Mayhew & Fairweather
[2022] FedCFamC1A 53
•12 April 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Mayhew & Fairweather [2022] FedCFamC1A 53
Appeal from: Fairweather & Mayhew [2021] FamCA 614 Appeal number(s): NAA 15 of 2021 File number(s): SYC 13 of 2017 Judgment of: AUSTIN, TREE & GILL JJ Date of judgment: 12 April 2022 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Appeal from final property settlement orders – Whether the primary judge erred in taking into account the husband’s defective disclosure when assessing contributions – Inadequacy of reasons – Whether the primary judge erred in “double counting” the value of a notional asset under s 79(4) and under s 75(2) of the Family Law Act 1975 (Cth) – Appeal allowed – Matter remitted for rehearing – Costs ordered in a fixed sum in favour of the appellant. Legislation: Family Law Act 1975 (Cth) ss 75, 79 Cases cited: Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148
House v The King (1936) 55 CLR 499; [1936] HCA 40
Semperton v Semperton (2012) 47 Fam LR 626; [2012] FamCAFC 132
Weir and Weir (1993) FLC 92-338; [1992] FamCA 69
Number of paragraphs: 27 Date of hearing: 30 March 2022 Place: Heard in Sydney, delivered in Cairns Counsel for the Appellant: Ms Gillies SC Solicitor for the Appellant: De Saxe O’Neill Counsel for the Respondent: Mr Longworth Solicitor for the Respondent: Broun Abrahams Burreket ORDERS
NAA 15 of 2021
SYC 13 of 2017FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR MAYHEW
Appellant
AND: MS FAIRWEATHER
Respondent
ORDER MADE BY:
AUSTIN, TREE & GILL JJ
DATE OF ORDER:
12 APRIL 2022
THE COURT ORDERS THAT:
1.The appeal be allowed.
2.The orders of the Family Court of Australia made 20 August 2021 be set aside.
3.The proceedings be remitted for hearing before a judge of the Federal Circuit and Family Court of Australia (Division 1) other than the primary judge.
4.Within 28 days, the respondent pay the appellant’s costs in the sum of $20,000.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Mayhew & Fairweather has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
AUSTIN, TREE & GILL JJ:
INTRODUCTION
By his Amended Notice of Appeal, Mr Mayhew (“the husband”) appeals from final property settlement orders made in the Family Court of Australia (as it then was titled) on 20 August 2021. Those orders provided that the parties’ property interests, including superannuation, be divided such that 60 per cent was received by Ms Fairweather (“the wife”) and 40 per cent by the husband.
The wife opposes the appeal, however for the reasons that follow, the appeal succeeds.
BACKGROUND
At the time of the primary judge’s reasons for judgment, the husband was 71 years of age and the wife 63. The husband is a health professional, albeit had a different career for a period during the relationship. The wife is a health professional.
The parties commenced cohabitation in 1990, married in May 1992, and separated at some point between February 2014 and October 2016. Whatever was the date of separation, plainly the relationship was lengthy.
One now adult child was born to the relationship.
At trial, the parties were able to agree on the items and values of their property, and the joint balance sheet appears at [11] of the primary judge’s reasons for judgment. What the parties could not agree upon was the extent of their respective contributions to the property pool and any adjustment to their entitlements pursuant to s 75(2) of the Family Law Act 1975 (Cth) (“the Act”).
THE APPEAL
At the outset, it is useful to restate the relevant principles which govern appeals from discretionary judgments. Particularly, it is well settled that error of the type identified in House v The King (1936) 55 CLR 499 at 504–505 must be established. There, the majority of the High Court said:
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 he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some 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 order, 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 the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
The grounds of appeal were as follows:
1.That His Honour erred in weighing each of the parties’ introduced capital on a mathematical basis, without any regard for when it was contributed, nor how the parties used those capital sums and in doing so he was wrong in law.
2.That the primary Judge failed to weigh (or properly weigh) the Husband’s significantly greater contributions and in failing to do so fell into error.
3.That His Honour erred in failing to give adequate Reasons for his finding that is was “just and equitable” that there be orders for a 60% division of the assets in favour of the Wife.
4.That His Honour erred in the manner in which he approached and determined an adjustment in favour of the Wife should be made.
5.That His Honour erred in the manner in which he approached the treatment of the capitalised value of the husband’s pension and in addition erred in assessing the wife’s Section 75(2) adjustment arising from the husband’s pension.
6.That His Honour erred in failing to make orders that were just and equitable by making orders that occasioned a 20% differential between the percentage figure that the husband was to receive as compared to the wife.
(As per the original)
However, as argued, the six grounds substantially overlapped and were interrelated. In considering the appeal, it is therefore convenient to initially address two themes raised under several grounds, as a result of which, as shall be seen, it is not necessary to thereafter consider the balance of the challenges advanced in the grounds.
