re Earnshaw-Wells (1894) 3 Ch. 156 at 157 said: —
“The expression ‘property’ is not a term of ancient art. The word is discussed in Williams On Real Property and incorporeal hereditaments are found under the title of real property. In that work there is a well-reasoned explanation of the word ‘property’ which says that it is used in three senses. ‘Property’ may denote the thing to which a person stands in a certain relation, and also the relation in which the person stands to the thing.”
The word has also been comprehensively defined in statutes both State and Imperial relating to married women’s property. We do not propose to instance those definitions here, but in Jones v. Skinner (1835) 5 L.J. Ch. 90 Langdale M.R. said: —
“Property is the most comprehensive of all terms which can be used inasmuch as it is indicative and descriptive of every possible interest which the party can have.”
This is a definition which commends itself to us as being descriptive of the nature of the concept of “property” to which it is intended that the Family Law Act 1975 should relate and over which the Family Court of Australia should have jurisdiction to intervene when disputes arise in relation to the property of spouses as between themselves or when the Court is asked to exercise the powers conferred upon it under Part VIII or its injunctive powers under sec. 114 so far as they are expressed to relate to a property of the party to a marriage.
We are of the view that the intention of sec. 79 is to enable the Court to take into account and assess all the property of the parties upon being asked by either of them to make an order altering the interests of the parties in property. We are further of the view that when sec. 4 defines property as being “property to which the parties are entitled whether in possession or reversion” the words “whether in possession or reversion” are not intended to indicate that the kind of property with which this Act can deal must be property to which a party is entitled in possession or reversion but rather the phrase “whether in possession or reversion” is, as a matter of grammar, an adverbial phrase which qualifies the word “entitled”. The phrase means that the entitlement to the property may be either in possession or reversion; i.e. the phrase is descriptive of the entitlement and not of the property and it removes any fetter upon the Court in dealing with property under this Act by limiting the nature of the entitlement thereto to entitlement in possession.
In Meneling Station (1982) 158 CLR 327 Mason J said, at pp 342 - 343:
In National Provincial Bank Ltd. v. Ainsworth [1965] AC 1175 at pp. 1247-1248, Lord Wilberforce said:
“Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.”[11] (at p342)
…
Assignability is not in all circumstances an essential characteristic of a right of property. By statute some forms of property are expressed to be inalienable. Nonetheless, it is generally correct to say, as Lord Wilberforce said, that a proprietary right must be "capable in its nature of assumption by third parties”.
[11] Toohey, Re; Ex parte Meneling Station (1982) 158 CLR 327, 342.
In Mullane & Mullane (1983) 158 CLR 436, the High Court said, at p 445:
In our opinion, therefore, s. 79 on its proper construction refers only to orders which work an alteration of the legal or equitable interests in the property of the parties or either of them. An interest in property is a right of a proprietary nature, not a mere personal right: Stowe v. Mineral Holdings (Aust) Pty Ltd (1977) 51 A.L.J.R. 672 at p 679; Reg. v. Toohey; Ex parte Meneling Station Pty. Ltd. (1982) 158 CLR 327, at pp 343, 350-351. It does not exclude every interest which is not assignable or transferable (cf. per Mason J. in Meneling Station (1982) 158 CLR 327, at p 343.). Thus an order under s 79 may give rise to an interest in property which is defeasible on assignment or transfer to a third party, or on the occurrence of some other event, or which the holder is enjoined from assigning or transferring.
Counsel referred to In the Marriage of Bevan[12] where the Full Court considered, amongst other things, an appeal against an order made, following a final hearing, that the wife hold a life insurance policy, over the husband’s life, upon trust for herself and the husband as tenants in common in equal shares. There the evidence established that the husband suffered from chronic lymphocytic leukaemia and heart disease, both of which conditions were described as ‘fairly serious and could at any stage turn life-threatening’. None of the grounds of appeal asserted that the life insurance policy was not ‘property’ for the purpose of the Act and the Court did not, understandably, consider this issue. Further, the Order appealed against did not require the transfer or assignment of the policy but rather imposed on the wife an obligation to hold the policy in the manner outlined.
[12](1993) 19 Fam LR 35.
In Brown & Brown[13] Moore J was asked to determine, at trial, competing claims in respect of an insurance policy taken out over the husband’s life: the wife sought that she retain ownership of it or, alternatively, if the Court ordered a transfer to the husband, she be ‘reimbursed’ the sums paid by her for premiums in respect of the policy since separation; the husband sought that the policy be transferred from the wife’s name into his and she be reimbursed the amount paid, post separation, by her in premiums. Both parties were prepared to give an undertaking that their children would benefit from the proceeds of the policy, payable on the husband’s death. Neither party asserted that the policy was not ‘property’ capable of being subject to an order made pursuant to s 79 of the Act.
