JCVB & SKK

[2005] FamCA 853

[2005] FamCA 853  JFJCVB

FAMILY LAW ACT 1975

IN THE FULL COURT OF

THE FAMILY COURT OF AUSTRALIA

AT SYDNEY

Appeal No. EA 113 of 2004
File No. PAF 3975 of 2003

IN THE MATTER OF:

JCVB

Appellant/Husband

- and -

SKK

The Estate of the Respondent/Wife

REASONS FOR JUDGMENT

BEFORE:  Holden, Coleman & May JJ
DATEOF HEARING:         8^th day of June 2005
DATE OF JUDGMENT:     6^th day of September 2005

APPEARANCES:               Mr Gould of Counsel, (instructed by Gibson Howlin, Solicitors, The Chambers) appeared on behalf of the appellant husband.

Mr Harding of Senior Counsel, (instructed by Caldwell Martin Cox, Solicitors) appeared on behalf of the estate of the respondent wife.

Name of Appeal  JCVB & SKK
Appeal Number  EA 113/2004
Date of Appeal hearing                   8^th day of June 2005
Date of Judgment  6^th day of September 2005
Coram  Holden, Coleman & May JJ

Catchwords:   Appeal against orders for settlement of property.

Further evidence with respect to changed circumstances, in particular the death of the wife and subsequent change in residence of the children to live with the husband, rendered s 75(2) adjustment in favour of the wife unsupportable and warranting an adjustment in favour of the husband – held that the further evidence did “demonstrate that the order under appeal is erroneous” - CDJ v VAJ (1998) 197 CLR 172 followed.

Trial Judge erred in failing to refer to or give adequate reasons for not making a superannuation splitting order - Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 and Bennett and Bennett (1991) FLC 92-191 followed.

Appeal allowed
Provision for submissions with respect to re-exercise of the trial Judge’s discretion

1. By Notice of Appeal filed 5 November 2004 the husband appealed against orders made by Purdy J on 13 October 2004 with respect to property settlement in proceedings between the husband and the wife. 

2. The trial Judge’s orders provided that the former matrimonial home of the parties at C in the State of New South Wales be sold and the net proceeds of sale divided as to 56.4 per cent to the wife and the balance to the husband.  A number of other orders were also made, none of which assumes significance in this appeal. 

3. In lieu of the trial Judge’s order the husband sought that the proceeds of sale of the former matrimonial home be divided as to 70 per cent to him and 30 per cent to the wife, and that the Court allocate 30 per cent of the value of the husband’s superannuation interest to the wife.

4. On 14 February 2005 the wife died. At the commencement of the hearing of the appeal the legal personal representative of the wife was substituted as a party for the deceased wife pursuant to Rule 6.15(3) of the Family Law Rules 2004. Through the legal personal representative, the estate of the wife (“the estate”) has continued to resist the husband’s appeal and retain the trial Judge’s orders.

MATERIAL FACTS

1. Some material facts provide background to the appeal.  These facts are not controversial. 

2. The husband was aged 47 years at the time of trial and the wife was aged 50.  The parties commenced co-habitation in 1991, married in 1992 and separated in 2002. 

3. There are two children of the marriage, aged 11 and 12 at the time of trial.  The wife had a child of a prior relationship who was born on 6 November 1982.  That child ordinarily resided with the husband and wife during their cohabitation. 

4. Subsequent to separation the children of the marriage resided primarily with the wife, the husband having regular contact.  The husband has at all material times been employed as an engineer by TP, by whom he continues to be employed.

5. In January 2001 the wife was diagnosed with and commenced treatment for primary breast cancer, resulting in a mastectomy and the commencement of chemotherapy and radiation therapy.  The wife gave up work shortly prior to the trial at which time she was hospitalised for cancer treatment.  The evidence of the wife’s treating doctor at trial was that she had a mean survival time of 12 months.

10.  As earlier recorded, the wife died in February 2005.

11.  The parties to the appeal have agreed that “since the time of the wife’s passing the appellant husband has had the care of the two children of the marriage”. 

