Marchant & Marchant
[2012] FamCAFC 181
•12 November 2012
FAMILY COURT OF AUSTRALIA
| MARCHANT & MARCHANT | [2012] FamCAFC 181 |
FAMILY LAW – APPEAL – Interim financial orders – Whether application for lump sum payment entertained solely because the payment was within the wife’s ultimate property entitlement – Whether sufficient circumstances existed for it to be appropriate to exercise power pursuant to s 79 and s 80(1)(h).
FAMILY LAW – APPEAL – Interim financial orders – Whether order for periodic payment directed to “property” – Future contingent interest in income from investments – Form of order made – Whether capable of being made pursuant to s 79 and s 80(1)(h).
| Family Law Act 1975 (Cth) Federal Proceedings (Costs) Act 1981 (Cth) |
| Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 Cordell & Cordell (1977) FLC 90-322 Crapp & Crapp (No 2) (1979) FLC 90-615 Duff and Duff (1977) FLC 90-217 Gabel & Yardley (2008) FLC 93-386 In the Marriage of Debs (1978) 4 Fam LN 48 In the Marriage of Nelson (1977) 30 FLR 573 In the Marriage of Rickaby (1995) FLC 92-642 In the Marriage of White (1979) FLC 90-682 Jones v Skinner (1835) 5 LJ Ch 87 Mullane & Mullane (1983) 158 CLR 436 Perrett & Perrett (1990) FLC 92-101 Rutherford & Rutherford (1991) FLC 92-255 Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 W & W (1980) FLC 90-872 |
| APPELLANT: | Mr Marchant |
| RESPONDENT: | Mrs Marchant |
| FILE NUMBER: | BRC 9607 of 2011 |
| APPEAL NUMBER: | NA 18 of 2012 |
| DATE DELIVERED: | 12 November 2012 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May, Ainslie-Wallace & Kent JJ |
| HEARING DATE: | 4 September 2012 |
| LOWER COURT JURISDICTION: | Federal Magistrates Court |
| LOWER COURT JUDGMENT DATE: | 10 February 2012 |
| LOWER COURT MNC: | [2011] FMCAfam201 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Graham Page SC |
| SOLICITOR FOR THE APPELLANT: | Rostron Carlyle Solicitors |
| COUNSEL FOR THE RESPONDENT: | R M Galloway |
| SOLICITOR FOR THE RESPONDENT: | Crowley Greenhalgh Solicitors |
Orders
The appellant have leave to appeal from the orders of Federal Magistrate Purdon-Sully made on 10 February 2012.
The appeal against Order 2 of the orders of Federal Magistrate Purdon-Sully of 10 February 2012 be allowed and that Order be discharged.
The Court grants to the appellant a costs certificate pursuant to s 9(1) of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate stating that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.
The Court grants to the respondent a costs certificate pursuant to s 6(1) of the Federal Proceedings (Costs) Act 1981 (Cth), being a certificate stating that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Marchant & Marchant has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 18 of 2012
File Number: BRC 9607 of 2011
| Mr Marchant |
Appellant
And
| Mrs Marchant |
Respondent
REASONS FOR JUDGMENT
By an Amended Notice of Appeal filed on 29 June 2012, Mr Marchant (“the husband”) seeks leave to appeal from interim financial orders made by Purdon-Sully FM on 10 February 2012 in substantive property proceedings pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) between the husband and Mrs Marchant (“the wife”).
The husband acknowledges that to obtain leave, he must demonstrate an error of principle or that substantial injustice will be visited upon him: Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 at 175; Rutherford & Rutherford (1991) FLC 92-255 at 78,715. The application for leave was argued with the appeal.
The interim orders made on 10 February 2012 which are the subject of this appeal are as follows:
1. That the Husband and Wife take all steps and sign all documents necessary to pay to the Wife the proceeds of the following bank accounts:
a. Westpac ESaver in the Husband’s name in the sum of $242,000;
b. Bank of Queensland Websaver in the name of [Mr Marchant] Family Trust in the sum of $960,958;
c. Westpac cheque account number … in the sum of $59,537;
d. [O Shares] in the sum of $19,570.
2. That the Husband pay to the Wife the sum of $11,500 on or before the 30th day of each month being one (1) half of his personal income derived from joint assets and holdings.
