HRDW & HSJL

[2005] FamCA 676

[2005] FamCA 676

FAMILY LAW ACT 1975

IN THE FAMILY COURT OF AUSTRALIA
AT BRISBANE      No. NA84 of 2004

(No. BRM 2949 of 2002)

BETWEEN:
  H
  R D W
  Appellant Husband

AND:
  H
  S J L
  Respondent Wife

BEFORE THE HONOURABLE JUSTICE WARNICK

REASONS FOR JUDGMENT

Dates of Hearing:              15 June 2005

Date of Judgment:            11 July 2005

Error! Bookmark not defined.

1. This appeal is brought by the husband.

2. On 22 November 2004, Federal Magistrate Baumann made orders in respect of the alteration of property interests between the parties.  The learned Magistrate had calculated an asset pool for division at $455,169.00.  The three items of major value were the equity in the former matrimonial home at $120,000.00, superannuation of the husband $109,452.00 and superannuation of the wife $210,177.00.  The husband had sought to retain the home, his own superannuation and to receive from the wife’s superannuation only so much as was necessary to give him his percentage entitlement, without requiring him to make any payment to the wife.

3. The wife also proposed a “split” of her superannuation in the husband’s favour.  Neither party proposed a “splitting” order in respect of the husband’s superannuation.

4. His Honour considered that the pool ought be divided 67.5% to the husband and 32.5% to the wife and that in the composition of property and interests which each party ought receive, the ratio of superannuation to other assets ought be the same as the proportion of the overall division.  The result was that the husband received a greater “split” of the wife’s superannuation interest than he sought, with the consequence that he needed to make a payment to the wife of some $41,005.00, if he was to retain the home.

5. The Notice of Appeal contains six grounds, which, it was submitted on behalf of the husband in the written outline of argument could largely be considered in two categories:

   “The characterisation of the appellants military pension; and an error in the exercise of discretion with regard to the ‘fourth step’ of doing justice and equity between the parties.”

6. However, that categorisation does not encapsulate all of the matters raised by counsel in the outline of argument and during argument of the appeal, but it represents the thrust of the appeal.

7. I will return to the appeal as argued in detail, after a short background and reference to the principles applicable to this appeal.

Background

1. In this background, facts stated are derived from the reasons for judgment.  A broad outline of the Federal Magistrate’s reasons is included, leaving details applicable to particular grounds of appeal to be provided later.

2. The parties married in 1990 and “neither had any significant assets other than some accumulated superannuation benefits from their military service.”  The husband also had some life insurance policies which he estimates had a surrender value at the time of marriage of approximately $10,500.00 and which were received later in the marriage at an amount of approximately $14,000.00.”

3. There are three children of the marriage.

4. Apart from periods of maternity leave, the wife has worked full-time in the Air Force.

5. The husband resigned from the Air Force in about 1993.  He received a redundancy package and became entitled to a partial pension.

6. The Federal Magistrate expressed himself as drawn to the conclusion that the husband made a more substantial non-financial contribution to the role of home-maker and parent.

7. However, his Honour accepted that the wife’s direct financial contributions were superior to the husband’s, even allowing for the life policy redemption and redundancy payment.

8. His Honour found contributions from all sources to the time of separation, which occurred in April 2001, to be equal in weight.

9. From April 2001 to January 2004, the wife resided in the former matrimonial home and the parties shared the care of the children.  The wife made payments, noted by the trial Judge, in relation to the home.

10. Since January 2004, the husband had made the more significant non-financial contribution in the role of parent and home-maker, because of the wife’s relocation for work purposes which caused the cessation of the week-about arrangement.

11. The learned Magistrate recognised that, post-separation, the wife’s continuity of employment had attracted additional employer contributions to her superannuation and the wife had made additional contributions.

12. His Honour thought that post-separation factors favoured a weighting of 5% to the wife.

13. As to factors relevant under section 75(2) of the Family Law Act 1975 (Cth), as amended (the Act), the husband had completed a number of courses which the learned Magistrate found enhanced his employability.  Further, his Honour expressed the view that, all three children being at school the next year, the husband would have increased availability for employment.  However, his Honour thought that the circumstances of the wife’s security of employment and certainty of a steady income, approximating $60,000.00 per annum at trial, were “significantly superior to the husband’s”.  His Honour made an adjustment of 17.5% in the husband’s favour.

