Hayton & Bendle
[2010] FamCA 592
•16 July 2010
FAMILY COURT OF AUSTRALIA
| HAYTON & BENDLE | [2010] FamCA 592 |
| FAMILY LAW – PROPERTY SETTLEMENT – Consideration of whether a judicial pension is a ‘superannuation interest’ as defined in the Act – Finding that the prospective pension is a superannuation interest and is ‘to be treated as property’ FAMILY LAW – PROPERTY SETTLEMENT – LEGAL FEES – Consideration of paid and unpaid legal fees – Wife’s prospective legal fees taken into account in the s 79(4)(e) process FAMILY LAW – PROPERTY SETTLEMENT – CONSIDERATION OF CONTRIBUTIONS – Contribution assessments differ between ‘non-pension’ pool and the pension – Lengthy marriage, both parties employed throughout relationship - Equal contributions to the ‘non-pension’ property – Consideration of how contribution to pension differs – ‘Value’ of the pension has increased considerable post-separation – Contributions of each party have differed greatly since separation – Contribution to the pension assessed as 85/15 in favour of the husband FAMILY LAW – PROPERTY SETTLEMENT – JUSTICE AND EQUITY AND S 75(2) FACTORS – Consideration of appropriate orders given differing nature, form and characteristics of real property and pension benefit – Husband has an essentially guaranteed income by way of the pension – Consideration of wife’s capacity to earn income and requirement to rehouse herself from the property settlement – Adjustment to the wife FAMILY LAW – SPOUSAL MAINTENANCE – Where the wife establishes the s 72 preconditions – Where the adult child has been living with the wife and will do for some short time in to the future – Maintenance to be paid for 18 months to allow the wife to establish herself post marriage |
| Evidence Act 1995 (Cth) |
| Aleksovski & Aleksovski (1996) FLC 92-705 Astbury and Astbury (1978) FLC 90-494 Chorn and Hopkins (2004) FLC 93-204 Clauson and Clauson (1995) FLC 92-595 Coghlan & Coghlan (2005) FLC 93-220 Farmer and Bramley (2000) 27 Fam LR 316 Farnell and Farnell (1996) FLC 92-681 Figgins & Figgins (2002) FLC 93-123 Guthrie and Rushton [2009] FamCA 1144 Hickey & Hickey & Attorney General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143 HRDW v HSJL [2005] Fam CA 676 In the Marriage of Best (1993) FLC 92-418 In the Marriage of Bonnici (1991) 15 Fam LR 138 In the Marriage of Crapp (No. 2) (1979) FLC 90-615 In the Marriage of Ferraro (1993) FLC 92-335 at 79,560 In the Marriage of Garrett (1984) FLC 91-539 In the Marriage of Harrison (1996) 20 Fam LR 322 In the Marriage of Pearce (1998) 24 Fam LR 377 In the Marriage of Prestwich (1985) 9 Fam LR 1069 In the Marriage of Waters and Jurek (1995) FLC 92-635 JEL and DDF (2001) FLC 93-075 Mallet v Mallet (1984) 156 CLR 605 Murkin and Murkin (1980) FLC 90-806 Norbis v Norbis (1986) 161 CLR 513 Norman and Norman (2010) FamCAFC 66 Re Rule’s Settlement [1915] VLR 670 U and U (2002) 211 CLR 238 Williams v Williams [2007] FamCA 313 |
| APPLICANT: | Mr Hayton |
| RESPONDENT: | Ms Bendle |
| FILE NUMBER: | SYC | 4264 | of | 2008 |
| DATE DELIVERED: | 16 July 2010 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Murphy J |
| HEARING DATE: | 10-11 December 2009, 6 May 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Lloyd SC |
| SOLICITOR FOR THE APPLICANT: | Watts McCray |
| COUNSEL FOR THE RESPONDENT: | Ms Rees SC appearing with Ms Messner |
| SOLICITOR FOR THE RESPONDENT: | Fishburn Watson O’Brien |
Orders
IT IS ORDERED as and by way of settlement of property pursuant to s 79 of the Family Law Act 1975 (as amended):
That in accordance with paragraph 90MT(4) of the Family Law Act 1975 the base amount representing 100% of the interest held by Mr Hayton (hereafter “the husband”) in the State Superannuation Scheme (“SSS”) is allocated to Ms Bendle (hereafter “the wife”).
That in accordance with paragraph 90MT(4) of the Family Law Act 1975 the base amount representing 100% of the interest held by the husband in the State Authorities Non-contributory Superannuation scheme (“SANCS”) is allocated to the wife.
That in accordance with paragraph 90MT(1)(a) of the Family Law Act 1975:
(a)The wife is entitled to be paid the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001; and
(b)The husband’s entitlement to payments out of his interest in SSS and SANCS and the entitlement of such other person to whom a splittable payment may be payable is correspondingly reduced by force of this Order.
That the trustee of SSS and SANCS (“the Trustee”) shall do all such acts and things and sign all such documents as may be necessary to:
(a)calculate, in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001, the entitlement created for the wife by clauses 1 and 2 of this Order; and
(b)pay the entitlement whenever the Trustee makes a splittable payment out of the husband’s interests in SSS and SANCS.
That this Order has effect from the operative time and the operative time is four days from the date of this Order.
That this Order binds the trustee of SSS and SANCS.
That the wife retain to the exclusion of any right, title, claim or interest by the husband all her right, title and interest in and to the ASGARD Superannuation Fund.
That the wife retain to the exclusion of any right, title, claim or interest by the husband all her right, title and interest in and to the REST Superannuation Fund.
That the husband retain to the exclusion of any right, title, claim or interest by the wife all his right, title and interest in and to his superannuation interest pursuant to the Judges’ Pensions Act 1953 (NSW).
That the husband retain to the exclusion of any right, title, claim or interest by the wife all his right, title and interest in and to:
(a) The balance of his Commonwealth Streamline and Netsaver bank accounts;
(b) The balance of his SGE Credit Union account; and
(c) His IAG shares.
That the wife retain to the exclusion of any right, title, claim or interest by the husband all her right, title and interest in and to:
(a) The balance of her Intech Credit Union account; and
(b) Her S1 account
Save as otherwise specifically provided in these orders:
(a)each of the parties shall retain all property of whatever type, description or value currently in their respective possession, to the exclusion of any right, title claim or interest the other may in respect thereof;
(b)each of the parties shall be liable for each and every debt in their respective names and shall indemnify the other in respect of any claim any creditor may make in respect of any such debt.
That the parties shall each do all such things and sign all such documents as might be necessary so as to sell the former matrimonial home situated at H by listing it for sale in such manner and at such price as might be agreed in writing between the parties and, failing agreement as might be nominated by the President of the New South Wales Division of the Australian Property Institute or his/her nominee.
That the parties shall each do all such things and sign all such documents as might be necessary so as to cause the proceeds of sale of the said former matrimonial home to be distributed as follows:
(a)in the payment of reasonable real estate agent’s commission and the reasonable costs of sale;
(b)to pay any reasonable costs associated with the nomination contemplated in the previous paragraph of these orders should such nomination be necessary;
(c) in discharge of the mortgage over the property;
(d)to the wife the sum of $600,000 (being 15% of the amount of the husband’s pension superannuation interest plus the sum of $300,000) rounded;
(e) thereafter in accordance with the succeeding paragraph of these Orders.
Upon payment of the amounts prescribed in the previous paragraph of these orders there be paid to the husband and the wife, the sums calculated as follows:
(a) As to the husband [50% x (A + B)] – C – D
Where:
A =1,047,749 (being the agreed sum of the agreed property and non-pension superannuation interests); and
B =the sum remaining upon compliance with paragraph 14(a), (b) and (c) of these orders;
C = $26,582 (being the agreed sum of the agreed property to be retained by the husband); and
D = $600,000 (being the sum referred to in paragraph 14(d) of these orders.
(b)As to the wife, the balance of the funds remaining from the sale of the former matrimonial home after payment of all of the sums referred to in paragraphs 14 and 15(a) of these orders.
IT IS FURTHER ORDERED as and by way of spousal maintenance:
That the husband shall pay to the wife, by depositing to a bank account nominated in writing by her, the sum of $2166 each calendar month commencing on 15 August 2010 and concluding on 15 January 2012.