3. That the categorisation of the payments received pursuant to these Orders be an issue for trial.
To avoid repetition of the full terms of each order when referred to, the above orders will be referred to as ‘order (1)’, ‘order (2)’ and ‘order (3)’ respectively in these reasons.
Whilst paragraphs 8 and 10 of the Amended Notice of Appeal identify only orders (1) and (2) as those from which the husband seeks to appeal, it is clear from paragraph 1 of the grounds of appeal; the husband’s summary of argument filed contemporaneously; and the oral submissions of Senior Counsel for the husband on the hearing of the appeal, that the husband also challenges the correctness of order (3).
The essence of the husband’s challenges on appeal may be paraphrased and summarised as follows:
a)The mere fact that the total amount of $1,296,634.00 provided for by order (1) to be received by the wife was an amount within the wife’s likely ultimate entitlement to property settlement in the substantive proceedings was not of itself sufficient to justify the making of this order, and the Federal Magistrate erred in relying solely upon that fact in determining that it was appropriate to make that order;
b)The Federal Magistrate failed to consider whether it was just and equitable to make order (1) or, alternatively, was in error in so finding;
c)Order (2) is founded upon an error of fact as to the amount of the income to which it is directed;
d)The only legitimate sources of power for order (2) were the power to order maintenance or the power to make an order as to costs, and the Federal Magistrate erred in making order (2) by failing to identify the source of power and to apply the relevant principles for the exercise of such power;
e)If order (2) was capable of being made and was in fact made pursuant to s 79, then the Federal Magistrate erred in the manner of exercise of such power;
f)The Federal Magistrate erred in failing to characterise the payments under orders (1) and (2) as interim property orders or otherwise and leaving such categorisation to the trial Judge and the making of order (3) was in error.
Background
The following matters extracted from the reasons for judgment of the Federal Magistrate are, unless indicated otherwise, the uncontroversial facts advanced in the material filed by each party below and provide the relevant context to this appeal.
The husband is 55 years of age. Since 2007, the husband has had very poor health, and it is common ground that he is unlikely to work in the future because of a chronic health condition requiring dialysis treatment. The wife is aged 41 years.
The parties commenced cohabitation in August 1994, married in May 1995, and separated in January 2011. Thus, the parties cohabited for some 16 ½ years.
There are two children of the marriage, a boy aged 15 years and a girl aged 13 years.
During their cohabitation and marriage, the parties pursued business and/or property development interests and accumulated assets in their personal names, in a superannuation fund and in the Mr Marchant Family Trust, of which the husband is trustee, and in Company A and Company B, in respect of which both the husband and the wife are directors and shareholders.
Upon marriage, the wife assumed responsibility for the management of the parties’ finances, including their business finances, the bookkeeping and management of rental properties, including the issuing of monthly rental invoices to tenants.
The parties, including via the entities referred to, accumulated a high net worth of between approximately $15,000,000, on the husband’s estimate, and approximately $17,000,000, on the wife’s estimate.
Following separation in January 2011, the wife and children commenced residing in a rental apartment. Because of flooding of the former matrimonial home in January 2011, the husband temporarily resided in an apartment in an adjoining building, although had returned to live in the former matrimonial home at the time of the hearing of the application.
The children attend private schools and primarily reside with the wife and are in her primary care.
As at the date of the interim hearing on 30 January 2012, both parties were reliant upon the income provided from their passive investments. This included rental income from a number of parcels of real property, plus deposited cash and shareholdings. It was not in issue that the husband would not work again. The wife was operating a small bookkeeping business, and had obtained registration as a bookkeeper, but almost all of the modest income of that business came from bookkeeping services provided to the parties’ company, Company B.
Whilst there were, at the hearing, various issues of fact in dispute between the parties, including issues surrounding the wife’s withdrawal and use of joint funds; the period from which, and the total amount of, financial support provided to the wife; it was not in contention that the husband had taken steps to terminate or reduce the wife’s erstwhile capacity to manage the parties’ investments and to access funds as had been the position historically, including in the period post-separation. It was acknowledged on behalf of the husband that as at the time of the hearing, the wife’s control of assets was limited to shares and cash worth $200,000, whilst the husband controlled the balance of the very substantial asset pool.
