Mowbray & Mowbray

[2007] FamCA 167

FAMILY COURT OF AUSTRALIA

MOWBRAY & MOWBRAY [2007] FamCA 167

APPEAL – FROM DECISION OF FAMILY COURT JUDGE – PROPERTY SETTLEMENT – CONTRIBUTIONS – ‘TIME SERVED’ FORMULA – In property settlement proceedings between the parties, the parties were in agreeance as to the marital assets and values and that there should be two pools – Pool 1 contained ‘tangible assets’, including the former matrimonial home and Pool 2 contained the husband Defence Force Retirement and Death Benefit Fund (DFRDB) pension – The husband sought that Pool 1 be divided 55/45 in his favour and that Pool 2 be divided 66.6/33.3 in his favour – The trial Judge divided both pools 55/45 in the husband’s favour – The husband argued that the trial Judge erred in assessing that the contributions to Pool 2  were the same as Pool 1 – The husband argued that the  ‘time served’ contributions formula used in West and Green should have been applied as the starting point in assessing the contributions to the DFRDB pension – The trial Judge found that as the husband’s earnings and DFRDB entitlements were not at the same level for the entire marriage, the application of the West and Green formula would not have been appropriate – The proposition argued by the husband was simply against the overwhelming weight of authority, including the decisions of Pierce, Figgins and Farmer and Bramley – It implied that no other contributions were relevant to the division of Pool 2 – For the trial Judge to have adopted the approach urged upon her by the husband would likely have constituted error

Family Law Act 1975 (Cth), s 75(2)

Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343
CDJ v VAJ (1998) 197 CLR 172
Farmer and Bramley (2000) FLC 93-060
West and Green (1993) FLC 92-395

APPELLANT: MOWBRAY

RESPONDENT: MOWBRAY

FILE NUMBER: BRF 3731 of 2005

APPEAL NUMBER: NA 79 of 2006

DATE DELIVERED: 9 MARCH 2007

PLACE DELIVERED: Brisbane

JUDGMENT OF: KAY, WARNICK AND BARRY JJ

HEARING DATE: 28 FEBRUARY 2007

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 1 SEPTEMBER 2006

LOWER COURT MNC: [2006] FamCA 857

REPRESENTATION

COUNSEL FOR THE APPELLANT: Mr Fleetwood

SOLICITOR FOR THE APPELLANT: WHD Lawyers

COUNSEL FOR THE RESPONDENT: Mr Laurie

SOLICITOR FOR THE RESPONDENT: Piper Craig Henry

Orders

1. That the appeal be dismissed.

2. That the husband pay the wife’s costs of and incidental to the appeal as agreed and in default of agreement, as assessed.

FAMILY COURT OF AUSTRALIA AT BRISBANE

Appeal Number: NA 79 of 2006
File Number: BRF 3731 of 2005

MOWBRAY

Appellant

And

MOWBRAY

Respondent

REASONS FOR JUDGMENT

1. In the trial of the issue of alteration of property interests that led to this appeal, the parties, in the words of the trial Judge, O’Reilly J:

   …were able to agree the nature and value of their assets and, with the assistance of their Counsel, that there should be “two pools”.…

2. The first pool contained what the parties described as tangible assets.  It included the former matrimonial home at a value of approximately $453,000, superannuation entitlements (in accumulation funds) of each of the parties, together totalling approximately $142,000 and other items for a total of $644,000 approximately.  The second pool contained but one item:

   Husband’s Defence Force Retirement and Death Benefit Fund   $326,506 Pension.

3. The trial Judge divided both pools 55 per cent to the husband and 45 per cent to the wife, finding that contributions to each pool were of the same weight.  The husband had sought such a distribution in respect of the first pool, but had argued that because of his time in the army before marriage, the second pool (comprising as it did only the DFRDB pension) should be divided 66²/₃ per cent to him.

4. The first point in this appeal was whether her Honour was correct to regard contributions to the “assets” in each pool as of the same comparative “value”.

5. O’Reilly J decided that no adjustment to the “contributions” apportionment should be made on account of factors relevant under s 75(2) of the Family Law Act 1975 (Cth). The other argument for the appellant was that that decision was wrong and that the husband should have received a 5% adjustment across both pools, because of health problems and a lesser (than the wife) anticipated working life.