IT IS FURTHER ORDERED
Any application for costs shall be made within 21 days of the date of these Orders, by filing written submissions in respect thereof via e-mail with the associate to Murphy J and contemporaneously serving same, via e-mail on the other party.
NOTATION :
This Order has been amended pursuant to Rule 17.02 of the FAMILY LAW RULES 2004 by amending the amount of 1,034,549 to 1,047,749 in 15(a) where A =1,047,749.
Justice P Murphy
(19 August 2010)
IT IS NOTED that publication of this judgment under the pseudonym Hayton & Bendle is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: SYC4264/2008
| MR HAYTON |
Applicant
And
| MS BENDLE |
Respondent
REASONS FOR JUDGMENT
The financial product of the approximate 22 year marriage of the parties to these s 79 proceedings can be seen to fall into two distinct groups (or “pools”). Into the first, falls the Husband’s prospective judicial pension, payable, at the earliest, upon his attaining the age of 60 and having served 10 years as a judge …. Into the other group, falls real property and personalty and, also, other superannuation interests of the parties.
It is recognised by the parties (implicitly) that the nature, form and characteristics of the property comprising the first “pool” differ markedly from those comprising the second (even accepting that the second pool, too, contains superannuation interests as well as property).
In particular, the characteristics of the husband’s prospective pension are such that any splitting order in favour of the Wife would see the receipt of the benefit by her “tied” to the Husband’s decisions about retirement. Unlike some other such schemes, the particular State legislation providing for the husband’s pension does not permit, for example, the Wife’s “split” to be commuted and rolled immediately into her own fund.
Rather, the Wife must await the vesting of the Husband’s interest, which, in turn, depends, first, upon the satisfaction of statutory requirements, and thereafter, the Husband’s decision to retire at any time up until when he must retire on his 72nd birthday.
Unsurprisingly, then, the Wife does not seek a splitting order in respect of the pension. Nor does the Husband. Further, the parties are agreed that, as part of the wife’s ultimate s 79 entitlement, the wife should receive a 100% split of the husband’s non-pension superannuation with the result that it will be rolled into a fund of her choice.
The agreed position with respect to the husband’s pension has consequences for the manner in which the requirements of s 79 are to be met in this case and the principles which underlie it.
The parties are agreed that the former matrimonial home (agreed as having a value of $1.3million) should be sold.
In addition to receiving the whole of the husband’s non-pension superannuation, the wife contends for an order that:
3.… the parties cause to be paid to the wife an amount representing 80% of the amount calculated by adding:
3.1 the net proceeds of sale
3.2the amount received by the wife pursuant to the splitting order;
3.3 the husband’s bank accounts of $23,144
3.4 the wife’s credit union account of $81,200
3.5 the husband’s IAG shares
3.6 the wife’s car valued at $24,000
3.7 the wife’s superannuation of $13,200
and to pay the balance remaining to the husband.
The wife also seeks an order for the payment of $500 per week by way of spousal maintenance.
The husband contends that, after payment of the usual charges and commissions and payment of the mortgage secured on the property, an order should be made:
5.5 … to divide the balance [sale proceeds] remaining between the parties such that the wife receives $C and the husband receives $D, calculated as follows:
5.5.1 ($E + $A) x 55% = $B
5.5.2 $B - $E = $C
5.5.3 $A - $C = $D
Where:
$E is the sum of the value of the Wife’s superannuation with Asgard Superannuation fund plus the sum of $183,000 representing the wife’s interest in REST superannuation plus the values of the Husband’s two interests in State Super
$A is the sale price of the property less [the deductions referred to above].
$B represents 55% of the total value of the home and the parties’ respective superannuation interests referred to above
$C is the amount payable to the wife
$D is the amount to be received by the Husband
The approach of each of the parties said to lead to those results involves differing approaches to the requirements of s 79 of the Family Law Act 1975 (Cth) (“the FLA”) in circumstances where no splitting order is sought in respect of a “superannuation interest”.
Although neither counsel addressed the issue in terms of earlier decided cases, the parties’ respective approaches raise for consideration the differences apparent in the decisions of differently-constituted Full Courts in, respectively, Hickey & Hickey & Attorney General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143 and Coghlan & Coghlan (2005) FLC 93-220.
It is necessary to address that issue below. First, however, it is necessary to say something about two preliminary matters, each of which is concerned with this matter’s progress to judgment.
Progress of the Hearing and Judgment
The acceptance by the husband of his prospective pension as a “superannuation interest” as defined in the FLA was, for the purpose of final submissions made on his behalf, as a result of a finding made by me in respect of which written reasons were delivered during the course of the trial.
At the outset of the trial, in the context of the husband’s objection to the introduction of evidence from a witness who asserted expertise, Mr Lloyd SC for the Husband argued that the Husband’s prospective pension was not a “superannuation interest” (as defined).
Neither counsel was able to point to any authority in this Court in which the issue had been considered in those terms. I considered the matter overnight and delivered written reasons in respect of that issue the following morning.
By agreement between counsel, then, that decision and those written reasons, which I will here make clear impact upon the ultimate orders made in this case, are incorporated into these reasons below.
The Re-Opening
Unfortunately, delay has attended this matter subsequent to the conclusion of the trial on 11 December 2009. It results primarily because of an error contained in initial correspondence from the State superannuation trustee. The circumstances in which that delay occurred resulted in the re-opening of the proceedings and require explanation.
On the first day of the trial (10 December 2009) a letter had been sent from “State Super – SAS Trustee Corporation” to the solicitors for the wife advising that “… the information provided to you in our letter dated 9 November 2009 advising that the Trustee would comply with a 100% split is incorrect”. But, that letter was not received by the solicitors for the wife until 14 December, after the trial had concluded.
On 30 December, 2009, the solicitors for the wife wrote to my associate, backcopied to the solicitors for the husband, advising of this occurrence. Upon my return from leave on 7 January, 2010, the parties were advised that “… the contents of that correspondence may involve a change to the basis upon which the parties conducted the trial … or an alteration to the basis upon which the case was conducted by one or both parties”.
As a result, a course was proposed, involving the re-opening of proceedings so as to receive into evidence the correspondence referred to, and, thereafter, written submissions to be received upon my return from a subsequent period of leave at the end of January, 2010. The interests of justice being the criteria for re-opening, plainly the circumstances justified that course of action. In the event, further correspondence ensued which complicated that intended process.
Ultimately, the matter was listed for further oral submissions on 6 May, 2010. At that time, an agreed statement of facts, which had been foreshadowed in earlier correspondence from the parties’ solicitors to the court, was handed up. On that date, then, a formal order was made re-opening the proceedings and the correspondence just referred to was made an Exhibit.
For the purpose of these reasons, it is appropriate to include a summary of the correspondence. (A summary also formed part of the Exhibit).
| 30/12/2009 | LETTER: FWO to Associate | Advising letter recv from State Super. |
| 07/01/2010 | LETTER: Associate to both solicitors | Judge requests written submissions by 20 Feb 2010 in respect of State Super letter. |
| 27/01/2010 | LETTER: FWO to Associate | Counsel on leave until end of January 2010. |
| 02/02/2010 | LETTER: FWO to Associate | Attaching State Super letter dated 19 Jan 2010. |
| 10/02/2010 | LETTER: Associate to both solicitors | Do parties want to make further submissions re Super. |
| 11/02/2010 | LETTER: Watts McCray (husband’s solicitors) to Associate | Seek clarification of the position of the State Superannuation Board, then will make short submissions to judge. Draft form of order within 7 to 14 days. |
| 05/03/2010 | LETTER: FWO to Watts McCray | Request for update on progress of matter. |
| 23/03/2010 | LETTER: Watts McCray copied to FWO | Request matter be relisted ASAP & Submission fwd under separate cover. |
| 15/04/2010 | LETTER: Associate to both solicitors | Request advice re when written submissions will be forwarded to chambers and which date for oral submissions |
| 19/04/2010 | LETTER: Watts McCray copied to FWO to Associate | Request further oral submissions on 6 May 2010 |
| 19/04/2010 | EMAIL: Associate to Watts McCray | Confirm listing for oral submissions by video 10am 6 May 2010 |
| 19/04/2010 | EMAIL: Watts McCray | Very real prospect of Agreed Statement of Facts being filed |
| 10/04/2010 | EMAIL: Associate to Watts McCray | 6 May hearing will be vacated if Agreed Statement of Facts is received and appropriate. |
On 6 May 2010, the parties agreed that the statement of facts prepared by them should also form part of the evidence. Further, it was agreed that orders should be made in the form submitted so as to give effect to the agreed position that the wife would take 100% of the husband’s non-pension superannuation. Again, the statement of facts, and those proposed orders were, for ease of identification, made Exhibits and, again, it is appropriate that they be included in these reasons in the form in which they were handed up:
1.At the hearing of these proceedings on 10 and 11 December 2009, both parties sought Orders to the effect that 100% of the husband’s superannuation interests with State Superannuation Scheme (“the SSS interest”) and the State Authorities Non-Contributory Superannuation Scheme (“the SANCS interest”) (together called the “husband’s superannuation interests”) be split in favour of the Wife.