14. His Honour then addressed the question of the future care of the children, finding that the husband would need to meet the majority of the children’s emotional and day-to-day needs and that the husband’s obligations would be likely to impede, to some degree, his employability.  The mother would maintain extensive contact and pay assessed child support.  As to these factors, his Honour said:

    “…I do not think that an allowance of more than 5% is justified considering the allowance made under section 75(2)(b) and the possibility (but not in my view probability) the wife could choose to resign from the Air Force to resume a shared care arrangement.…”

15. His Honour then addressed questions about other section 75(2) factors, but concluded that overall, the two adjustments he had already made for section 75(2) factors, amounting to 22.5%, represented appropriate dealing with all factors.

16. As seen, the end result of his Honour’s assessment of both contributions and section 75(2) factors was the division of 67.5% to the husband and 32.5% to the wife.

17. The learned Magistrate then went on to address the questions of the composition of the assets and interests which each party sought, and which he thought each ought receive.

Principles applicable to the appeal

1. The appeal being against a discretionary judgment, the circumstances in which interference by an appellate court is justified are set out in the well-known passage of the judgment of Dixon, Evatt and McTeirnan JJ in House v The King (1936) 55 CLR 499, at pp 504‑505:

   “The manner in which an appeal against an exercise of discretion should be determined is governed by established principles.  It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course.  It must appear that some error has been made in exercising the discretion.  If the judge acts upon a wrong principle, if the allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some of the material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so.  It may not appear how the primary judge has reached the result embodied in his orders, but if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.  In such a case, although the nature of the error may not be discoverable, the exercise of discretion is reviewed on the ground that a substantial wrong has in fact occurred.”

2. As to error of law, subsequent to the decision of the learned Magistrate, the Full Court of the Family Court handed down several decisions, notably C & C [2005] FamCA 429, in which the correct approach to superannuation interests in property settlement cases was discussed.

3. The nature of appellate review under the Act means that whether the learned Magistrate erred in his approach to superannuation is a question to be measured against the law which applied at the time of the decision, but as presently expounded, even though that exposition comes after the learned Magistrate’s conclusions.

Abandonment of ground

1. Ground 4 was abandoned.

Grounds of appeal

Grounds 1, 2 (and arguably) 3 – the characterisation of the appellant’s military pension

“1.    The Honourable Federal Magistrate erred in including the husband’s MSBS Pension as an asset of the marriage and not as a financial resource.

2.     The Honourable Federal Magistrate erred in placing a value on the husband’s MSBS Pension.

3.     The Honourable Federal Magistrate erred in awarding a division of the property over all classes of the assets.”

1. The first question raised in the outline of argument is whether the husband’s pension was property as defined in section 4(1) of the Act.  In written submissions on behalf of the husband, his pension was referred to as “…a life pension from the military, in the sum of $5,016.44 per annum (indexed to CPI).  He cannot convert this amount to a lump sum.”  Reference was made to comments by O’Ryan J in C & C [2005] FamCA 429 at 131.

2. There, his Honour said:

   “…the husband’s pension which was in the payment phase was property as defined in s 4(1)…”

3. In C & C, I took the view that the question of whether the husband’s superannuation entitlement was “property”, had not been argued and should not be determined in that case.

4. There is no indication in this case that the question was argued before the learned Federal Magistrate and, although the question is raised in the outline of argument, there is no argument in respect of it, beyond the bald proposition that the husband’s entitlement is not property.  I do not think that the question is one which ought be determined in this appeal.

5. Rather, as discussed with counsel for the husband during the hearing of the appeal, and, I took it, acknowledged, and as was submitted in the outline of argument, the point really being raised on behalf of the husband was that, whether “property” or not, the pension was in the nature of an “income stream”.  This, it was submitted in the outline, led to the following proposition:

   “Even if the court finds that the pension is property, the valuation of it at $109,452.00 and the inclusion of that value in the ‘pool’ of property in the marriage has, in the circumstances of this case, caused injustice.

   In my respectful submission, the learned presiding Federal Magistrate erred in the exercise of his discretion by including the ‘value’ of the pension as part of the pool available for distribution.

   …

   ‘In my submission, the valuation of the pension gives the court an understanding of ‘its true value’ over the life of the pension; however it cannot be assigned as the value for the purpose of assessing the asset pool; it operates as a guide to 75(2) (as being, at least, in the nature of an income stream or financial resource), or to an ultimate determination as to what is just and equitable in all the circumstances of this particular case.