[13][2002] FamCA 259.
In Marchant (supra) the Full Court said, at paragraph 57:
As the Full Court (Nicholson CJ, Fogarty and Purvis JJ) observed in In the Marriage of Perrett (1990) FLC 92-101 at p 77,659 (Perrett):
The question of whether a particular right or entitlement can or should be characterised as property has been one of continual difficulty which has troubled courts on many occasions both under the Family Law Act and its predecessor and otherwise.
In order to determine the question, we think it necessary in each case to first examine and carefully identify the precise nature of the particular entitlement in question.
And at paragraphs 65 and 66:
However, whereas at common law some future and contingent interests have been characterised as property, many cases decided with reference to the Act and s 79, particularly the so-called “superannuation cases” prior to the relevant amendments as to the treatment of superannuation interests, established that “property” for the purpose of the Act does not include contingent interests.
One of the most notable examples is the oft-quoted statement of Fogarty J in In the Marriage of Crapp (No 2) (1979) FLC 90-615 at 78,176 (Crapp) as follows:
… An order can only be made … under s 79 where a party has a present or future interest in a particular item of property. Clearly where a party has a present interest no difficulties arise, and by “future interest” in the above sense, I take it to mean a situation where a party has an established interest in an item of property but the date of receipt is postponed to some future time. That is different from the case where a party may become entitled to an interest in property in the future, provided that certain events occur and/or that certain disqualifying events do not occur in the meantime ...
In Crapp & Crapp (No 2) (supra) Fogarty J continued, at p 78,182:
At the time the matter was before his honour the property was not within the possession of the husband nor did he have any present right to institute proceedings against the trustees the payment of it to him. No doubt he would have become entitled to the amount then standing to his credit in the fund upon his resignation, assuming that he had not died or been summarily dismissed in the meantime. Until that event occurs in my view his interest is not property and the fact that he could readily do so by resigning or that summary dismissal was most unlikely is in my view not relevant to the legal issue of whether it was at the time of the hearing property, any more than is the countervailing fact that it would be improvident for him to do so, as such a course would immediately bring to an end the very substantial salary upon which the maintenance orders and in part this very property order was postulated.
…
The interest of the husband is inalienable prior to his retirement and would not form part of his estate in the event of his death prior to retirement.
In Sand & Sand[14] Coleman J. said, at paragraph 41:
It is readily apparent that, whatever constitutes “property”, the section contemplates present, rather than past or future interests, rights or entitlements. Although, as the section contemplates, the “property” may not have vested in possession, or vest in possession for a potentially long time, the right or entitlement to it presently exists.
[14](2012) 48 Fam LR 458.
Whilst expressed in the course of a discussion about the applicability of the decision in Kennon & Spry (2008) 238 CLR 366 to the case there under consideration, I consider that the comment of Coleman J at [52] in Sand & Sand has resonance in the determination of the current issue.
As outlined above, in Duff (supra) the Court specifically referred to life policies as coming within the definition of ‘property’ for the purpose of the Act. Such policies are clearly definable, identifiable by third parties and have a degree of permanence or stability. The ownership of each may be transferred. I consider that each party has, at present, an established interest in the policy each owns although the receipt of the money payable under each is postponed until some future time.
Whilst the receipt by either party of the payment to which they are entitled under the policies will occur only upon the happening of certain specified events (namely, critical injury or death), their right to receive such payment presently exists. I conclude that the husband’s policy and the wife’s policy are both ‘property’ for the purpose of the Act.
In considering whether it is proper or just and equitable in all the current circumstances that an interim order be made transferring the ownership of each of the policies to the non-owner party, it is, I think, pertinent to have regard to not only the parties’ current financial circumstances, as outlined briefly above, but also the circumstances in and for which they (the policies) were acquired and the manner in which they have been preserved since then.
How did the policies come into existence?
Given that Counsel for the wife referred to and relied on Mr H’s evidence during the course of his submissions on behalf of the wife, I conclude that the wife does not challenge the accuracy of Mr H’s recall of past events.
The parties married in 1985. By March 1996, when they obtained advice from Mr H, a financial planner, they had two young children and a mortgage. Mr H says that the ‘insurance against death’ policy which formed part of each party’s total portfolio was recommended because it provided a pre-determined lump sum benefit in the event of that party’s death so as to assist with the repayment of debts such as a mortgage or personal loan. Mr H says that the reason the policies were taken out in the manner that they were was that, in the event of a party’s death, the proceeds would be immediately payable to the surviving spouse without the benefits forming part of the deceased’s estate.