Grounds of Appeal
In both the Summary of Argument filed on behalf of the husband on
29 June 2012 and the oral argument by the husband’s Senior Counsel on the hearing of the appeal, the approach was taken of addressing the husband’s challenges by reference to each of the respective orders rather than by reference to the ground of appeal.
Likewise, the wife’s Summary of Argument filed 3 August 2012 and her Counsel’s oral arguments were addressed in that manner.
We therefore do not propose to deal seriatim with each ground of appeal, but will deal with the challenges advanced likewise by reference to each of the subject orders.
Order (1)
The husband took no issue that the Federal Magistrate identified s 79 of the Act as the jurisdictional basis for this order and that the total of the amounts identified was within the wife’s ultimate entitlement.
The essential contention of the husband with respect to order (1) is that the sole relevant circumstance which existed, and the sole ground upon which the Federal Magistrate relied in entertaining the application, was the mere fact that the applicant was likely to receive, by way of ultimate property orders, more than the total amounts provided for in order (1) and this was not sufficient for a legitimate exercise of power.
It was submitted (paragraph 21):
In essence the Federal Magistrate has found that because on an exercise of power pursuant to section 79 and having regard to the terms of the appellant’s response, the respondent would receive the amount that she sought, it was appropriate to make such an order. It is submitted that in so doing, the Court has erred.
In Strahan & Strahan (Interim Property Orders) (2011) FLC 93-466 (“Strahan”), the Full Court (Boland, Thackray and O’Ryan JJ) undertook a comprehensive review of the authorities and identified relevant principles and guidelines to be followed in respect of interim property orders pursuant to ss 79 and 80(1)(h) of the Act.
It follows from the joint judgment of Boland and O’Ryan JJ in Strahan that there are two stages to the hearing of such an application and that the first question on an application for such an order is whether the Court should exercise its discretion to entertain the application. Whilst it is not necessary for an applicant to establish compelling circumstances for that question to receive an affirmative answer, it is necessary to establish that it would be appropriate for the Court to exercise the power and the, “…overarching consideration…” as to appropriateness is the interests of justice. Recognising that in the context of s 79 proceedings, the interests of justice will usually be best served by one single and final determination of property orders, it will not be appropriate to exercise the power merely because, on such a final determination, the applicant would receive the interim property sought or in excess of that sought.
We think it is important to highlight that whilst the discussion of the first question in the joint judgment in Strahan includes examples, including by reference to other cases, where the appropriateness criteria would be met, there was no attempt to define or exhaustively identify those circumstances or categories of cases meeting that criteria. That is understandable, given the discretionary nature of the adjudication involved and the wide range and variety of circumstances presented from case to case, so that any such attempt would likely prove to be futile. Nevertheless, the joint judgment in Strahan emphasised both the importance of the interests of justice normally being served by a single and final determination of s 79 orders and that establishing only that the applicant’s ultimate entitlement would cover or exceed the interim claim was not sufficient, on its own, to establish that the application ought be entertained.
It also follows from Strahan that if the first question is answered affirmatively, and the second or substantive stage is reached, because the jurisdiction under
s 79 of the Act is being exercised, the provisions of that section must be considered and applied, but with limitations given that it is not the final hearing ([135]). As their Honours Boland and O’Ryan JJ noted at [136], because the discretion conferred by the power in s 79 is to make such order as the Court considers appropriate, provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order, the interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal, and must be capable of alteration at any time prior to, or as part of, a final exercise of the s 79 power.
However, if it is established that it is likely that the applicant would only be receiving what he or she was entitled to receive when the power was exhausted, that would be sufficient to enable the order sought to be made ([137]).
Having regard to the uncontentious matters of fact framing the background to the application and the specific findings of the Federal Magistrate, and the necessary or obvious inferences to be drawn from those findings, we are satisfied that the applicant established more than the mere fact that her final entitlement to property orders under s 79 would exceed the total amounts identified in order (1).
The relevant circumstances established included the following:
a)The husband contended that the parties’ net asset pool was valued at approximately $15,000,000, and the final orders he sought contended that the wife was entitled to 20 per cent of that pool, or approximately $3,000,000 in value. The total of the cash amounts sought by the wife, as provided for in order (1), was $1,296,634 or about 8.64 per cent of the pool value contended by the husband, which is obviously less than half the wife’s overall entitlement as contended for by the husband.