12.  The terms of the wife’s last will and testament are not in contest.  The wife left her estate upon trust for such of her three children as survived her and attained the age of 25 years in equal shares as tenants in common.  The trustee of the wife’s will was empowered:

… in her absolute discretion to apply the whole or any part of the income and capital of the expectant contingent or vested share of any child under the age of 25 years taking under the trust of this my Will in or towards the maintenance education or advancement or otherwise for the benefit in life of any such child and for such purpose to pay the same to the guardian for the time being of such child without being bound to see to the application thereof.

THE TRIAL JUDGE’S JUDGMENT

13.  As the trial Judge’s findings with respect to the property of the parties and their contributions have not been challenged, it is unnecessary to refer in detail to many of such matters. 

14.  His Honour recorded the material facts to which we have earlier referred and found the property of the parties to the marriage to be worth $1,006,706.00 net.  The major asset was the former matrimonial home at C, NSW which was agreed to be worth $725,000.00.  The parties had superannuation interests, the husband’s interest worth $186,769.00, the wife’s interest worth $94,137.00.  The trial Judge concluded contribution entitlements of 55 per cent to the husband and 45 per cent to the wife to be appropriate. 

15.  The trial Judge considered the matters referred to in s 75(2), noting them to be “difficult”.  He referred to the absence of income on the part of the wife, a situation which his Honour concluded was likely to continue until she died.  His Honour made an order for spousal maintenance in the wife’s favour. No aspect of the present appeal relates to such order. 

16.  It was common ground at trial that the wife had a terminal illness.  His Honour referred to the wife having the care of the children “on the basis that if she becomes unable through illness to care for them they will go to the husband”, which in fact occurred upon the wife’s death in February 2005.  He concluded that, but for the wife’s short life expectancy, there would be “a very big adjustment for s 75(2)” in her favour.  Detailed reference was made to the medical evidence before the trial Judge (paragraphs 45, 46, 47 and 48) who concluded that the wife had a “mean survival time of 12 months” which meant that the wife:

49.  … could die prior to the 12 months but it is difficult to accept this is so on the manner of her presentation and the fact that she has been in the work force as well as being the principal carer for the children until very recently. 

17.  His Honour then said:

50.  If I made a finding that on balance of probability she will be dead in 12 months, then I probably would make no adjustment under s 75(2).  It is common ground the husband will be paying child support; the exact amount is certainly not common ground. On one version the payment will be $555 a week, on another $423 a week.  Neither side’s legal advisers cared to chance their arm and try to work through the intricacies of the Child Support legislation and come up with the exact figure and in this I do not blame them in the slightest.  I have not cared to do the same exercise either.  But whatever it is, it is going to be a significant sum that the husband is paying by way of child support.

18.  Reference was then made to the payment of private school fees by the husband.  His Honour estimated “on fairly scanty evidence” that the husband would, when the second child commenced attendance at private school in 2005, incur an additional $10,000 per annum.  The trial Judge however concluded that the “difference in their incomes” warranted a 5 per cent adjustment in favour of the wife “on the basis that to assume her decease within 12 months could well result in a very significant injustice to her”.  His Honour thus concluded that a 50 per cent division of the net assets of the parties would be just and equitable. 

THE GROUNDS OF APPEAL

19.  Grounds 1 and 2, which were argued together, provided:

1.   That the Trial Judge erred in making an adjustment in respect of Section 75(2) matters in favour of the wife.

2.   That the Trial Judge erred in failing to make an adjustment in respect of Section 75(2) matters in favour of the husband.

20.  As learned counsel for the husband confirmed, the grounds were advanced on either of two bases, namely that appellable error could be demonstrated by reference to the trial Judge’s reasons, or, if not, that the effect of the further evidence in relation to the implications of the death of the wife on 14 February 2004 enabled the grounds to be upheld.  For reasons which will emerge, we prefer to deal first with the second limb of the challenge embodied in these grounds. 