2.Further, at the hearing of these proceedings on 10 and 11 December 2009, evidence established that the valuation of the Husband’s superannuation interests, in accordance with the relevant Regulations, was $893,372. The Husband contended that, in the event the proposed splitting Order was made, then the figure to be ascribed to the interests in the hands of the Wife was $893,372. The Wife contended that the said valuation did not represent the amount that she would actually receive and that the value of the superannuation interests to be received by her had a lower “value” to her, namely the amount of $565,279, being the sum of $463,820 and $101,459, which were the two amounts standing in the husband’s names in the SSS and SANCS funds respectively.
3.Judgement was reserved by His Honour on 11 December 2002.
4.By letter dated 14 December 2009, SAS Trustee Corporation (“the Trustee”), as Trustee of the husband’s superannuation interests, advised that previous advice from the Trustee that it would comply with an Order as sought by the parties for a percentage splitting order was incorrect. A copy of that letter is attached hereto and marked “A”.
5.The parties thereupon asked his Honour not to deliver Judgement until this issue could be resolved.
6.By letter dated 21 January 2010, the Trustee confirmed that a percentage splitting order would not be complied with and that the specification of a base amount was required. A copy of that letter is attached hereto and marked “B”.
7.By letter dated 25 March 2010, the Trustee advised that the previous advice as to the valuation of the Husband’s superannuation interests was incorrect. A copy of that letter is attached and marked “C”. That letter attaches a replacement Form 6 Superannuation Information Form in respect of the husband’s superannuation interests, which is part of attachment “C”. The valuation of the Husband’s State Superannuation Scheme interest is shown as $857,087.65 as at 23 March 2010. The valuation of the Husband’s SANCS interest is shown as $114,464.30 as at 23 March 2010.
8.By letter dated 12 April 2010, the Trustee confirmed the valuations stated above. The total gross value of the Husband’s superannuation interests is therefore $971,551.95.
It is noted that the Husband’s superannuation interests are subject to a Superannuation Surcharge Debt of $29,209.01. The net value of the Husband’s superannuation interests is therefore $942,342.94. A copy of that letter is attached hereto and marked “D”.
9.The Trustee Corporation has acknowledged that, in the event a splitting order is made, then the amount to be paid to the Wife shall be the sum calculated in accordance with the figures used in Paragraph 7. The issue between the parties referred to in Paragraph 2 has therefore ceased to be an issue. See copy letter dated 13 April 2010 which is attached hereto and marked “E”.
10.By letter dated 16 April 2010 to the Trustee, the Wife’s solicitors, Fishburn Watson O’Brien sought formal approval of the proposed splitting Order. The proposed order referred to the splitting of the base amounts which represent the most recent information as to the value of the husband’s superannuation interests. A copy of that letter is attached hereto and marked “F”.
11.The Trustee, by letter dated 29 April 2010, acknowledges that either a splitting order using base amounts, or an order splitting 100% of the husband’s superannuation interests will be complied with. A copy of that letter is attached hereto and marked “G”.
12.The parties each seek that an order be made by consent in the terms of the Proposed Minute of Proposed Order filed with this Statement of Agreed Facts.
13.The parties renew their positions as at the hearing of these proceedings, namely that the Husband’s superannuation interests (as defined in Paragraph 1) be split as to 100% to the Wife. The benefit the Wife shall thereby receive shall be $942,342.94 (as calculated in Paragraph 8). This will have the benefit of finalising the Husband’s superannuation interests and ensuring that the Superannuation Surcharge Debt is met in full at the time of payment. There can be expected to be increases by way of interest accrued to the date of payment to the benefit of the Wife.
14.By letter dated 4 May 2010, the Trustee confirms the form of order required to achieve a 100% split of the Husband’s superannuation interests to the Wife. A copy of that letter is attached hereto and marked “H”. The parties’ joint position is to invite the Court to make an order in the terms suggested by the Trustee in annexure “H”.
15.The parties further agree that this Statement of Agreed Facts and the Proposed Minute of Proposed Order does not refer to or affect any of the submissions made by either party in respect of the Husband’s pension entitlements pursuant to the NSW Judges Pension Act, save as to any consequent effect as a result of the value now ascribed to the Husband’s superannuation interests.
The orders agreed to be made to effect the agreed 100% split are:
1.That in accordance with paragraph 90MT(4) of the Family Law Act 1975 the base amount representing 100% of the interest held by [the husband] in the State Superannuation Scheme (“SSS”) is allocated to [the wife].
2.That in accordance with paragraph 90MT(4) of the Family Law Act 1975 the base amount representing 100% of the interest held by [the husband] in the State Authorities Non-contributory Superannuation scheme (“SANCS”) is allocated to [the wife].
3.That in accordance with paragraph 90MT(1)(a) of the Family Law Act 1975:
(a)[The wife] is entitled to be paid the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001; and
(b)[The husband’s] entitlement to payments out of his interest in SSS and SANCS and the entitlement of such other person to whom a splittable payment may be payable is correspondingly reduced by force of this Order.
4.That the trustee of SSS and SANCS (“the Trustee”) shall do all such acts and things and sign all such documents as may be necessary to:
(a)calculate, in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001, the entitlement created for [the wife] by clauses 1 and 2 of this Order; and
(b)pay the entitlement whenever the Trustee makes a splittable payment out of [the husband’s] interests in SSS and SANCS.
5.That this Order has effect from the operative time and the operative time is four days from the date of this Order.
6.That this Order binds the trustee of SSS and SANCS.
Is The Prospective Pension a “Superannuation Interest”?
The reasons given during the course of the hearing for finding that the husband’s judicial pension is a “superannuation interest” within the meaning of the FLA (which also include some important matters of background) are as follows.
The husband was appointed [to the Bench in …]. He was later elevated to a higher position. He is, as a result of each, entitled, at a future time, and upon the occurrence of specified events, to a judicial pension. That pension is governed by the Judges’ Pensions Act 1953 (NSW) (“the Pensions Act”).
In the context of arguments about the admissibility of evidence at the outset of these proceedings, Mr Lloyd SC, counsel for the husband, objected to opinions expressed by a single expert on the basis that they were opinions as to matters of law. Specifically, the expert, Mr S, opines that the husband had a superannuation interest within the meaning of that expression in the FLA.
The wife had obtained two additional reports. The first contains actuarial calculations performed by a Ms V. That affidavit and its attendant report is objected to by Mr Lloyd SC in its entirety. An affidavit was also obtained, upon instructions from the wife, from a Mr B. The affidavit and report of Mr B was not objected to.
Contained within Mr B’s report was an assertion similar to that made by Mr S that the husband had a “superannuation interest” within the meaning of the FLA. The expertise of Mr B to give such an opinion was accepted (presumably on the basis that Mr B is a legal practitioner who has “specialised knowledge” referenced to his “training, study or experience” – s 79 Evidence Act 1995 (Cth)). Mr Lloyd SC made it clear, however, that the conclusion just referred to was challenged.
Counsel for each of the parties agreed that the most expeditious way of dealing with the issues just described and, thereafter, to proceed to a determination of the evidentiary questions and, ultimately, the determination of just and equitable orders for settlement of property, was to take the evidence of Mr B first, and for me to decide, as a preliminary point, whether the husband’s prospective judicial pension was a “superannuation interest” within the meaning of the Act.