The husband’s defective disclosure – Grounds 3 and 4
The primary judge discussed the husband’s defective disclosure in several places in his reasons, as follows:
66.Being bound by those authorities, I must apply their divining principle. Having regard to the concessions made about [the husband’s] non-disclosure in circumstances where [the husband’s] duty to disclose is absolute, an inevitable finding follows that [the husband] failed in his disclosure duty. I cannot therefore be satisfied that [the husband’s] version of the property in issue in this case is accurate. Put differently, in the face of [the husband’s] concession that his disclosure has been defective, I am fortified in the conclusion that it is appropriate to err on the side of generosity in favour of [the wife].
…
141.[Counsel for the wife] also relied on [the husband’s] defective disclosure as grounding [the wife’s] entitlement to an enhanced assessment of her contributions.
…
144.In my view the position advanced on behalf of [the wife] is correct. The inheritance she received had the effect of substantially altering the nature, form and extent of contributions that to that point in time were largely equal, aside from the initial contributions. The contributions ceased to be equal when the inheritances were taken into account and in my view, [the wife’s] inheritance had the effect of tilting the scales in her favour in the percentage urged by [counsel for the wife]. This is supported by [the husband’s] defective disclosure. In my view an adjustment in [the wife’s] favour of 57.5% is just and equitable. To that must be added an amount to reflect the fact that the parties’ earning capacity hereafter is disparate with [the husband’s] being significantly more assured by reason of his pension. That warranted an additional 2.5% making 60% in the wife’s favour. No double counting was involved in that approach.
(Emphasis added)
It can therefore be seen that, notwithstanding not being satisfied as to “[the husband’s] version of the property”, the primary judge considered that the appropriate way to deal with the defective disclosure was to reflect it in an unspecified way (save that it was disadvantageous to the husband) in the assessment of the parties’ contributions to the agreed pool. That it was material is demonstrated by the fact that it “supported” the “tilting [of] the scales” in the wife’s favour such that her contributions were adjudicated to be superior to the husband’s to the extent of 7.5 per cent.
The primary judge relied upon the Full Court’s decision in Weir and Weir (1993) FLC 92-338 in support of this approach. In that case, some slender reference to the impact which inadequate disclosure can have on the assessment of contributions is made at 79,594, however it is very difficult to see how, in this case, inadequate disclosure could have any logical connection to either the wife’s financial contributions to the identified and agreed pool, or her non-financial contribution to it either.
Yet, in order to be considered under s 79(4)(a) or (b) of the Act, the defective disclosure must relate to a direct or indirect, financial or non-financial, contribution “to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them” (emphasis added). Whilst we do not say that could never be the case, (for example, if the non-disclosure related to financial contributions to property) here where the pool was agreed, we cannot see it, and as the primary judge did not explain how the defective disclosure related to contributions, we cannot ascertain the reasoning upon which the decision is based (Bennett and Bennett (1991) FLC 92-191 at 78,266).
The usual way in which defective disclosure is taken into account is either by adding a sum to the pool, reflective of an estimate of the value of undisclosed property (as the primary judge seemingly acknowledged at [66]), or under s 75(2)(o) of the Act. Either of those is how any defective disclosure might properly have been accommodated here, although that said, the deficiency in question appears more about the timeliness, rather than the comprehensiveness, of the husband’s disclosure, and hence what weight it deserves is a live issue. However, we are satisfied that by factoring it in to the analysis of contributions, the primary judge erred, and further, his reasons in that respect are inadequate.
The husband’s pension – Ground 5
By virtue of his career, the husband is entitled to a tax free pension for life. For reasons which are not clear to us, at trial both parties dealt with that non-commutable pension by attributing to it an agreed capital value of $1,353,642, although no evidence of the valuation methodology was put before the primary judge.
The primary judge, as the parties asked him to, included the figure of $1,353,642 in the balance sheet as if it were a tangible asset, and that sum was part of the 40 per cent taken by the husband under the orders. Of course, in fact there is no tangible asset of that value, but rather the husband only has a statutory right to an income stream for life.
However, in addition to including the full value of the notional asset in the balance sheet, the primary judge also took the pension into account when considering s 75(2) factors. That consideration commenced at [119] as follows:
119.Both parties made detailed submissions on the manner in which [the husband’s] pension should be treated. The agreed amount for [the husband’s] pension was recorded in the agreed balance sheet at item 34 as $1,353,642. Both parties addressed the significance of [the husband’s] pension on the basis that it was an item to be reckoned in the operation of s 75(2) of the Family Law Act.
Later, at [126]–[131] the primary judge continued:
126.[Senior counsel for the husband] relied on the decision in Semperton v Semperton as well as the decision of a single judge of the Family Court of Western Australia in Fitzgerald-Stevens & Leslighter. He said those cases stood for the proposition that a court dealing with a entitlement such as a Defence Forces Retirement and Death benefit –
(a)should have regard to the fact that such a benefit has a different character when it comes to the adjustment required under s 75(2); and
(b)the different character of the benefit in that case required attention when constructing the pools but also at each other point in the process, most especially at the s 75(2) stage and when assessing the justice and the equity of the outcome.