The Federal Magistrate’s reference to the delay to trial at [37] of her reasons was in the context of the submission during argument, uncontroverted either by the husband’s legal representatives or by the Federal Magistrate, as to the prospect of a two year delay to trial.
Thus, even on the husband’s case, the wife had an apparently irresistible claim to more than double that which she sought on an interim basis. The balance entitlement was a very substantial amount in itself in a further approximate sum of $2,300,000, with the potential for the wife to be held out from receiving any capital at all for a period of up to two years if no interim order were made.
b)At [37] of the reasons, the Federal Magistrate referred to the circumstances of the wife as including her living in rented accommodation with the primary care of the parties’ two school-aged children (noting also the circumstance that the husband suffers a chronic health condition, then shortly requiring dialysis treatment); where the wife had only modest capital at her disposal as earlier referred to. The Federal Magistrate found the wife to be reliant on income provided by the husband which was less than her claimed expenditure.
c)From the historical position of the parties having apparently determined that their joint interests were served by the wife managing the parties’ investments, including in the period after they separated, with the wife having also the ability to access funds as needed or as she chose, the finding that the wife was, at the hearing, reliant on income the husband chose to provide has particular resonance. In the context of the Federal Magistrate’s other findings to the effect that prior to the application below, the husband had assumed control of the parties’ investments and was limiting the wife’s access to funds, and the parties plainly being in dispute as to the needs of the wife and children, with the husband having caused the parties’ bankers to pursue the wife for reimbursement of funds withdrawn by her ([11]), the wife’s financial security was clearly in issue.
The Federal Magistrate’s specific reference at [11] of her reasons to correspondence from the parties’ bankers seeking reimbursement from the wife, was a reference to the letter from Westpac to the wife reflecting that the husband had apparently taken steps to cause Westpac to make formal demand upon the wife for reimbursement of an amount of $5,556.42. The significance of that reference is to be read and understood in the context of the overall extent of the parties’ joint wealth.
d)Unusually, even for cases involving a large asset pool such as this, the amount sought by the wife was comprised entirely in available cash deposits. The parties’ asset pool comprised largely investment assets and the parties either personally or via the entities they controlled, passively received income streams from those assets, none of which income was required to fund liabilities secured upon, or supporting, those assets. As the Federal Magistrate referred to, no assets had to be sold to meet the order, nor would compliance with it disturb any structure in which the parties’ assets were held.
e)The parties jointly owned real estate and held, including via the entities referred to which they controlled, substantial assets. Whilst the evidence of the parties did not descend to particulars of any breakdown of specific income received from each specific asset or source, it was not in contention that, as at the hearing, the husband had assumed control of the parties’ assets and income, implicitly irrespective of the manner in which legal ownership was held, except for $200,000 in shares and cash held by the wife, as earlier referred to.
The evidence established that the husband controlled Company B through his 90 per cent shareholding. Company B is the trustee of the Mr Marchant Super Fund, holding assets with an estimated value of $4,480,000. The husband was entitled to 91.1799 per cent of the assets of the Mr Marchant Super Fund (reasons [16]). The husband is the sole trustee of the Mr Marchant Family Trust and the husband’s estimate of value for the assets of that trust is approximately $1,760,000.
As already noted, the husband’s solicitor acknowledged, and the Federal Magistrate referred to the fact that, the husband was controlling all but $200,000 of the pool value. The husband was also controlling income received irrespective of the way in which legal interests were held by the parties or via the entities referred to.
f)Also at paragraph [37] of her reasons, the Federal Magistrate referred to the subject litigation and the prospect of the litigation involving the valuation of 14 real properties.
Given the Federal Magistrate’s summary of relevant circumstances appearing in paragraph [37] of the reasons, taken with the Federal Magistrate’s other findings and references from which is extracted our summary above, we are comfortably satisfied that the Federal Magistrate did not simply rely upon the mere fact that, upon a final hearing, the wife would receive the property sought as identified in order (1) or an amount in excess of that. To the contrary, the Federal Magistrate referred to these circumstances for her conclusion in respect of what is termed the “first stage” or “first question” on such an application that it was appropriate to exercise the power under s 79 and s 80(1)(h) of the Act. Not only were the particular circumstances of this case as identified capable of justifying the conclusion that it was “appropriate” to exercise the power, we consider that it would be difficult to justify any other conclusion in all the circumstances.