6. The husband sought to adduce further evidence in support of the appeal.  An affidavit by the husband’s solicitor deposed that he had been informed by the husband that he had ceased employment upon medical advice.  That advice was contained within a report provided by “Dr S”.  However, the report contained no medical opinion at all but merely recorded that on 14 February 2007 the husband had told the doctor that he had ceased work, and why.  Other evidence was that the wife had resigned from the position she held at trial and obtained another position.  This meant that leave allowances that had been contingent at trial had come into possession.

7. Having regard to the principles set out in CDJ v VAJ (1998) 197 CLR 172, we refused the application because of the irrelevant and self-serving nature of the medical report and the minor significance of the change concerning the wife’s entitlements.

8. The appeal is one against a discretionary decision and the principles applicable are set out in House v The King (1936) 55 CLR 499 at 504-505, and in Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343 at 345.

Short background

1. The husband was in the defence force from 1962.  The parties married in 1970.  The husband left the defence force in 1985.  The parties separated in 2004, thus they cohabited for some 34 years.  There were two adult children of the marriage.

2. At trial, the husband was 62 years of age and the wife 58.  The parties had agreed on the assets that each would retain except for some chattels, the wife retaining the home and other assets from the first pool amounting to $534,152 and the husband retaining assets of $109,912 from that pool.

3. At trial, the husband took the position that there should be no splitting order and he would retain the whole of his pension and the wife also agreed with that approach.

4. As filed, the Notice of Appeal contained 7 grounds. Grounds 4 and 5 were abandoned. The first 3 grounds related to the contributions issue. Grounds 6 and 7 related to the s 75(2) assessment.

The argument that the trial Judge erred in applying the same assessment of contributions to both pools

1. The relevant grounds of appeal were:

   1.Her Honour correctly found there were two pools of property for division, then erred by assessing contributions to pool two at the same percentage to her Honour’s assessment of the contributions to pool one.

   2.Her Honour erred by finding the West and Green or “time served” approach could not be applied to the second pool because the husband’s earnings were not at the same level for the whole of the twenty three (23) years he contributed to his DFRDB entitlements.

   3.Her Honour erred in failing to use the West and Green or “time served” formula to determine the contributions made to the husband’s DFRDB.

2. Ground 2 was not separately argued, but was subsumed under the broader attack on the trial Judge’s rejection of the formula in West and Green (1993) FLC 92-395.

3. The basis of these grounds is narrow.

   •There is (though there was, in the abandoned ground 4) no challenge to the value of the DFRDB pension as taken by the trial Judge.

   •There is no argument that the nature of that entitlement (of which the trial Judge made specific comment) should have resulted in any adjustment to the assessment based on contributions.

   •There is no challenge to the identity and assessment of component contributions to Pool 1, an assessment then, as seen, applied to Pool 2.

4. The argument is simply that that overall assessment should not have been applied to Pool 2, but rather a West and Green formulaic approach taken.

5. This argument implies that apart from the initial contribution of DFRDB service pre-marriage, none of the contributions relevant to Pool 1 applied to Pool 2.

6. As to contribution, the trial Judge said:

   17.It was common ground that the parties’ initial contribution, contribution during the marriage and post separation contribution should be regarded as equal, other than in relation to:

   (a)DFRDB lump sum payment of $89,000 received by the husband in 1985; and

   (b)the husband’s DFRDB pension paid weekly from 1985 until the final separation.

7. It seems that there was no formal agreement between the parties about the position stated in paragraph 17 but indeed, as the trial Judge said, that there was “common ground”.  This appears to be an inference taken from the various statements of the parties on the topic at the hearing.

8. The first of these was in the summary of argument filed by the husband a few days before the trial.  Paragraphs 3 and 4 read:

   3.Generally, the contributions made by the parties during a long marriage were equal.

   4.The exception to equality of contribution arises out of the Husband’s additional contributions from:

   (a)His DFRDB lump sum payment of $89,000.00 received in 1985;

   (b)His DRFDB Pension contributed from 1985 until the end of the relationship; and

   (c)His War Services Pension contributed from 1985 until the end of the relationship.

9. We do not know whether the absence of subparagraph (c) relating to the husband’s War Service Pension from her Honour’s record of what was “common ground” was deliberate, or an oversight.  We rejected an application by the husband to add a ground of appeal directed to that omission because of the conduct of the case below and the lateness of the application.