Mr H says that the parties briefly discussed the situation which would arise in the event of a marital separation. He says that this was not a “major issue,” because each party had ownership of the other’s life cover and a “mutually agreeable arrangement would be negotiated.” It seems to me to be likely that, at its highest, the parties, at that time, contemplated future discussions, involving the possibility of the transfer of the policies, in the event that their marital relationship came to an end.
The documents retained by Mr H record that the husband identified, at the time the policy he owns (over the wife’s life) was taken out, that a “need” for the benefits payable under the policy was to clear debts in the event of death. I consider that the reference to ‘debts’ is properly interpreted as referring to debts which had been incurred during the currency of the marital relationship.
The husband, whose evidence in this respect was not contradicted by the wife, says that the parties took out the policies in the manner that they did to ensure that matrimonial liabilities could be met in the event of the death of one of them. Given the parties’ circumstances at the time the policies were taken out, such purpose does not seem controversial.
Contributions to the acquisition or conservation of the policies
The parties dispute the manner in which the premium for each of the policies was paid prior to separation: the wife asserts that, during cohabitation, the premiums for each policy were paid by the parties jointly[15] and the husband asserts that he has been responsible for paying the premiums for his policy (which insures the wife’s life) since March 1996. Given the interim nature of this hearing, I am not in a position to make factual findings in relation to this issue.
[15] Affidavit of the Wife filed 4 November 2013, paragraph 3.
As I understand it, there is no dispute that, since separation in October 2009, the wife has paid the premium associated with the wife’s policy, in an amount of $204.02 per month, and the husband has paid the premium associated with the relevant “part” of the husband’s policy in an amount of $83.74 per month.[16]
[16] See paragraph [5] above
On what basis does the wife seek the order?
Counsel for the wife submitted that the Court would be persuaded, on an interim basis, to make the order sought because:
a)it is “inappropriate” that, following their divorce, each party “control” an insurance policy which insures the other’s life;
b)the wife seeks to be placed into a position where either both of the parties’ children, or their daughter alone, could have the benefit of the husband’s policy – which insures her life – if she passes away and seeks to ensure that the parties’ daughter is provided for in the event of her death;
c)the husband’s policy has no “real value” absent her death;
d)the policies were entered into as an incident of the marital relationship between the parties and, given that this relationship has broken down irretrievably, it is now just and equitable that an order be made transferring ownership of the policies;
e)there are many cases where orders for the disposition of a life policy have been made by consent and “largely incidentally” and that the order sought by the wife is a “machinery or incidental type” of order – the latter proposition being one which I reject wholeheartedly;
f)“community standards” compel the making of such an order;
g)there is no basis upon which the husband contends that he would be entitled, at final hearing, to an order which would see him retain the policy over the wife’s life;
h)it would be “remarkable” that, following the making of an order pursuant to s 79 of the Act, a party would continue to have their life insured by a former spouse.
Counsel for the wife also submitted that it was a relevant consideration that the husband has already had the benefit of $50,000.00 (part of the lump sum payment received prior to separation as a consequence of the wife’s diagnosis with cancer) which was applied in establishing his legal practice. I assume that the essence of the submission was that, as this benefit has already been received and applied by the husband, it is now just and equitable to make an order to ensure that he does not receive any further benefit from the policy in the event of the wife’s death.
On what basis does the husband opposes the making of the order sought by the wife?
The husband opposes the order sought by the wife because, if made, it will enable the wife to action her stated intention to nominate the parties’ children as beneficiaries under the policy insuring her life. If this occurs, the purpose for which the parties obtained the policies – namely, to pay matrimonial liabilities – will be defeated.