In summary, we are satisfied that the applicant was able to point to relevant circumstances other than the mere fact of the substantial size of the asset pool and her likely ultimate entitlement, even on the husband’s case, in comparison to the interim orders sought, and the Federal Magistrate sufficiently identified the relevant circumstances as rendering it appropriate to consider exercise of the power.
We therefore find no merit in the husband’s challenges on appeal in this respect.
As to the second or substantive stage earlier discussed, we have already noted the requirement to consider and apply the provisions of s 79, albeit in the circumscribed fashion referred to in the joint judgment in Strahan at [135] to [137]. On the hearing of the appeal, Senior Counsel for the husband frankly conceded that the foreshadowed challenge as to the second stage could not be made out, and was not pursued.
The Federal Magistrate referred to the wife’s involvement in, and management of, the business affairs of the parties from the commencement of the marriage. Her Honour also referred to the cohabitation, which was relatively lengthy; and the fact of the parties having two school-aged children with the feature that the wife was continuing to provide for their primary care in circumstances which included the husband’s long-standing ill-health.
It was observed in paragraph [137] of the joint judgment in Strahan, in relation to the requirement to undertake consideration of the matters in s 79(4), including by reference to s 79(4)(e), the matters in s 75(2) so far as they may be relevant:
…However consideration of such matters may be brief and if it is established that “it seems likely to the Court that… the applicant… will be likely receive [sic] by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the orders sought to be made.” …
(footnotes omitted)
In that context, the Federal Magistrate’s identification of the feature that what the wife was seeking, as identified in order (1), together with the other findings already referred to, was no more or less than a determination that the fundamental requirement was fulfilled.
We therefore find no merit in any of the husband’s challenges to order (1).
Order (3)
As the husband’s challenges to order (3) are directed in part to the Federal Magistrate not characterising the order (1) payments as interim property, and include therefore that the Federal Magistrate ought not have made order (3) in respect of those payments, it is convenient to now deal with the challenges to order (3) to the extent that they relate to order (1).
Whilst the joint judgment in Strahan highlights the importance of the identification of the juridical basis for an order, including identification of ss 79 and 80(1)(h), if that be the source of power relied upon for the order made, as it was here, it does not follow that the need to identify the source of power exercised extends to a requirement to characterise the property or money so ordered to be paid or transferred on an interim basis upon an exercise of such power.
That much is clear from the Full Court’s judgment in Gabel & Yardley (2008) FLC 93-386 (“Gabel”), referred to with approval by their Honours in Strahan. In Gabel, Bryant CJ and Coleman J at [57], having referred to there being only one exercise of the power under s 79 of the Act, held that this power may, “…be exercised by a succession of orders until the power… is exhausted,” and that the power is exhausted, “…when there remains no property…with respect to which orders by way of alteration of interests in property could be or have been made.” At [69] – [73], Bryant CJ and Coleman J held that an earlier order, whether made under s 79(6) or s 80(1)(h), is capable of alteration at any time prior to, or as part of, the final exercise of the s 79 power. At [125], Finn J said, “…it is only the final order, which deals on a final basis with all known property of the parties, which completes the one single exercise of the s 79 power.” At [126], Finn J likewise referred to an earlier order being capable of alteration at any time prior to, or as part of, a final exercise of the s 79 power.
Once it is recognised that an interim property order is capable of alteration or indeed may be reversed on the final determination or final exercise of s 79 power, it can be readily concluded that the proposition that it is essential to, “…characterise…” the order as such at the interim stage is a proposition not burdened with merit.
In this, as in all such cases, the trial judge hearing and determining the s 79 proceedings on a final basis will be obliged to identify and determine the value of the assets, liabilities and financial resources of the parties or either of them as at the time of trial, consistent with the usual approach. Contribution, within the meaning of s 79(4), to the time of trial will be assessed and evaluated, as will the relevant s 75(2) factors operative at that time. The trial judge will be obliged to determine orders which are just and equitable as at that time.