The Legislation
In 2001, amending legislation, applicable from 28 December, 2002, introduced what is now Part VIIIB of the Act. That Part permits, in s79 proceedings, a particular form of order to be made by the court (a “splitting order”) in respect of defined “superannuation interests”.
Prior to the amendments to the FLA, debate had centred upon whether superannuation was “property” within the meaning of the Act. The issue was important because s 79 empowered the court to make orders only “with respect to the property of the parties to the marriage or either of them”.
Although there were exceptions, as a general rule superannuation had been held to not be property (see eg: In the Marriage of Crapp (No. 2) (1979) FLC 90-615; In the Marriage of Prestwich (1985) 9 Fam LR 1069; and In the Marriage of Harrison (1996) 20 Fam LR 322).
The introduction of Part VIIIB was accompanied by other pieces of legislation which can be seen to work in conjunction with the amendments to the FLA. For example, the Family Law (Superannuation) Regulations 2001 (Cth) prescribe (among other things) methods for valuing superannuation interests. The Superannuation Industry (Supervision) Amendment Regulations 2001 (Cth) and the Superannuation Industry (Supervision) Amendment Regulations 2002 (Cth) permit trustees of funds to create new interests and provide for roll-overs and the like. Yet other legislation introduced at the same time, made consequential changes to the taxation and social security and veterans affairs legislation.
Importantly, s 90MB of the FLA provides, among other things, that Part VIIIB “has effect despite anything to the contrary” contained in “any other law of the Commonwealth” or “any law of a State or Territory” or “anything in a Trust Deed or other instrument”.
This court has jurisdiction in respect of “matrimonial causes”. Jurisdiction in respect of “superannuation interests” is attracted by s 90MC which provides that the superannuation interest “…is to be treated as property for the purposes of paragraph (ca) of the definition of matrimonial cause in s 4”.
Within jurisdiction, the court is given power to make orders in relation to “superannuation interests” of the spouses (s 90MS). The particular sorts of orders that can be made (splitting orders) are provided for in s 90MT. That section specifies the types of orders that can be made “in relation to a superannuation interest (other than an unsplittable interest)”.
It can be observed, then, that the concept of a “superannuation interest” is central to both the court’s jurisdiction and to its specific power to make specific types of orders. Unsurprisingly, then, “superannuation interest” is defined:
Superannuation interest means an interest that a person has as a member of an eligible superannuation plan, but does not include a reversionary interest.
That definition contains, relevantly, two terms which are also defined. “Eligible Superannuation Plan” is defined (s 90MD) to mean any of the following:
(a) A superannuation fund within the meaning of the SIS Act;
(b) An approved deposit fund;
(c) An RSA;
(d)An account within the meaning of the Small Superannuation Accounts Act 1995;
(e)A superannuation annuity (within the meaning of Income Tax Assessment Act 1997).
In addition, “member” is defined as:
Member, in relation to an eligible superannuation plan, includes a beneficiary (including a contingent or prospective beneficiary).
Beneficiary is not defined. However, “interest” is defined as “including prospective or contingent interests, and also includes an expectancy”.
It can be seen that an “eligible superannuation plan” is a “superannuation fund” within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth) (“the SIS Act”). Section 10 of the SIS Act provides that:
Superannuation Fund means:
…
(b) A Public Sector Superannuation Scheme
The latter expression is defined, relevantly, as
A scheme for the payment of superannuation, retirement, or death benefits, where the scheme is established:
(a)By or under a law of the Commonwealth or of a State or Territory…
In my view, it is clear beyond doubt that the Pensions Act is a scheme for the payment of “retirement or death benefits” and, thus, is a “public sector superannuation scheme”. That means that, in turn, it is a “superannuation fund” within the meaning of the SIS Act, which means, in turn, that it is an “eligible superannuation plan” within the meaning of s 90MD of the Family Law Act.
The central plank of the argument advanced on behalf of the husband rests, firstly, upon the uncontroversial assertion that the husband receives (leaving aside death or disability) no pension of any type if he retires prior to attaining the age of 60 and having served 10 years as a judge.
Section 4 of the Pensions Act provides:
A judge who has attained the age of 60 years and has served as a judge for not less than 10 years, may retire voluntarily from his or her judicial office, and on so retiring shall be entitled to an annual pension in all respects as if he or she had attained the age of 72 years and had retired from that office in accordance with law.
Section 3 of the same Act entitles the judge meeting those criteria to 60% of “his or her notional judicial salary” as at the retirement date.
Mr Lloyd SC argues that the husband has “no interest at all” until he attains 10 years of service and the age of 60 pursuant to s 4 of the Act. When cross-examining Mr B, counsel put it in a slightly different way: the husband could not have a “nil entitlement” because there was no such thing; rather, the husband had no entitlement at all. If he has no entitlement at all, he cannot be said to have an interest in the fund. Focussing upon the FLA definition of “superannuation interest”, Mr Lloyd SC argued that the husband was “not a member of any fund”.
Mr B disagreed in each respect, saying that, currently, the husband “had an interest but not an entitlement”. When asked what the husband’s interest was, Mr B said that his interest was an accruing right at the rate of 10% per annum, but which such right does not crystallise until the relevant two criteria for entitlement are met.
Mr B said that the prospective pension entitlement was, then, “accruing in the same way as a defined benefit superannuation interest would accrue”. Mr B used the example of the superannuation scheme established under the Commonwealth Superannuation Act which (prior to recent changes) provided for some members to have defined benefit interests. Mr B said that, if a member of that scheme resigned prior to meeting the relevant vesting criteria, the member was entitled to withdraw his or her contributions but they were entitled to receive nil by way of pension.
The evidence of Mr B is, as it were, reinforced in the current specific context by reference to s 16A of the Pensions Act. That section provides:
Section 16A Accrued Benefit Multiples for Family Law superannuation purposes.
(1)For the purposes of the Family Law superannuation legislation, [defined in the following subsection] the accrued benefit multiple of a judge or retired judge is the period (in years and parts of years) that the judge or retired judge served as a judge in his or her judicial office.
Under cross-examination, Mr B indicated, in my view correctly, that the section provides a legislative foundation for his assertion that the prospective judicial pension is “accruing in the same way as any defined benefit fund”. The reference point for other defined benefit funds is a prescribed multiple either as a percentage of final salary (in the case of pensions) or as a numerical figure (in the case of lump sum entitlements).
Mr B sought to further illustrate the point by reference to comparing an unfunded scheme (of which the NSW Judge’s pension is an example) and a funded defined benefits scheme. In the latter, the accumulating right of the prospective recipient is provided for by the accumulation of funds sufficient to meet the future entitlement. In the former case no such funds are accumulated because, when the entitlement crystallises, the amount is met from consolidated revenue.
The proposition put forward on behalf of the husband can be seen exemplified (albeit in a slightly different context) in statements made relatively early in the life of the court. Amongst the most well-known is that of Fogarty J delivering the judgment of the Full Court In the Marriage of Crapp (No. 2) above. His Honour said (at 78,181):
It appears to me that generally an interest in a superannuation fund or the like is not “property” as defined in sec. 4 of the Family Law Act or at all. It is normally a contingent interest only; until he actually receives it in his hands he has no control over it; he is unable to alienate it in the meantime and in the event of his death prior to retirement, the right does not form part of his estate. In my view such an interest falls outside the term “property” as ordinarily understand or as defined in sec. 4 of the Family Law Act…
It might be noted that it has been argued that the fact that an interest is contingent does not preclude it from being “property” within the meaning of the Act. One example is Dr Dickey in Contingent Interests as Property, 66 ALJ 833. Dr. Dickey there refers to Re Rule’s Settlement [1915] VLR 670 and says:
…the Full Court of the Supreme Court of Victoria made it quite clear that a contingent interest in property is itself property…:
The word “property” as used in the [Stamps Act 1892 (Vic)] in the sense of “proprium”, something of one’s own, some property in which the settlor has a distinct interest, vested or contingent. It may be that the property may never come to enjoyment by reason of the failure of the contingency upon which enjoyment is to depend, but, nonetheless, such a distinct contingent interest would be “property”.