   In all the circumstances a proper exercise of discretion in this particular case was to assign a nil value to the pension at ‘step one’ in the process.’”

6. As earlier indicated, though the learned Federal Magistrate decided this case prior to the decision of the Full Court of the Family Court in C & C, nonetheless, it is appropriate on appeal to apply any relevant principles enunciated in C & C, insofar as it has (now) declared the law, as it applied at the time of the decision of the learned Magistrate.

7. I do not think the contentions on behalf of the husband about the way in which the learned Federal Magistrate ought have treated the husbands’ superannuation interest, are consistent with what was said by the majority in C & C.

8. In C & C the majority considered the effect of sections 90MC and 90MS of the Act and concluded:

   “47.  The court in dealing with property proceedings and with proceedings where the parties have superannuation interests must then turn to s 79(2), which requires that any order, including an order that relates to superannuation interests, must be just and equitable.

   48.           The court is then required under s 79(4) in considering what order should be made with respect to the property of the parties (and/or any superannuation interests), to take into account the following matters:…”

   …

   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. 

   …

   63.    …the preferred approach to the determination of property settlement cases must be to prepare in addition to the list of items of property (which would clearly fall within the definition of that term in s 4(1)), a separate list containing any superannuation interest or interests (valued according to the Regulations if a splitting order is sought in any application before the Court, or if no such order is sought, valued either according to the Regulations or otherwise).  This of course is the approach which the trial Judge adopted in this case.

   …

   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.

   66.    In the context of a consideration of the matters referred to in sub-paragraphs (b) and (c) of the last paragraph, the following matters may well be relevant: the relationship between years of fund membership and cohabitation; actual contributions made by the fund member at the commencement of the cohabitation (if applicable), at separation and at the date of hearing; preserved and non-preserved resignation entitlements at those times; and any factors peculiar to the fund or to the spouse’s present and/or future entitlements under the fund.”

9. In the light of the passages quoted, I do not consider that the trial Magistrate:

   (a)     was at liberty to “assign a nil value to the pension at step one in the process”;

   (b)    erred in including the “value” of the pension as part of a pool available for distribution.

10. While the submissions on behalf of the husband might be inconsistent with what was required of the trial Magistrate according to C & C, the question of whether, to accord with what was required by C & C, the learned Magistrate should have done other than he did, and, in particular whether the learned Magistrate erred in not placing superannuation in one pool, or two pools, separate from other assets, is considered next.

11. The prospect of a separate pool or pools for superannuation was certainly not plainly argued during the appeal, although alluded to in discussion between the bench and counsel for the husband.  However, it was submitted on behalf of the husband that, though the Federal Magistrate payed attention to a number of aspects of contributions to the superannuation interests and to the composition of assets to be received by each party, nowhere did he pay attention to the particular nature of the husband’s superannuation which, as earlier seen, was an entitlement to periodic pension payments only.

12. In the outline of argument, this submission was referred to in support of the second category of grounds, relating to consideration of the justice and equity of the proposed orders.  There, it was said that:

    “(o)   …of the 67.5% awarded from the pool to the appellant, one-third of that was a pension which cannot ever be accessed as a lump sum, whereas the respondent will have access to significant lump sums on retirement.”

13. As to these issues, the learned Magistrate did recognise the nature of superannuation entitlements (in general and to some extent in this particular case ) when he said:

    “3.    …Apart from that asset, the most contentious issue arises from how the respective military superannuation benefits of the husband (currently being received as a lifetime pension) and the wife (being a combined defined benefit and accumulation interest) should be divided, if at all.

    …

    6.     The assets of significance which represent the pool are not seriously in dispute.  The husband proposes that his superannuation in its payment phase should be excluded.  The wife says such an approach is not appropriate.  The wife seeks a splitting order as to her superannuation in favour of the husband.  Since Coleman J's decision in Cahill the issue of whether superannuation (which is to be "treated" as property) should be excluded from the pool of assets has been the subject of much judicial comment. 

    7.     It is not necessary for me to add significantly to that debate which I understand has been argued recently before two specially constituted Full Courts.  The decisions of those Full Courts have not yet been delivered. 