127.In this case [senior counsel for the husband] contended that a risk existed of double counting if on the one hand I were to factor [the husband’s] pension in the assets in the balance sheet yet on the other hand additionally treated the pension as a discrete matter to be addressed under s 75(2). The consequence that such an issue threw up, although in the context of a defence forces retirement and death benefit, was specifically addressed in Semperton v Semperton. The following is a distillation of the holdings of the plurality –
(a)applying Hayton v Bendle, it is important to not double count a pension entitlement that is already included in the pool of assets;
(b)also applying Hayton v Bendle, nevertheless, such a pension assumes some relevance in the s 75(2) adjustment;
(c)a judicial pension was involved in Hayton v Bendle having “far greater magnitude” than the benefit under consideration in Semperton; and
(d)tax payable on the defence force retirement and death benefit was not explored at trial in that case yet it was an important issue.
128.In this case, [the husband’s] pension entitlements are not taxable. He said it was an income stream only and was not capital available to [the husband]. The observations of the plurality in Semperton on the issue of tax on the retirement and death benefit tax distinguish this case from Semperton. While I accept that in this case the pension is not capital in nature, guaranteed income streams have been treated as being of considerable value, those decisions being canvassed between paragraphs 171 and 184 of the reasons of the plurality in Semperton.
129.[Senior counsel for the husband] also relied on a first instance decision of the Family Court of Western Australia. To my mind the observations in that case represent little more than a fact specific illustration of principles canvassed by a full court in Semperton. The ratio decidendi of Semperton binds me. The single judge’s decision does not.
130.It seems to me that based on the reasons in Semperton, I should take into account –
(a)[the husband’s] income stream from his pension;
(b) that it is not taxable;
(c) that the pension is not capital; and
(d) that compared to 2018, the weekly sum payable has increased.
131.The pension in this case is of a different character to the judicial pension in Hayton v Bendle yet in both a regular income stream was under consideration. Even in Hayton v Bendle where a judicial pension was involved, the court held that s 75(2) assumed some relevance in the adjustment.
(Footnotes omitted)
At [142] the primary judge continued:
142.Expressed in aggregate, [counsel for the wife] submitted that an appropriate percentage alteration of property interests was 57.5% in [the wife’s] favour. He said that such a percentage reflected appropriate recognition of the greater inheritance, the greater indirect financial contribution and the substantial non-financial contribution in the provision of care to the couple’s son. To that [counsel for the wife] submitted that an additional 2.5% should be added under s 75(2) to reflect the greater income stream [the husband] will receive by reason of his pension. In total, that equated to a division in [the wife’s] favour of 60%.
(Emphasis added)
The primary judge concluded his consideration of this issue at [144], which we have recited earlier, but we should here emphasise that the 2.5 per cent adjustment referrable to s 75(2) was there in part justified by the husband’s greater earning capacity “being significantly more assured by reason of his pension” and that his Honour denied that this was in any way “double counting”.
The plurality of the Full Court in Semperton v Semperton (2012) 47 Fam LR 626 held that “where the nature of the property to be retained by one of the parties has a quality about it which is not accurately reflected in the value ascribed” then it may be legitimate to take that into account under s 75(2)(b) (at [146]), and likewise if “there was some aspect of the entitlement that had not already been taken into account when assigning it a value” (at [148]).
Here, since the notional capital value of the husband’s pension was agreed, no evidence was presented as to what had been taken into account in reaching that value. Whilst not altogether clear, it appears, from [142] that it was “the greater income stream … by reason of [the husband’s] pension” and, from [144], that the husband’s higher earning capacity was “more assured” by virtue of the pension, which were relied upon by the primary judge when considering s 75(2) factors.
However, it seems inconceivable that the quantum of the income stream was not expressly taken into account in arriving at its notional capital value, and its assurance likely was reflected in the capitalisation rate applied to the income stream, and hence it was already valued by reference to that feature. In any event, even if that were not so, absent the matters taken into account in the valuation of the pension being known by the primary judge, how his Honour could have been satisfied that some aspect or quality of the pension had not already been taken into account in arriving at its notional value, is completely unclear. To thus use both the income stream and its assurance as the justification, even in part, for an adjustment of 2.5 per cent – in this case reflective of about $384,000 – is to “double dip” and thus to err.
Given that the monetary adjustment referrable to s 75(2) factors is more than 28 per cent of the agreed notional capital value of the pension, the error is likely material.
Conclusion
Given the errors which we have identified, the appeal must be allowed and, as counsel for both parties reluctantly but entirely properly conceded, in that event the matter would need to be remitted.
Given the remitter, it is not appropriate for us to consider the remaining grounds, which largely comprise weight challenges, and an assertion that the overall outcome was manifestly unjust. Also, given the frank errors we have identified, it is not productive to further consider the challenge to the adequacy of the primary judge’s reasons.
COSTS
In the event that the appeal succeeded, the husband sought an order for costs in a sum slightly in excess of $33,000. Whilst opposed by the wife, we are satisfied that the husband’s success, and the parties’ financial positions, justifies an order for costs here. However we are not persuaded that, in all the circumstances, it ought be in the sum sought, but rather we fix the husband’s costs at $20,000. The wife should pay them within 28 days.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Austin, Tree & Gill. Associate:
Dated: 12 April 2022
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