But, crucially, the issue in the instant proceedings is different. Contrary to a central plank of the argument on behalf of the husband, the issue here is not whether the prospective pension of the husband is “property” or, as was argued, “an interest in a fund”. Rather, the issue here is whether the husband’s prospective pension is a “superannuation interest” as defined. The defined concept, whatever else it, or similar expressions, might mean in other contexts, has a specific statutory meaning and context for the purposes of property proceedings between spouses pursuant to the FLA.
The Pensions Act is clearly a “public sector superannuation scheme” by reason of providing for retirement or death benefits for a “judge”. As such, it is a “superannuation fund” within the meaning of s 10 of the SIS Act. As such it is an “eligible superannuation plan” within the meaning of s 90MD of the Family Law Act. As such, an interest in that eligible superannuation plan will be a “superannuation interest” within the meaning of s 90MD if the husband in this case is a “member” of that eligible superannuation plan.
Because the NSW legislation constitutes the plan, it is that legislation that determines whether the husband is a “member” of the plan. The plain reading of that Act dictates, as it seems to me, that a person has a prospective interest under that scheme when he or she is validly appointed a judge. It is a “judge” who, upon satisfying the vesting criteria, receives the entitlement to the retirement benefit (see s 4).
“Judge” is defined in s 2 to mean, [“a person holding the office of Chief Justice or puisne judge of the Supreme Court of New South Wales, President of the Court of Appeal or Judge of Appeal, President or other member of the Industrial Commission of New South Wales, Judge of the Industrial Court, judicial member of the Industrial Relations Commission of New South Wales, Chief Judge or Judge of the Land and Environment Court, Chief Judge or Judge of the District Court, or Chief Judge or Judge of the Compensation Court of New South Wales]”. Thus, pursuant to that legislation, a judge (as relevantly defined) becomes entitled prospectively to a retirement benefit pursuant to s 4 (or s 3 as the case may be) the day he or she is validly appointed a judge. (The periods in each court can, for pension purposes, be regarded as continuous – see s 8 of the Pensions Act).
As earlier observed, a person entitled to retirement benefits which are contingent or prospective is a “member” of a fund within the meaning of the FLA (s 90MD). It follows, in my view, that the husband is a “member” as defined, of a superannuation interest as defined and, although that interest is entirely prospective, it becomes a superannuation interest for all purposes pursuant to the FLA.
The Full Court in Hickey & Hickey & Attorney General for the Commonwealth of Australia (Intervenor) above held, at [75] that:
Although, for obvious reasons, the definition of property in s. 4 was not amended to include a superannuation interest or deem such an interest to be property, the effect of s. 90MC is that in proceedings in relation to property under s. 79 a superannuation interest is to be treated as property irrespective of whether or not a splitting or flagging order is sought or proposed to be made. As was submitted on behalf of the husband, the expression “treated as property” should be understood as meaning “treated as if it were property even though it is not” and that it should be so treated for the purposes of s. 79.
The Full Court went on to say, in the same paragraph:
Because a superannuation interest is to be treated as property in a s. 79 proceedings it follows that it would be included in the list of property and valued at what is step one of the preferred four step approach to the determination of an application pursuant to s. 79. At step three the superannuation interest may be taken into account, as are other items of property and financial resources, pursuant to the provisions of s. 75(2) if the interest is relevant. The superannuation legislation introduced reforms which are directed to how a court will deal with the superannuation interest at steps one and four of the preferred four step approach in the determination of an application under s. 79. The legislation did not amend s. 79 or s. 75.
A later, differently constituted, Full Court held in Coghlan and Coghlan above (in the joint judgment of Bryant CJ, Finn and Coleman JJ, at para 43) that:
… the way in which s 90MS is drafted leads us to the view that superannuation interests are another species of asset which is different from property as defined in s 4(1), and in relation to which orders also can be made in proceedings under s 79.
Whatever might be the difference between the two Full Courts, it is plain that each considered that interests falling within the definition of “superannuation interest” within the meaning of the FLA would see those superannuation interests as being included with the property of the parties or either of them for the purposes of the application of s 79(4) of the FLA (see Hickey, previous citation and Coghlan at [48]).
The latter Full Court went on to hold, at [53]:
Importantly, the conclusion, that by virtue of s 90MS superannuation interests are to be regarded as another species of asset in relation to which orders can be made, will mean that the Court will be relieved from having to determine in any particular case the question of whether “a superannuation interest”, which comes within the definition of that term contained in s 90MD, may in fact also come within the definition of “property” in s 4(1) … or whether it is only a financial resource.
Warnick J in Coghlan agreed in the result but differed in the interpretation of sections within Part VIIIB. His Honour held (at [82]):
In my view, it is a necessary implication of the insertion of Part VIIIB and in particular, s 90MC that one reads subsection (1) of s 79 as relating to proceedings with respect to the property of the parties, which property includes a superannuation interest treated as property. That then is a cause of action which matches the cause of action constituting a matrimonial cause by virtue of paragraph (ca).
In my view, then, the superannuation interest of the husband in this case is to be included with the property of the parties or either of them in the application of s 79 of the Act, and in particular, s 79(4).
Once an interest is a “superannuation interest” as defined, the court is mandatorily required to determine an amount in relation to the interests in accordance with the Regulations, if the Regulations provide for the determination of that amount in relation to the interest (s 90MT)(2)(a)). In the event that the Regulations do not so provide there is an alternative mandatory requirement upon the court, namely to “determine the value of the interest by such method as a court considers appropriate” (s 90MT(2)(b)).
The single expert, Mr S, is of the view that the Regulations do not provide for the determination of an amount in relation to this particular superannuation interest arising out the Pensions Act. Mr B agrees with that assessment. Specifically, both of those experts are agreed that Regulation 27 of the Family Law (Superannuation) Regulations provides for a methodology for determining an amount if, relevantly, the interest “is not a percentage only interest”.
The relevant interest here is a percentage-only interest. Accordingly, the Regulations do not provide for a determination of an amount for the interest pursuant to the Pensions Act.
Mr S, the single expert, uses an analogy for this interest in arriving at an amount, namely the method within the Regulations for determining the gross value of a defined benefit interest in the growth phase. Mr B was cross-examined about that issue by Mr Lloyd SC, and, after some questions posed by me, Mr B’s evidence was to the effect that the Regulations do provide for a method for the valuation of superannuation interests which have “a nature, form and characteristics similar or identical” to the interests under the Pensions Act. Mr B then went on to explain those similarities.
The answers given by Mr B to questions in cross-examination from Mr Lloyd SC were, in effect, confirmatory of the analogous means of arriving at a value employed by Mr S.
I am of the view that:
a)The husband is a member of an eligible superannuation plan within the meaning of each of those expressions in s 90MD of the FLA;
b)The Pensions Act provides a benefit which, although as yet uncrystallised because the criteria for entitlement have not been met, is, nevertheless, a “superannuation interest” within the meaning of the FLA;
c)Accordingly, the husband’s prospective pension is to be treated as property and included with the property of the parties or either of them as that to which s 79 and, in particular s 79(4), applies;
d)The Regulations do not provide for the determination of an amount in relation to that interest within the meaning of s 90MT (2)(a);
e)The Family Law Act requires the court to determine the value of the interest by such method as the court considers appropriate.
Subsequent to delivery of those reasons, the parties agreed to adopt the amount arrived at by Mr S, the single expert in this case, as the s 90MT(2) “value” of the pensions. I have no evidence to the contrary and adopt Mr S’s value.
The Approach to be Adopted?
The approach adopted by the husband might be described as akin to the “two pools approach” described by the Full Court in Coghlan, above. Yet, here, it is contended, first, that superannuation interests other than the pension should be included with the property of the parties and a contribution assessment applied to the “pool” thus created, and, secondly, no contribution assessment should be made in respect of, or applied to, the prospective pension.
Although not necessarily articulated in this manner, the approach might be seen to be founded in the markedly different nature, form and characteristics of the property and interests comprising the “property and superannuation pool” when compared to the nature, form and characteristics of the prospective judicial pension. In doing so, no distinction is made between the nature, form and characteristics of the superannuation interests of the parties other than the husband’s pension.