    8.     I am attracted to the principle which Coleman J enunciated, namely that if the inclusion of the value of the superannuation (which is in its payment phase) has the capacity to distort the pool of assets then in a quest to achieve justice and equity to the parties the trial adjudicator, in the exercise of discretion, may be entitled to exclude the value of that interest.  Trite as it is to say, each case depends on its own facts.  I am of the view that this is a case where the pool should be initially assessed with all superannuation interests included at the value determined by the independent experts.…”

14. Moreover, his Honour returned to questions of the nature or features of superannuation entitlements (again in general but to some extent particular), when, under the heading “Terms of proposed section 79 order”, he said “When I …weigh in the wife’s inability to access her superannuation entitlements (absent her resigning) I would make no adjustment under section 75(2)(n)” and then, when considering the justice and equity of proposed orders, he said:

    “39.  The wife says, in effect, that as the matrimonial home is the only significant asset that is available to both the parties now, it would not be just and equitable for the husband to receive all the current equity in the home.  She proposes a higher splitting order.  How differently would the distribution be if the division I have assessed was applied in the same manner to the superannuation interests (combined at $319,629) and the "liquid" assets (combined at $135,540).  Instead of a splitting order of $65,247 the splitting order in the husband’s favour would be for $106,297 approximately and the husband would then have to borrow approximately $41,000 to retain the home. 

    40.    I have no evidence as to whether the current mortgagee Suncorp-Metway would provide further funding.  It would increase the debt on the property to about $150,000 (or 65 per cent debt/equity).  Such a payment of about $41,000 would give the wife some opportunity now to re-establish herself financially.  Nearly all of the superannuation interests accrued during the course of the marriage. 

    41.    It seems to me that the intent of the Parliament, even though superannuation is to be treated as property, would not be met if one party ended up with all the realisable/liquid property whilst the other remained “superannuation rich”.  That was too often the situation prior to the amendments.  I propose to make an order which reflects an adjustment across the “class of assets” on the same basis.  In this case, I regard such a result as just and equitable. 

1. While it can be seen that, as was conceded on behalf of the husband, the trial Magistrate addressed a number of features of the superannuation interests of each party, including that the husband’s entitlement was in the payment phase, it is true that his Honour nowhere discussed whether an adjustment to percentages for division should be made on account of the nature of the husband’s entitlement.

2. However, this is not the same as saying that his Honour had no regard to it.  He recognised the nature of the husband’s interest, and the contention arising from it.

3. Moreover, in suggesting that the learned Federal Magistrate failed to have regard to the limitation of the husband’s entitlement to receipt of periodic payments, there are some difficulties which confront the husband.

4. It is not demonstrated that any particular propositions arising from the nature of the husband’s entitlement were put to the learned Magistrate and called for his consideration.  That might not be fatal to the position of the husband on this point, if it be that the nature of the husband’s entitlement inherently called for some consideration, with a view to adjustment of assessment of contributions, or elsewhere in the decision-making process.  In this regard, counsel for the husband suggested that the value of the husband’s entitlement had been “plucked from the air” and he referred to terms such as “an air of artificiality”, used by his Honour Justice Coleman in Cahill v Cahill [2003] FamCA 172. These terms seem to involve the assumption that a lump sum is inherently a more valuable form of property than an entitlement to a pension. I would not make such an assumption and certainly I would not make an assumption that such differences as existed could not be “valued” in the absence of expert evidence on point, of which there was none in this case.

5. Indeed, it has not been demonstrated that, before the learned Magistrate, was any evidence of the value of the husband’s superannuation interest beyond the figure included in the pool of assets.  Nor has it been demonstrated what the components of that value were, nor that there was some deficiency about that valuation process.

6. In such circumstances it is, in my view, relatively meaningless to speak of an “air of artificiality”.  On the face of it, the value ascribed is the value of the interest in the hands of the husband.  There is nothing inherently mystical or improbable about a present day value of an entitlement, for a predicted time, to a periodic payment.

7. It might be, in accordance with C & C, that the learned Federal Magistrate, instead of using one pool of assets, could have used three “pools” (the realisable assets, and one for each of the superannuation interests) and that, in respect of each pool he separately considered contributions and section 75(2) factors.

8. Counsel for the husband did not suggest this particular exercise, but presumably would have said that, in any such exercise, either the value of the husband’s superannuation should have been adjusted by the learned Magistrate or the percentage distribution in favour of the husband increased beyond 67.5%, to account for the particular nature of the husband’s superannuation.  Having regard to what I earlier said about the value of the husband’s entitlement, I am not persuaded that even if the learned Magistrate adopted the approach of separate pools for each of the superannuation interests, he would have come to any different conclusion about percentage distribution.