Consistent with that, we cannot see how it can be contended that it was appealable error for the Federal Magistrate to make order (3) and not characterise the payment provided for in order (1), given that no such characterisation could, even if made, limit the discretion of a trial judge ultimately determining final orders.
We therefore find no merit in the husband’s challenges to order (3) as those challenges relate to order (1).
Order (2)
We do not consider that it can sensibly be open to doubt that the Federal Magistrate relied upon the same source of power for making order (2) as she did for order (1), namely the power pursuant to ss 79 and 80(1)(h), to make an interim property order.
In reaching that conclusion, we note that in the course of submissions below, there was first this exchange between the Federal Magistrate and Counsel for the wife with reference to expenses the wife deposed to in affidavit material:
Her Honour: So are you saying that I don’t need to cast my eye over a lot of expenses set out in part N?
Mr Hamwood: No. No.
Then, there was the following exchange:
Her Honour: …But the distribution that she’s seeking in the form of cash payment that she’s seeking, you’re not asking for that to be categorised in any particular way…
Mr Hamwood: No, not at this stage your Honour. No.
Her Honour: ---as spouse maintenance or anything? You’re simply saying that there should be a distribution based on Strahan and the categorisation--
Mr Hamwood: Yes, an interim property order.
Her Honour: An interim distribution.
Mr Hamwood: Yes.
Turning to the reasons for judgment, the Federal Magistrate, having stated at [42] that she proposed to make order (2) (there referred to as “order 3 sought by the wife”) recorded at [43]:
I accept that this is an appropriate and just order to make in the circumstances of this case. I accept the submissions on behalf of the wife that one can anticipate that at the end of the day there may be an argument in relation to the payment of legal fees and the source of that – whether out of income or property – and that the way to short-circuit that is to ensure that both parties have access to the income and that any funds spent by the parties can then easily be added back, if necessary.
(emphasis added)
At [45] of her reasons, the Federal Magistrate recorded:
In summary, in reaching that decision, I have taken into account the fact that the wife will be receiving pursuant to the orders made by me a significant capital payment, however, if both parties have equal access to the monthly income from matrimonial assets, then it potentially avoids Court time being taken up with a plethora of issues that often present in this Court in circumstances where the pool is very large and the receipt by the parties of income in equal amounts can be taken into account at trial and any adjustments, if necessary, made at that time. I accept the submissions of Counsel for the wife, Mr Hamwood, in this regard, in their entirety in this regard [sic].
(emphasis added)
At [86] of the joint judgment in Strahan, in discussing the various sources of jurisdiction for the making of an interim financial order to fund litigation expenses, their Honours said:
…If the source of jurisdiction is s 117(2) of the Act, then the court may make such order as it considers just provided there are justifying circumstances. If the order is sought under s 79 of the Act, then the court may make such an order as it considers appropriate provided it is satisfied that it is just and equitable to make the order. If the order is sought under
s 74 of the Act, then the court may make such order as is proper.
Given that there was never any contention before the Federal Magistrate to the effect that any order was sought pursuant to the power to make an order as to costs in s 117(2), it seems to us that the only conclusion open, given the words used by the Federal Magistrate, to which we have referred, against the background of the submissions to which we have referred, is that the Federal Magistrate referred to and relied upon the s 79 power to make order (2).
Central to the husband’s challenges to order (2) is that it is directed to income and not property. That is, that this order could not be made pursuant to the s 79 power because the subject matter of the order is income rather than property.
We accept that, leaving aside the considerations following from Strahan already discussed as to the exercise of discretion to make an interim property order, the legitimacy of order (2) also rests upon whether its subject matter is property within the meaning of s 79.
The term “property” is defined in s 4(1) of the Act as follows:
… “property” means:
(a)in relation to the parties to a marriage or either of them – means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion; …
This definition is self-evidently a limited or partial definition in terms of identifying specifically the kinds of interests or entitlements that constitute “property” for the purpose of the Act. The jurisprudence that has developed in this Court as to whether a particular right or entitlement can or should be characterised as property for the purposes of s 79 reflects the statutory definition being a partial one, and that the kinds of rights or entitlements that are “property” for s 79 purposes are referenced to that jurisprudence.