Counsel for the husband submitted that the Court should not be persuaded to accede to the wife’s application because:
a)the purpose for which the policies were obtained by the parties was to protect them financially in respect of matrimonial liabilities and, whilst the matrimonial relationship has ended, this common purpose (to use payments received under the policy to meet matrimonial liabilities) remains such that it would not be just and equitable to make the order sought;
b)any transfer of the husband’s policy to the wife would not only defeat the parties’ previous agreement that the proceeds of the same be used to meet matrimonial liabilities but, given the wife’s evidence that she intends to nominate persons other than the husband as beneficiaries under the policy, would also extinguish any indirect entitlement (for example, through the reduction of matrimonial liabilities) that the husband has to the proceeds of the same;
c)as the quantum of the significant matrimonial liabilities – said by the husband to be about $4,799,814.00 – is greater than the value of matrimonial assets, the consequence of an order transferring the husband’s policy (which insures the wife’s life) to the wife will be that, in the event of the wife’s death, the husband will be left to meet entirely, and without contribution from the wife, the responsibility for these significant matrimonial debts without the benefit of the policy payment;
d)given the parties’ financial position – where matrimonial liabilities exceed the value of the property of the parties – the order, and its resultant consequence of enabling the wife to implement her stated intention to benefit persons other than the husband, will not be capable of being reversed or adjusted at trial if it is subsequently considered necessary to do so;
e)it would not be just and equitable to make the order sought as the wife is not seeking an interim property distribution for her own benefit but so as immediately to assign and/or nominate a third party beneficiary outside the marriage (the parties’ daughter);
f)the husband has contributed significantly to the existence of the husband’s policy because of his payment of the premium since 1996 – a period of some 17 years and eight months;
g)it would be unjust and inequitable to the husband to make the order on an interim basis as to do so would accord to the wife the benefit of the policy – to do with as she wishes – whilst removing from the parties the opportunity to use the proceeds of the same toward the reduction of matrimonial debt.
If, as here, the power relied upon for the making of the orders sought is s 79 of the Act, the Court may exercise such power through “a succession of orders until the power… is exhausted” or until a final order dealing with all the known property of the parties is made: Gabel & Yardley, cited in Strahan & Strahan(Interim Property Orders ) (2009) 42 Fam LR 203 at [113] (“Strahan”).
The principles applicable to cases in which an interim property order is sought in reliance on the power provided by s 79 of the Act are well known: Strahan.
In Marchant & Marchant (2013) 49 Fam LR 1 the Full Court (May, Ainslie-Wallace and Kent JJ) said, at paragraph 25:
It follows from the joint judgment of Boland and O’Ryan JJ in Strahan that there are two stages to the hearing of such an application and that the first question on an application for such an order is whether the Court should exercise its discretion to entertain the application. Whilst it is not necessary for an applicant to establish compelling circumstances for that question to receive an affirmative answer, it is necessary to establish that it would be appropriate for the Court to exercise the power and the, “…overarching consideration…” as to appropriateness is the interests of justice. Recognising that in the context of s 79 proceedings, the interests of justice will usually be best served by one single and final determination of property orders, it will not be appropriate to exercise the power merely because, on such a final determination, the applicant would receive the interim property sought or in excess of that sought.
Counsel for the wife submitted that it is inconceivable that a Court would not make a property settlement order that required the transfer of ownership in the husband’s policy (which insures the wife’s life) to the wife. I am not persuaded that this is necessarily the case in the circumstances of this case where significant matrimonial debts (exclusive of those met by the application of the sale proceeds, in which the wife has an interest, of the former matrimonial home) may be left to be borne in their entirety by the husband.
In Marchant the Full Court said, further, at paragraph 27:
As their Honours Boland and O’Ryan JJ noted at [136], because the discretion conferred by the power in s 79 is to make such order as the Court considers appropriate, provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order, the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal, and must be capable of alteration at any time prior to, or as part of, a final exercise of the s 79 power.
If the husband’s policy is transferred to her the wife has clearly stated her intention to act so as to ensure that her children – or one of them – is the nominated beneficiary under the policy. Given this, the effect of an order transferring ownership of the husband’s policy to the wife is not capable of variation in the event that the wife dies prior to the final hearing of the matter.
This situation is compounded given my acceptance of the submission made by Counsel for the wife, in reply, that I am not in a position to conclude that there is a “negative pool” in the property settlement proceedings between the parties because, whilst the former matrimonial home has been valued, other property including asserted investment interests and the husband’s interest in his legal practice are yet to be valued.
This inability to arrive at any likely approximate figure in relation to the value of the property of the parties the subject of the property settlement order proceedings or to determine whether and/or by how much the parties’ property is a ‘negative’ makes it very difficult for a Court, required to act conservatively, to be persuaded that it is just and equitable, on an interim basis, that an order be made transferring ownership in the husband’s policy to the wife.
There is, I think, no conflict in the principles enunciated in Strahan and the comments of the High Court (French CJ, Hayne, Kiefel and Bell JJ) in Stanford v Stanford (2012) 247 CLR 108: the consideration as to whether to exercise the jurisdiction to make an interim property order must rest upon a primary determination that to make the interim order sought is just – the interests of justice being the overarching consideration - and equitable in the circumstances known at that time.[17]
[17] Stanford & Stanford (2012) 247 CLR 108, [35].