In respect of the prospective pension, it must be emphasised, as outlined above, that the New South Wales judicial pension scheme, unlike some other judicial pension schemes, does not permit of the splitting of the underlying interest in the pension
This last matter has the potential to have very significant ramifications in arriving at orders now that are considered to be just and equitable because the effect is that, although a splitting order of the judicial pension might be made, the wife cannot receive the benefit of any split interest until the husband satisfies a vesting event; the husband’s underlying interest is not split until that time.
That is to be contrasted with a scheme (eg. Victoria) whose legislation permits the underlying interest to be split. In that event, the “non-pension spouse” could, upon the making of a splitting order, roll the split interest into a fund of their choosing and, thereafter, their entitlement will depend upon vesting events applicable to them, according to the rules of their fund.
That distinction lies at the heart of the wife’s position in this case in which she seeks no splitting order in respect of the husband’s pension. Her position is understandable; she is some eight years older than the husband and he says he intends working until aged 72 (when he must retire). A splitting order would, then, bring with it the possibility that receipt by the wife of her entitlement would be postponed until she was 80.
But, the husband’s “superannuation interest” is extremely valuable as its agreed “amount” plainly reveals. How can orders which are just and equitable give, in the absence of a splitting order, recognition of this very considerable “value” while at the same time, not doing an injustice to the pension’s recipient whose receipt of any benefit is postponed to (at the earliest) a mandatory future point and who, in any event, can never receive any part of the benefit as a lump sum?
That question is at the heart of deciding what orders are just and equitable in this case.
The path to that result requires what earlier Full Courts have called “a disciplined approach” consistent with the requirements of s 79. That, in turn, has led to the development of what has been called “the four-step” (or “three-step”) approach to applications pursuant to that section. (See, eg. Hickey above at [39]; In the Marriage of Ferraro (1993) FLC 92-335 at 79,560; Figgins & Figgins (2002) FLC 93-123 and the cases cited in each. As to the role of the “fourth step” see, eg, Norman and Norman (2010) FamCAFC 66 esp at [59]).
An initial question which arises is whether the approaches of each of the parties is justified by reference to the Act and established principle.
The Respective Approaches
Senior Counsel for the husband suggested in argument that this issue ought be dealt with in the following manner:
… we would invite your Honour to treat … the judicial pension … as thought it was nothing more than a calculation … which is done for the purpose of identifying its value within 90MT but having regard to the fact that it equates to nothing more than a continuation of cash flow to the husband who will receive it subject to health and other exigencies of life.
The argument continues in effect that, although the Act requires this superannuation interest to “be treated as property even though it is not”, it should, because of its particular nature, form and characteristics (eg. non-commutable; underlying interest cannot be split; no entitlement until both minimum requirements are met), it should be treated as a matter which should form (a significant) component of the s 79(4)(e) considerations but no contribution assessment should be applied to it.
As an approach, it can be seen to be similar to that which applied prior to the introduction of Part VIIIB into the FLA; significant potential superannuation benefits were treated as a “financial resource” and, in the absence of the power to make splitting orders, justice and equity needed to be effected through orders in respect of property exclusive of superannuation interests.
During Senior Counsel for the wife’s address, I posed the questions:
HIS HONOUR: … Do you (a) contend for a two pools approach, and (b) contend that if I adopt a two pools approach because you don’t seek a splitting order that I should treat the judicial pension pool effectively in the same way as Mr Lloyd has, in other words, within the context of 75(2)?
After some discussion, Ms Rees SC submitted:
… I frankly don’t resile from the suggestion that there is an equal contribution to [the “pool” constituted by the judicial pension]. The question is, how do we recognise it and you recognise it the only way you can recognise it once it’s conceded that it stays with the husband, is to recognise it in the adjustment under s. 75(2).
Thus, I took Ms Rees to contend, ultimately, for a position that contributions should be assessed as equal in respect of each of the “pension pool” and the “non-pension pool”.
The Parties’ Approaches By Reference to the FLA and Earlier Authority
It has long been the law that, just as there is no such thing as “matrimonial property” (as distinct from “the property of the parties or either of them”), no property is excluded from consideration because of its particular form or characteristics. An example is In the Marriage of Bonnici (1991) 15 Fam LR 138 at [43] where it was said that property “…does not fall into a protected category merely because it is an inheritance”. In Hickey at [40], the Full Court said:
Section 79, unlike s 78, requires the Court to consider the whole of the property of the parties, however and whenever acquired notwithstanding that the parties may only seek an alteration of interest in some of that property …
Consistent with those principles, a superannuation interest does not fall into a protected category merely because it is a superannuation interest. Moreover, a superannuation interest does not fall into a protected category merely because it has a particular nature or form, or particular characteristics – such as those peculiar to a judicial pension.
If, as here, an interest is a “superannuation interest” as defined in the FLA, it must, as s 90MC requires, be “treated as property” for the purposes of the relevant matrimonial cause. However, what that legislative requirement means, in terms of the application of s 79, has been the subject of significant judicial debate, exemplified by the differing approaches of differently-constituted Full Courts in Hickey and Coghlan earlier referred to.
In particular, the question has arisen for discussion in the same context as exists here, namely where no splitting order is sought by either of the parties. Within that context, a question arises as to whether, as the husband contends here, the court can refrain from making a contribution finding in respect of the particular superannuation interest, reflecting that interest only in a consideration of the so-called “s 75(2) factors” (i.e. s 79(4)(e)).
In Hickey, it was held (at [30], [75]) that the interest is “to be treated as property even though it is not”. In the latter case a superannuation interest was said by the majority (at [40]) to be “another species of asset which is different from property as defined in s 4(1)…in relation to which orders can also be made in proceedings under s 79.”
As earlier referred to, the Full Court pointed out in Hickey, above, at [40]:-
Section 79, unlike s. 78, requires the Court to consider the whole of the property of the parties, however and whenever acquired, notwithstanding that the parties may only seek an alteration in interest in some of that property…”
Plainly, as the same Full Court made clear, it is within discretion for a Court in exercising power under s 79, to not make a splitting order when there are superannuation interests (see, eg. Hickey at [80]). An order (referred to in the same case as a “catch-all order”) acknowledging the retention of superannuation interests as remaining with their “owner” is within power.
It might also be pointed out that it is within discretion for a court (subject to procedural fairness considerations to the parties and the trustee/s) to make a splitting order where neither party seeks same if considered that same represents a just and equitable result. As will emerge, justice and equity in this case does not demand that occurring.
In respect of an issue directly relevant to issue under discussion, it was said in Hickey:
75. … Because a superannuation interest is to be treated as property in s.79 proceedings it follows that it will be included in the list of property and valued at what is step one of the preferred four step approach to the determination of an application pursuant to s.79. At step three the superannuation interest may be taken into account, as are other items of property and financial resources, pursuant to the provisions of s.75(2) if the interest is relevant. The superannuation legislation introduced reforms which are directed to how a court will deal with a superannuation interest at steps one and four of the preferred four step approach in the determination of an application under s.79. The legislation did not amend s.79 or s.75. [emphasis added]
In the later decision in Coghlan the majority held at [54]:-
It has to be recognised…that the requirement to apply the provisions of s 79 (particularly s 79(4)(a) to (g)) to superannuation interests would, strictly speaking, only arise under s 90MS in circumstances where an order is actually sought under Part VIIIB. It also has to be recognised that the legislation appears to be otherwise silent as to what are the obligations on, and the powers of, the Court where the parties have superannuation interests but no order is sought under Part VIIIB. This in our view is a significant omission from the legislation.”
The majority go on:
[55] The reasoning in Hickey would seem to overcome this legislative omission in that if the words in paragraph (ca) of the definition of “matrimonial cause” in s 4(1) are read not, as we hold, as merely enlivening the jurisdiction to make orders concerning superannuation interests, but rather as meaning that in all proceedings under s 79 (irrespective of whether or not a splitting order is sought), superannuation interests are to be treated as property.