21.  In short, it was submitted that the effect of the further evidence was to render erroneous any s 75(2) adjustment in favour of the wife and, as the corollary of that proposition, the failure to make a s 75(2) adjustment in favour of the husband.  The wife having died, it was submitted no adjustment in her favour could be sustained whilst, as a consequence of her death and the husband having the care of the children, without direct financial support from her, a s 75(2) adjustment had to be made in his favour. 

22.  Learned Senior Counsel for the estate, whilst not conceding the implications of the wife’s death, confined his submissions to the first aspect of the challenges embodied in these grounds.  With respect, it is difficult to see what could have been productively asserted in response to the submissions of learned counsel for the husband in relation to the second aspect of these challenges.

23.  In CDJ v VAJ (1998) 197 CLR 172, the majority (McHugh, Gummow and Callinan JJ) said at 201:

One consideration in construing s 93A(2) is its remedial nature. Its principal purpose is to give to the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous. The power exists to facilitate the avoidance of errors which cannot be otherwise remedied by the application of the conventional appellate procedures. A further, but in practice subsidiary, purpose is to give the Full Court a discretion to admit further evidence to buttress the findings already made.

24.  In our view, the further evidence that the wife is now deceased does “demonstrate that the order under appeal is erroneous” in that the s 75(2) adjustment in favour of the wife cannot now be sustained. Nor can the consequential failure to make a s 75(2) adjustment in the husband’s favour in the circumstances which arose after the wife’s death. 

25.  The second basis of the challenges raised by grounds 1 and 2 is thus established.  It is unnecessary to consider the challenges pursuant to the first limb of the challenges contained in those grounds and of little more than academic interest in any event.

26.  Ground 3 provided:

That the Trial Judge erred in taking into account his own observations as to the wife’s “manner of presentation” in assessing her life expectancy.

27.  The wife’s death in February 2005 and our conclusions in relation to the implications of her death in the context of grounds 1 and 2 render consideration of ground 3 unnecessary.

28.  Ground 4 provided:

That the Trial Judge erred in failing to give any or adequate reasons for not making a superannuation splitting order as sought by the husband.

29.  The submission on behalf of the husband was that the application for a superannuation splitting order “was a significant part of his case” and “if granted, would have had the effect of providing him with more cash from the sale of the home to be able to purchase other accommodation”.  The essence of the complaint is that the husband’s application was “not referred to by the trial Judge”. 

30.  On behalf of the estate, it was submitted that the “application for a splitting order dealt with by a single expert and Mr S [the single expert] stated in his report that the splitting order may only be able to be made when the husband retires”. 

31.  The estate contended that the single expert had given evidence that the trustee of the husband’s superannuation fund was “awaiting legal advice as to whether they are able to split the fund before the husband retires”.  The husband was 47 at trial and there was “no suggestion that the husband intended to retire”. 

32.  It was further submitted by the estate that the issue was:

… debated conclusively and seems to have been put to rest in that in order to make (sic) splitting order there would need to be an amendment to the trust deed and that the best that could be done would be a flagging order.

33.  Mr S said in his single expert report of 24 September 2004:

Orders can be made to allocate 100% of the husband’s superannuation to the wife; however, that amount may only be able to be split when the husband retires.  I have spoken to Accumen Super, the manager/trustee of the TK Staff Benefit Fund, and that (sic) have advised that they are awaiting legal advice as to whether they are able to split the fund at this stage (i.e. before the husband retires).  The Trust Deed of the fund would have to be amended before a split could be processed.  It is likely that the wife’s interest would be noted and flagged to be split when the interest changes to the payment phase.  Further, it is unlikely that only the accumulation component could be rolled over without amendments to the Trust Deed.

34.  Mr S did not give oral evidence clarifying those statements.  In the course of submissions, learned counsel for the husband submitted to the trial Judge:

Secondly, until a week or so ago, the wife was inviting your Honour through her application to make a splitting order in relation to the husband’s superannuation, and my client continues to invite your Honour to do that.