As the Full Court (Nicholson CJ, Fogarty and Purvis JJ) observed in Perrett & Perrett (1990) FLC 92-101 (“Perrett”) at p 77,659:
The question of whether a particular right or entitlement can or should be characterised as property has been one of continual difficulty which has troubled courts on many occasions both under the Family Law Act and its predecessor and otherwise.
In order to determine the question, we think it necessary in each case to first examine and carefully identify the precise nature of the particular entitlement in question.
In Perrett, the Full Court determined that the husband’s entitlement to a defence force pension was no more than an entitlement to receive a series of fortnightly pension payments for the rest of his life, and that it was impossible to characterise that entitlement as a chose in action referable to some notional capitalised figure. The Full Court determined that it would be wrong to treat a notional lump sum as “property” for the purpose of the Act. That conclusion was so notwithstanding the Court’s observations to the effect that, once paid into the hands of the husband, the money constituted property.
The term “property” has been generally given a wide meaning. Lord Langdale MR in Jones v Skinner (1835) 5 LJ Ch 87 at page 90 stated that it is:
…the most comprehensive of all terms which can be used in as much as it is indication and description of every possible interest which the party can have.
This quote was cited with approval by the Full Court of this Court in Duff and Duff (1977) FLC 90-217 (“Duff”), where it was held that at p 76,131:
…the Act is to be read and construed widely and liberally with words and expressions being given their ordinary meaning…
The Full Court in that case identified that “property” included real and personal property as well as choses in action, and specifically held that shares in a family company could constitute property within the meaning of the Act.
It follows from Duff that there is no doubt that “property” includes both real and personal property and that a chose in possession or a chose in action, including both an equitable and a legal chose in action, can be “property” for the purpose of s 79. In Duff, shares in a limited liability company were held to be property.
In Duff, the meaning of the words, “…whether in possession or reversion”, was held to be an expression of an adverbial phrase which qualifies the verb, “…entitled…” and that it is not intended to limit the kind of property with which the Act can deal. The Court held at p 76,133:
The phrase means that the entitlement to the property may be either in possession or reversion, i.e. the phrase is descriptive of the entitlement and not of the property and it removes any fetter upon the Court in dealing with property under this Act by limiting the nature of the entitlement thereto to entitlement in possession.
Cases subsequent to Duff have confirmed many types of rights or entitlements as “property” within the meaning of the Act. For example, an interest in a partnership (Cordell & Cordell (1977) FLC 90-322); moneys due under a verdict (In the Marriage of Debs (1978) 4 Fam LN 48); a vested interest in an estate, even though postponed during a life estate (In the Marriage of White (1979) FLC 90-682); an interest under contract (In the Marriage of Nelson (1977) 30 FLR 573); and the interest of a beneficiary in a deceased estate (In the Marriage of Rickaby (1995) FLC 92-642 at 82,481).
However, whereas at common law some future and contingent interests have been characterised as property, many cases decided with reference to the Act and s 79, particularly the so-called “superannuation cases” prior to the relevant amendments as to the treatment of superannuation interests, established that “property” for the purpose of the Act does not include contingent interests.
One of the most notable examples is the oft-quoted statement of Fogarty J in Crapp & Crapp (No 2) (1979) FLC 90-615 (“Crapp”) at 78,176 as follows:
An order can only be made… under s 79 where a party has a present or future interest in a particular item of property. Clearly where a party has a present interest no difficulties arise, and by “future interest” in the above sense, I take it to mean a situation where a party has an established interest in an item of property but the date of receipt is postponed to some future time. That is different from the case where a party may become entitled to an interest in property in the future, provided that certain events occur and/or that certain disqualifying events do not occur in the meantime...
Cases such as W & W (1980) FLC 90-872 (“W & W”) and Crapp have long settled the principle that an expectation of future income, however real or imminent, does not constitute property under the Act. In W & W, work in progress was held to not amount to property within the meaning of s 79(1)(a).