[56] It may well be that it was the intention of the legislature that where no order is sought under Part VIIIB, then the superannuation interests of the parties are to be treated in the same way as such interests were treated prior to the introduction of Part VIIIB. The difficulty, however, with that argument is that the Court has an obligation in property settlement proceedings to make an order which is just and equitable. In the circumstances now prevailing since the introduction of Part VIIIB, in which a valuation which provides an indication of the true worth of a superannuation interest can be made available and in which the Court has the capacity to make a splitting order in relation to payments made in respect of a superannuation interest, a Court may well only be able to satisfy itself that any order it makes will be just and equitable, if it applies to its consideration of the superannuation interests, the criteria for determining a just and equitable order – those criteria being in effect the matters contained in s 79(4) of the Act. [emphasis added]
[57] We recognise, in connection with the approach just suggested, that paragraphs 79(4)(a) and (b) refer to the contributions to “property” and that the expression “property” as used in those paragraphs must be taken to mean property as defined in s 4(1). Accordingly, it might be argued that there is no requirement for the Court to consider the parties’ contributions to their respective superannuation interests in a case where no splitting order is sought. But if this view is correct the contributions to superannuation interests would still remain to be considered under s 75(2)(j). (See in this regard the observations of the Full Court in Wunderwald & Wunderwald (1992) FLC 92-315 at 79,361-2, which we consider have general application despite the nature of the particular superannuation fund under consideration in that case. See also the discussion in B and B (No 2) (2000) FLC 93-031, paragraphs 59 to 70). [emphasis added]
[58] Thus, we consider that because of the obligation under s 79(2) to make a just and equitable order, then in order to ensure such a result the Court should wherever there is a superannuation interest apply the provisions of s 79(4)(a) to (g) (which will include the matters contained in s 75(2)) to that superannuation interest whether or not a splitting order is sought. [emphasis in original]
However, relevant to the instant issue, the majority held, ultimately:
[65] In summary, then, the trial Judge has a discretion as to how superannuation interests will be treated in a particular case. If superannuation is not included in the list of property but rather made the subject of a separate pool, it will be necessary where a splitting order is sought, or extremely prudent where no such splitting order is sought (in order to ensure that justice and equity is achieved) to:
(a) value the superannuation interest (according to the Regulations if an order under Part VIIIB is sought or according to the Regulations or otherwise if no order is sought);
(b) consider and make findings about the types of contributions referred to in s 79(4)(a), (b) and (c) which have been made by the parties to the superannuation interests on either a global approach or an asset by asset approach depending on the circumstances;
(c) consider the other factors in s 79(4) being the matters in s 79(4)(d), (e), (f) and (g); and
(d) ensure that pursuant to s 79(2) the orders in relation to the parties’ property, and any order under Part VIIIB in relation to superannuation interests are just and equitable.
[emphasis added]
Warnick J and O’Ryan J, while agreeing in the result in Coghlan, each wrote judgments disagreeing with the majority’s reasoning. Importantly, in respect of the issue under discussion, Warnick J held:
104 If superannuation is not to be treated as property for the purposes of the application of s. 79, then there is no legislative foundation for the requirement that division of it be in accordance with the provisions of s. 79(4)(a) or (b), which relate only to the division of property…
…
109 With great respect, even if the majority view as to why superannuation interests are to be divided according to the application of s. 79 principles relevant to property, is correct, if no order is sought in relation to a superannuation interest, there is no legislative provision, not even the note to s. 90MS (as the majority recognises) to invoke the application of s. 79(4)(a) and/or (b) to the court’s dealing with the superannuation interest.
His Honour also held:
111. …the one set of considerations (s. 79(4)(a) and (b)) is well established by jurisprudence as a factor to be considered at the “second step” and with other factors, to result in a percentage assessment of contributions to property …
112. Current jurisprudence is contrary to any suggestion that it matters not by which means or at which stage one considers contributions.
The majority in Coghlan indicated a preference for an approach “… whereby superannuation interests are dealt with separately from property as defined in s 4(1), but are subject to the considerations in s 79(4)…”. Their Honours go on to say in the same paragraph that doing so will allow:-
…contributions, both direct and indirect, by either party to such superannuation interests [to] be more likely to be given proper recognition that the real nature of the superannuation interests in question can also be taken into account, both in consideration of the s 75(2) matters and in the final assessment of whether the ultimate order is just and equitable.
Thus, it might be observed, the weekly disposable income of the husband revealed in that material is about seven times that of the wife. The continuing capacity to generate a high income allows of a greater opportunity for the husband to “earn his way out of” the economic difficulties generated by marriage breakdown and the distribution of property (as to which see eg In the Marriage of Best, above at 80,295).
The cross-examination of the wife was directed toward the proposition that a woman who had held a position of some skill and importance in a large organisation had a greater future (and probably present) capacity to earn than what was being exercised.
In her affidavit filed November 2009, the wife deposed to being employed on “a month-to-month basis” and to there being “no security of tenure”. In the witness box, the wife said that her contract with her then employer had finished and that her “last day of work was on 27 October”. She went on to say “I haven’t been really in a fit state to even contemplate working or looking for work since then. I have been consumed with all of this – all the paperwork that has gone with these proceedings”.
When asked about her prospects once these proceedings concluded, the wife responded “I have no idea what type of employment that could possibly take. I don’t know”. The wife was paid $110 per hour when previously employed on a month-to-month basis.
In overview, in the five years to when made redundant in 2005, the wife had average gross earnings of around $85,000 per year. In the approximate five years since being made redundant in 2005, once one-offs such as termination payments and the like are removed, she has averaged less than half of that.
The wife is 62 years of age. While her doctor says she is physically healthy, she says she is experiencing a number of debilitating emotional conditions which, at least in part, she connects with these proceedings and, more broadly, the breakdown of her marriage of more than 20 years. She has clearly had marketable employment skills in the past. She says they are impacted by her age and time out of the fulltime workforce. She doesn’t deny the possibility of future employment; but is not particularly optimistic.
I think it likely that, upon the resolution of these proceedings and, with their proceeds, the establishment of a post-marriage life, the wife, in time, will return to employment of the type she has undertaken since 2005. I consider the prospects of her returning to the fulltime workforce and/or income of her pre-2005 levels to be very low.
The wife does not have the “care and control of a child” as defined – the parties’ child is an adult. However, as was said in a different context by Gummow and Callinan JJ, maternity and paternity involve the incurring of “obligations both legal and moral, the latter sometimes lasting a lifetime…” (U and U (2002) 211 CLR 238 at [92]). The husband has met a number of his son’s expenses post-separation. The child has lived with his mother. Expenses in respect of a young man are incurred as a result as the wife’s Financial Statement shows. Moral obligations of non-financial support are also incurred, particularly if an adult son is suffering from a medical condition. I take these matters into account pursuant to s 75(2)(o).
The eligibility of the husband for a pension pursuant to State legislation needs to be taken into account. An assessment in respect of contributions has been made in respect of same. Double counting must be avoided. The pension has relevance, as a s 75(2) factor, though, beyond that assessment. A consequence of a government-guaranteed pension for life in a substantial amount, is that pre-retirement income can be utilised without regard to the necessity of investment for a post-retirement life. So, too, a borrowing capacity can be calculated by reference to a guaranteed pre-retirement income and a guaranteed post-retirement income. Within that context, I also take account of the fact that the husband’s future pension is never realisable as a lump sum.
Those matters (among others) have relevance not only to s 75(2)(f) itself, but also to the comparative standards of living that each party might enjoy post property settlement (s 75(2)(g)).
That latter factor can also be seen to intersect with a consideration of the “income property and financial resources of the parties” (s 75(2)(b)).
The mooted division on the basis of contributions as assessed would see the husband receiving property in the region of $870,000. For the sake of comparison of prospective standards of living, if it is assumed that the whole of that figure is used to acquire a home and that the wife used an equivalent amount for the same purpose, the wife would have available to her about $600,000 in property – predominantly cash and the husband nil. The wife would need to meet any additional capital injection into her home purchase and any borrowings, living expenses, and to make provision for her retirement from (as found, a likely at best) non-guaranteed income of about one-seventh that of the husband’s. The husband would need to borrow the whole of any additional sum for the purchase of his home and meet his living expenses from an income seven times that of the wife’s and has no need to make any provision for his future retirement.
I have taken into account that the wife has a projected liability for legal fees which will need to be met from her entitlement.