35.  It was submitted on behalf of the wife at trial that:

… on the evidence of Mr [S] (sic), in my respectful submission, there is simply no capacity for your Honour to make the splitting order as sought by the husband.  And if your Honour was of a mind to make some type of flagging order – that is, flag the superannuation, adjourn an aspect of the property proceedings until the husband retires, heaven knows whether it would be the mother, whether it would be the executor of her estate, who would be…

36.  We are unable to discern that the issue was subsequently revisited by learned counsel for either party.

37.  In Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 279, McHugh JA said:

… without the articulation of reasons, a judicial decision cannot be distinguished from an arbitrary decision. In my opinion the giving of reasons is correctly perceived as ‘a necessary incident of the judicial process’ because it enables the basis of the decision to be seen and understood both for the instant case and for the future direction of the law.

38.  Soulemezis v Dudley (Holdings) Pty Ltd (supra) and other authorities were followed by the Full Court of this Court in Bennett and Bennett (1991) FLC 92-191. The Full Court there said at 78,266:

In Sun Alliance Insurance Ltd v Massoud (1989) VR 8, the Full Court of the Supreme Court of Victoria, consisting of Fullagar, Gray and Tadgell JJ, followed the principles established by the New South Wales Court of Appeal. Gray J, who delivered the principal judgment, said, at 18:

"The adequacy of the reasons will depend upon the circumstances of the case. But the reasons will, in my opinion, be inadequate if: --

(a) the appeal court is unable to ascertain the reasoning upon which the decision is based; or

(b) justice is not seen to have been done.

The two above stated criteria of inadequacy will frequently overlap. If the primary Judge does not sufficiently disclose his or her reasoning, the appeal court is denied the opportunity to detect error and the losing party is denied knowledge of why his or her case was rejected."

We think that the test propounded by Gray J is a particularly useful one, and one which also applies to discretionary judgments.

39.  Whilst the evidence of Mr S may have rendered less than certain the Court’s capacity to make a splitting order in relation to the husband’s superannuation interest, and whilst the submissions to the learned trial Judge in that regard were somewhat cryptic, we conclude that in all the circumstances the trial Judge was obliged to provide some reasons for declining to make a splitting order.  Whilst extensive reasons were not in the circumstances required, some elucidation of his Honour’s reasoning process was.  We thus consider this ground to have been made out. 

CONCLUSION

40.  For the reasons we have given, the appeal should be allowed.  Whilst both counsel agreed that a re-hearing before a single judge would be regrettable, it remains to be seen whether this Court is able to re-exercise the trial Judge’s discretion. 

41.  The trial Judge’s conclusions with respect to contributions having not been challenged, only a limited number of issues are relevant to the re-exercise of discretion, whether that be by this Court, or on a remitter to a single judge (see Ruscoe v Walker [2001] FamCA 268).

42.  The issues of fact which require clarification, failing which further evidence, possibly of a contested nature, would be likely to be adduced, are agreed to be the current value of the former matrimonial home, the current value of the deceased wife’s motor vehicle, the current value of the husband’s superannuation interest and the nature and value of such superannuation interest as the estate may have by virtue of the terms of the superannuation fund of which the wife was a member. These factual issues should be able to be resolved by the parties obtaining the relevant advice. 

43.  We understand both parties seek the opportunity to clarify these issues and, if possible, have this Court re-exercise the discretion of the trial Judge.  The application for a splitting order and the s 75(2) adjustment appropriate to be made in the husband’s favour are clearly matters involving the re-exercise of discretion, but require agreement as to relevant facts and valuations if this Court is to be able to undertake such re-exercise.  Absent such agreement, remitting the matter to a single judge would appear unavoidable.

44.  Consistent with the course of discussion with learned counsel for the parties during the hearing of the appeal, we propose inviting written submissions addressing the matters to which we have referred and the issue of costs of the appeal.

ORDERS

45. It is accordingly ordered:

1. That the appeal be allowed.

2. That within 28 days hereof the husband file and serve written submissions in relation to the ability of the Full Court to re-exercise the trial Judge’s discretion.

3. That within 56 days hereof the estate file and serve written submissions in response to the submissions of the husband.

I certify that the preceding
45 paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Court.
 
Associate
Date: 06/09/05