Whilst, in determining whether it is just and equitable in any particular case to make the order sought on an interim basis, regard must be had to the matters helpfully outlined in Strahan, it cannot be forgotten that :
The expression "just and equitable" is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. And while the power given by s 79 is not "to be exercised in accordance with fixed rules", nevertheless, three fundamental propositions must not be obscured.[18]
[18] Ibid at [36].
I summarise the ‘three fundamental propositions’ as follows:
a)whether, having regard to the existing legal and equitable interests of the parties in the property, the Court is satisfied that it is just and equitable to make a property settlement order;[19]
b)the determination of whether it is just and equitable in all the circumstances of each particular case to make the order sought does not rest on assuming that the parties' rights to or interests in marital property are or should be different from those that then exist;[20]
c)whether making a property settlement order in the terms sought by a party is ‘just and equitable’ is not answered by beginning with the assumption that one of the parties has ‘the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters set out in s 79(4) of the Act.[21]
[19] Ibid at [37].
[20] Ibid at [38]-[39].
[21] Ibid at [40].
It follows from the above that there must be a basis, based upon the principles in the Act, to interfere with the parties’ legal and equitable interests in property “and whatever may have been [the parties’] stated or unstated assumptions and agreements about property interests during the continuance of the marriage.”[22]
[22] Stanford & Stanford (2012) 247 CLR 108, [41].
Whilst the parties have separated, the purpose underlying the joint decision to take out the policies in the manner which has resulted in them being owned in the manner that they are was to meet joint matrimonial debts. It was not contended by the wife that the significant outstanding liabilities of the parties are anything but joint matrimonial debts. If the order sought is made, the wife will take steps to ensure that, in the event of her death, none of the proceeds of the policy are available to meet any matrimonial debts. In such circumstances, I am not persuaded, on an interim basis, that such an outcome would be just and equitable.
One can easily envisage a situation in which it would be just and equitable to make an order in the terms sought by the wife: for example, where a party has accrued significant post separation debts, it may well be thought to be just and equitable to order the transfer of a policy such as that which exists in this case so as to ensure that the party whose life is insured has the opportunity to deal with the proceeds of the policy in the manner that party chooses rather than leave their previous partner or spouse to benefit from their death and apply the proceeds to reduce non-matrimonial debt. That, however, is not the situation here.
I note that, in Brown & Brown (supra) a policy, for an insured sum of $500,000.00, was taken out about midway through the parties’ twenty-seven year relationship. It was owned by the wife. Premiums were paid from joint funds prior to separation and by the wife after separation. The parties divorced in the year prior to the trial. The husband suffered from coronary artery disease after the policy was taken out. The medical evidence at trial established that his ‘immediate and long term outlook must be guarded’. It was not disputed that, at the time of the trial, the husband would not have been able to obtain insurance on his own life.
The parties disputed the purpose for which the policy was taken out: the wife asserted it was for the protection of the family and the husband contended it was because the bank required it (when funds were borrowed to purchase property) and, also, to protect the wife and children’s future needs. The Court had no evidence in relation to the bank’s attitude.
The Court concluded that the ownership of the policy ought be transferred to the husband upon him paying the wife the amount necessary to reimburse her for premiums paid post separation. In arriving at this conclusion, the Court appeared to place significance upon the fact that the husband was not then able to take out insurance on his own life (because of the state of his health) and that, if the motivation was financial or to protect the wife and children, circumstances giving rise to that perceived need had changed: the children were all adult and the wife’s financial position had altered such that she no longer had any “need” of the protection that receipt of the $500,000.00 payment would provide. Further, application of the ‘principle’ contained within s 81 of the Act was considered to lend weight to the view that the husband should take the assignment of the policy rather than leaving the wife with the benefit of insurance on his life.
The circumstances of this case suggest that, in contrast to the position in Brown & Brown, the husband may well continue to have ‘need’ of the “protection” that the receipt of the payment pursuant to the husband’s policy would provide.
The arguments advanced in Brown & Brown or some similar to those may have greater resonance at a final hearing of this matter. However, I am not persuaded on an interim basis that it is proper or appropriate or just and equitable in all the circumstances to make the orders sought by the wife and, for the reasons outlined above, I decline to do so.
The orders made will permit any application for costs arising from this decision to be determined in Chambers without the necessity of a further appearance.
I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Hogan delivered on 12 December 2013.
Associate:
Date: 12 December 2013
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Civil Procedure
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