9. Moreover, any adjustment in the husband’s favour of the percentage for division, in respect of his superannuation, might have been counterbalanced or outstripped by adjustment in respect of the wife’s superannuation, which is a hybrid entitlement, partly accumulation fund and partly defined benefit scheme and, contrary to the position of the husband in relation to his entitlement, is not even vested at this time.

10. Finally, to some extent at least, when addressing the question of the justice and equity of the proposed orders, as seen in paragraph 39 of his reasons, earlier quoted, the learned Magistrate did separate the combined superannuation entitlements of the parties from other assets.

11. The passage of C & C earlier quoted, namely:

    “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,…”

    indicates that considerable flexibility is given to a trial Judge as to the approach to superannuation.

12. I am not persuaded that in the approach he adopted, the learned Magistrate fell into error.

Error in the exercise of discretion with regard to the “fourth step” of doing justice and equity between the parties, grounds 5 and 6

“5.    The Honourable Federal Magistrate failed to take into account the emotional and financial hardship his orders would place on the husband.

6.     The Honourable Federal Magistrate failed to take into account the superior financial position of the wife.”

1. In the written outline of argument it is asserted that the learned Magistrate failed to give any or any proper weight to the fact that the wife had repartnered and was planning to marry.  Her partner was also in the RAAF and therefore “…the wife does not need a sum of money to be afforded ‘some opportunity now to re-establish herself’.” Again, it is not known what was put to the learned Federal Magistrate about this point. It is one about which there are a number of obvious qualifications. The mere fact of cohabitation of itself is not a matter to be taken into account pursuant to section 75(2)(m). What is to be taken account of are the financial circumstances relating to the cohabitation. Apart from the mere fact of cohabitation, the plan to marry and the occupation of the wife’s partner, I was not taken to other evidence to indicate circumstances relating to the cohabitation. Insofar as the new partner might have had some superannuation entitlements, in the absence of particulars it is very difficult for the husband to argue that the learned Magistrate should have placed some weight upon that aspect and in any event, it is so remote a matter that it is difficult to imagine it would impact on a consideration of section 75(2) factors, except perhaps to bolster adjustment called for on other accounts.

2. Otherwise, the submissions in this regard presupposed an overwhelming significance of the husband’s desire to retain the former matrimonial home as a residence for himself and the children.  There were no particular circumstances pointed to as demonstrating that any need for the husband to retain the particular home was overwhelming.  The learned Magistrate addressed the point and is has not been shown that in so doing he gave it insufficient weight.

3. It was further submitted that in addressing this question, the learned Federal Magistrate wrongly assumed that the husband could borrow, but what the learned Magistrate said about this was:

   “40.  I have no evidence as to whether the current mortgagee Suncorp-Metway would provide further funding.…:

4. It was also submitted that there was no particular reason why the wife could not have been left “superannuation rich”, but the balance of asset-types was a legitimate consideration and not one in which it is shown that the learned Magistrate’s discretion miscarried.

5. The question of the consideration by the learned magistrate of the particular limitations of the husband’s superannuation entitlement, raised in relation to these grounds in the outline of argument, has already been discussed.  That discussion in my view, equally applies to any relevance of that question to these grounds.

6. I am not satisfied that there is any merit in these grounds.

Conclusion

1. It follows from discussion of the individual grounds that the appeal will be dismissed.

Costs

1. Although an application for costs seems unlikely in view of the result and the wife’s appearance unrepresented, I will make directions as to any applications.

ORDERS

1. That the appeal be dismissed.

2. That either party be at liberty to make an application by way of written submissions in respect of costs incurred by him or her in relation to the appeal by filing such submissions at the Brisbane Registry of the Family Court and serving them on the other party within 21 days of the date hereof.

3. That the other party have a further 14 days in which to make written submissions in answer thereto by filing such submissions at the Brisbane Registry of the Family Court and serving them on the other party.

4. That either party be at liberty to reply to an answer by way of written submissions by filing such reply at the Brisbane Registry of the Family Court and serving it on the other party within a further 7 days.

5. That each party endorse on the cover sheet the date on which a copy of that submission was served on the other party.

   I certify that the preceding 62 paragraphs

   are a true copy of the Reasons for Judgment

   herein of the Honourable Justice Warnick.

   ………………………………….
     Associate

   Date:  11 July 2005