It is also important to emphasise in this context that, quite apart from rights or entitlements capable of being “property” within the meaning of the Act, the power under s 79 is to make orders, “…altering the interests of the parties to the marriage in the property.” In Mullane & Mullane (1983) 158 CLR 436, the High Court said at p 445:
In our opinion, therefore, s. 79 on its proper construction refers only to orders which work an alteration of the legal or equitable interests in the property of the parties or either of them. An interest in property is a right of a proprietary nature, not a mere personal right: Stowe v Mineral Holdings(Aust) Pty Ltd (1977) 51 ALJR 672 at p 679; Ex parte Meneling Station Pty Ltd (unreported, delivered 8/12/82, pp. 14 and 28)…
By its terms, order (2) did not effect the transfer or assignment to the wife of any of the parties’ property from which they received investment income. That is, whilst in respect of any tenancy, the parties would have “property” in the form of the chose or the right under the contract or lease for tenancy which would be “property” within the meaning of s 79, order (2) is not directed to effect any alteration of such interests in favour of the wife.
In the form in which it operates, order (2) does not operate only upon such income as the husband actually receives but obliges the husband to make a set monthly payment to the wife in a fixed amount, irrespective of what income is actually received and without altering any underlying property interest.
Plainly enough, whilst there was no specific evidence as to the structure of the income streams from particular items of property as we have earlier referred to, receipt of such income, in whatever form, would be subject to a variety of contingencies. For example, so far as tenancies are concerned, those contingencies would include the continuing tenancy of the subject properties, as well as tenants meeting their obligations. Any “right” to income was contingent.
We also highlight that the opening words to the definitions in s 4, recorded above, are important. Section 79, by subsection (4)(e), cross-references subsection 75(2) of the Act. Section 75(2)(b) identifies, “the income, property and financial resources of each of the parties…” understood as meaning present and future income where, “…income…” is there referred to, it is difficult to see how, as a matter of statutory interpretation, prospective or contingent income could be capable of being treated as “property” for the purposes of s 79.
We therefore conclude that whilst the Federal Magistrate purported to exercise the s 79 and s 80(1)(h) power in making order (2), the terms of that order were beyond that power because the subject matter of the order is not “property” within the meaning of s 79, and the order does not alter the interests of the parties in “property”.
Even if we were persuaded that order (2) was directed to “property” and was a property order by its terms, the further fundamental difficulty is that, having made order (1), the Federal Magistrate necessarily had to consider the wife’ s position as a result of receiving such a significant capital sum in considering whether to exercise the discretion to make a further interim property order, the first step or stage identified in Strahan which we have earlier discussed. We do not see how it could be that each and every of the circumstances we have earlier detailed as satisfying the first step with respect to order (1) could be said to continue to have relevant effect, once the order (1) payments for the wife were made when embarking upon consideration of whether or not to make further provision.
For these reasons, we are satisfied that order (2) cannot stand and must be discharged.
For the reasons earlier identified, legitimate interim property orders might have been framed to achieve the same or similar effect as order (2) or alternatively, orders made pursuant to the injunctive powers might have achieved the result that pending a trial, each party received equivalent income. We do not, in ordering that order (2) be discharged, purport to eliminate the prospect of the wife seeking further or other orders on an interim basis pending the trial of the substantive proceedings.
Given our conclusions with respect to order (2), it is unnecessary for us to give any further consideration to the other challenges made by the husband to this order or to order (3), so far as it relates to order (2).
We simply record that because payments have been made pursuant to order (2) since it was made it will be necessary for those payments to be considered in the final determination of s 79 orders.
Conclusion
Neither party ultimately sought, in the event that the appeal was upheld, the remitter of the application. With respect to order (2), the husband sought the discharge of that order, but it was not contended that there be any other consequential order.
It follows from our determination that order (2) must be discharged, and the reasons for that determination, that the husband ought be granted leave.
The husband sought his costs of the appeal if it were successful, and the wife sought her costs if the appeal was dismissed.
In circumstances where we have dismissed the appeal with respect to order (1), but have upheld the appeal with respect to order (2), we are satisfied that, having regard to our reasons for upholding the appeal, that the appropriate order as to costs is to grant each party a certificate pursuant to the Federal Proceedings (Costs) Act 1981 (Cth).
We therefore make orders in terms of the orders set out at the commencement of these reasons.
I certify that the preceding eighty-three (83) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Ainslie-Wallace and Kent JJ) delivered on 12 November 2012.
Associate:
Date: 12 November 2012
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