The matters relevant to s 75(2) of the Act in my view call for an adjustment in favour of the wife. Authority demands that consideration be given to “the real impact” of any such adjustment in dollar terms (eg. Clauson and Clauson (1995) FLC 92-595 at 81,911). Furthermore, adjustments, traditionally expressed as percentages, are productive of a disparity between the two parties and it is the latter which, in my view gives a better understanding of the real impact of any such adjustment.
In my judgment, there should be an adjustment to the wife of $300,000.
The total “pool” might be seen to be about $4.34 million. Yet, of course, the “pool” of realisable – and immediately useable – property is valued at about $2.34 million. The assessed sum represents slightly more than 12.5% of the “non-pension pool” or about 7% of the whole “pool” – disparities of about 25% and 14% respectively.
Each year in which the husband continues to be employed as a judicial officer (and his evidence is that he intends, all else being equal, to keep working for about another 17 years) and in which the wife in the future earns (as I have found is her likely “best case”) income of about her post-2005 average, is represented by a disparity of about $160,000 in net income. Whilst the dollar value into the future is likely to change, neither it nor, the disparity is, in my view, likely to decrease.
It is a disparity of that type that gives rise to comments of the type quoted from Best above. The adjustment here represents less than two year’s net income for the husband, and the disparity about three and half year’s net income. In three and a half years time, the wife will be 65. The husband will be 57. If his current plans materialise he will have another 15 years of high earnings ahead of him, on the other hand he has, at his election, about 18 months of high earnings followed by a pension (which itself, is a significant income) for life.
I consider the adjustment just and equitable.
Just and Equitable – The So-Called “Fourth Step”
The adjustment arrived at will see the wife receive property valued at about $1.773 million. That includes superannuation valued at slightly less than a million dollars, which has already been utilised and which is likely to be utilised in significant part in the purchase of a place to live. Her entitlement is entirely useable now.
The husband will receive property valued in the region of $570,000 and a 100% entitlement to a future superannuation interest received as a pension having a current “value” of just over $2million. He receives, then, about 24% of the “non-pension pool”.
Given the length of the marriage, the current respective financial positions of the parties, their likely future positions and, particularly, the nature, form and characteristics of the property and superannuation interests to be divided, I consider the result to be just and equitable.
Spousal Maintenance
An application for spousal maintenance brought contemporaneously with proceedings for settlement of property should be seen in the context of the property orders.
The statutory pre-conditions for relief (s 72) “seem[ ] to imply that each party should attempt to support himself or herself where this is reasonable having regard to the factors listed …”. (Astbury and Astbury (1978) FLC 90-494 at 77,562). The question is whether the wife “… is able to support herself adequately, that is whether she can generate funds from her own resources or earning capacity to supply her own needs … [t]he threshold test in terms of s. 72 is ability to support one’s self, not need”. (per Nygh J, Murkin and Murkin (1980) FLC 90-806 at 75,081).
Section 72 also prescribes findings necessary to precede a finding that the wife is unable to support herself; relevantly “by reason of age or … mental incapacity for appropriate employment” or “for any other adequate reason”.
The findings earlier made about the parties’ current and future capacity to earn income are repeated in this context as are the findings in respect of the disparity in respect of same. I also repeat that I consider the wife will be likely to resume some form of employment once these proceedings conclude and she is, as a result, better able to establish a post-marriage and post-proceedings life for herself.
The parties’ respective Financial Statements give a broad overview of both the wife’s capacity to support herself and the husband’s ability to contribute to that support; of course those respective sworn statements do not reflect the changed positions consequent upon the orders for property settlement.
To the husband’s list of expenditure can be added back the current support there disclosed. His then weekly rental payment in respect of where he lives was $795 (or about $3,400 per month). The evidence does not reveal how the husband’s position in that respect might change or how, for example, any future mortgage payments might compare. So, too, the wife’s Financial Statement discloses that, at that time, no employment income and no accommodation expenses are met. That, too, is likely to change. Again, the evidence does not reveal how it might do so.
The wife’s Financial Statement provides a list of weekly expenses totalling $816 for herself and $224 for the parties’ child. No real attack was mounted on those expenses; unsurprising in light of the pre-separation standard of living of the parties and the husband’s expenses. The husband lists weekly expenses totalling $6888. When taxation, salary sacrifice and expenses paid for the wife and the parties’ child are removed, they total around $2,700. The husband deposes in that document to $1,800 as a total of “Personal, household, utilities, travel and legal expenses”. It is not otherwise broken down.
In my view, the wife has established to a reasonable satisfaction the pre-conditions to relief contained in s 72. The task, then, is to consider whether it is “proper” to make a maintenance order and, if so, in what terms having regard to the matters in s 75(2) relevant to the inquiry.
Although the matters discussed in respect of s 75(2) above serve a different function in the context of a s 79 application, I nevertheless repeat the findings there made as relevant to the determination just enunciated.
Once the parties’ child leaves home, the wife’s needs, both in terms of week to week expenditure and broader needs such as housing and the like, are likely to change. It is anticipated this will occur in about 12 months or so. I consider that this event will allow the wife’s position to further crystallise and improve in the manner earlier described.
The husband’s Financial Statement records an (averaged) amount of $1,424 per week erstwhile being paid “for the benefit of [the wife] and [the parties’ child]” details of which are deposed as “$250 per week in cash plus bills for miscellaneous household expenses, utilities etc, [the child’s] university fees and related expenses, medical and pharmaceutical expenses”.
Again, some of those expenses have changed or will change – for example, the wife said in the witness box that the parties’ child had “finished university in mid November” and intended to enter the full-time workforce. I have excluded claimed day-to-day expenses in respect of the child contained in the Financial Statement, notwithstanding that he was, at the time of trial, still living with the wife.
While no specific challenge was addressed to the wife’s expenses, it does not in my view follow that all of the claimed expenses ($816 per week) should be met by the husband. Perhaps in recognition of this, the wife seeks an order for $500 per week. I consider an order in that amount proper.
I consider, though, that the amount should be paid only for a period of 18 months, being the period I assess as reasonable to allow for the changes earlier referred to, to occur and the wife’s financial position to crystallise.
Costs of Discrete Issue
Ms Rees SC makes application for the wife’s costs in respect of, as it was expressed in final submissions, “the… application in relation to the characterisation of the judicial pension”.
Whilst the submission refers to “the application”, as earlier outlined the issue arose in reference to an objection to evidence. The specific issue (whether the husband’s prospective pension is a “superannuation interest”) was central to the opinion expressed by a single expert which was the subject of the objection.
The general rule prescribed in the FLA in respect of costs (s 117(1)) is in respect of “proceedings under the Act”. The power to order costs as an exception to that general rule (s 117(2)) gives a wide discretion to award costs (reference to specified criteria – s 117(2A)) “in proceedings under this Act”. “Proceedings” is defined (s 4) to mean “a proceeding in a court” and to include “an incidental proceeding in the course of or in connexion with a proceeding”. The proceedings here are for settlement of property and maintenance. There is power, “in [those] proceedings to order costs “where there are circumstances that justify it…”.
The central component of the wife’s argument is, as it seems to me, that “the matter would have been finished yesterday had that not been raised” – an implicit reference, as I take it, to “conduct” within the meaning of s 117(2A)(c). The husband, it is submitted, was wholly unsuccessful in respect of the argument within the meaning of s 117(2A)(e). The disparity in financial circumstances has already been referred to (s 117(2A)(a)).
I am not necessarily convinced that the matter would necessarily have completed in a day had the issue not been raised. That assumes a number of things, fundamentally that the same total time would have been taken in that event and also that the cross-examination and addresses would have had the same length (and focus) which they ultimately did. I am not prepared to assume that.
Secondly, it seems to me that, in the absence of the issue arising when it did, it would have been open to the husband to raise the argument (and expand upon it fully) during final address.
Thirdly, lack of success on the issue as it was in fact raised may not bear a direct relationship to the ultimate result and, thus, to matters which may be vital to the determination of any application for costs in respect of the proceedings as a whole.
For those reasons, I decline to exercise my discretion to order costs in respect of the distinct proceeding in the manner argued.
I make the orders set out at the commencement of these reasons.
I certify that the preceding two hundred and twenty-nine (229) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy.
Associate:
Date: 16 July 2010
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Costs
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