10. The trial Judge recorded that counsel for the husband submitted that the husband should have a five per cent “contribution weighting” in respect of pool one, having regard to the lump sum payment from the DFRDB and from his pension.  Her Honour then said in respect of counsel’s submission about pool 2:

    28.It is relevant to mention at this stage that Mr Burridge’s submissions in relation to Pool 2 were based upon the notion that in relation to the husband’s DFRDB entitlement now I should apply the “time served” approach having regard to West and Green (1993) FLC 92-395 as the “starting point”, submitting that having regard to the 8 years/15years ratio of the husband’s 23 years service with the [defence force] (1962 to 1985) I should find that the husband’s entitlement now in relation to Pool 2 should be 66% and the wife’s 33% (her entitlement then to be reduced for factors to which I will refer below) but that in relation to Pool 1 (as I have said) contribution should be 55% to the husband and 45% to the wife being a 5% weighting or 10% differential in the husband’s favour.

    29.Thus, in relation to both Pool 1 and Pool 2, it is necessary for me to assess the weight to be given to the husband’s initial contribution of his DFRDB entitlements having regard to his eight years premarriage [defence force] service.

    30.Plainly enough, for both pools the contribution weighting in relation to this factor should be the same (that is, for the moment, leaving aside other relative contributions which may alter the ultimate contribution weighting assessment).  This is because the husband’s DFRDB interest crystallised in 1985 when he (1) retired from the [defence force]; (2) commuted $89,000 of his DFRDB interest to a lump sum; and (3) commenced to receive a weekly pension for the remaining 19 years of the marriage continuing into the post separation period.  It is not as if the husband contributed more to his pension being received now (Pool 2) than to the benefits he received in 1985 and following until the end of the marriage (relevant to contribution to Pool 1).

11. In considering the application of the West and Green approach,  after reference to authority, her Honour said as follows:

    37.…However, the application of the “time served” approach, to have efficacy, would need to be based upon the notion that the husband’s earnings and thus his DFRDB entitlements were at the same level for the whole 23 year period.  Plainly, on the evidence, they were not, as his earnings, on the evidence, were considerably less between 1962 and 1970 than between 1970 and 1985.…

12. Her Honour then said:

    37.…Then, when regard is had to the wife’s $10,000 inheritance contribution, the length of the marriage overall and the principles in the authorities to which I have referred, these matters tend to indicate against a significant weighting in the husband’s favour in relation to his initial contribution.

13. After further discussion, her Honour rejected the formulaic approach as one which would “…potentially be unfair to the wife”, but said:

    42.Nonetheless, to not allow some weighting in the husband’s favour for his initial contribution as at 1970 of whatever his DFRDB interest may then have been worth, would be unfair to the husband.

    43.Having regard to the size of Pool 1, the 5% weighting sought by Mr Burridge (a 10% differential) with which I understand Mr Laurie to agree does not seem to me to be unreasonable and would result in about $64,400 more in value now to the husband than the wife.  It is important to bear in mind that no matter what may have been the value of the husband’s DFRDB entitlement in 1970, that was introduced by the husband 34 years before the parties’ final separation and, as observed in Kessey (above) the value of initial contribution may be eroded over time; although, as subsequently observed in Pierce (above) the more current approach is that it is  “not so much a matter of erosion of contribution but a question of what weight is to be attached, in all of the circumstances, to the initial contribution.”

    …

    45.Having regard to all of the matters which I am required to consider, and the circumstance that the determination of contribution entitlements involves the exercise of a wide discretion and does not readily permit mathematical precision (McKinnon, par 24) I am satisfied that a 5% weighting in the husband’s favour having regard to his initial contribution as at 1970 of his then DFRDB entitlement is a fair assessment both to the husband and to the wife.  In so concluding, it is necessary to bear in mind (which, on the evidence, I would have found in any event) that the parties agreed that, other than for the husband’s initial DFRDB contribution in 1970, the parties’ initial contributions, contributions during the marriage and their post separation contributions should be regarded as equal.

14. As with her Honour’s initial record of the parties’ “common ground”, paragraph 45 seems to contain at least an even more abbreviated description of what the parties agreed.  However, as we earlier pointed out, there is no appeal on the basis of any omission and it may simply be that her Honour was using an attenuated description.

15. Her Honour then turned her attention to “Contribution – Pool 2”:

    48In relation to Pool 2, Mr Burridge urged the application of the West and Green “time served” approach, without qualification (other than in relation to reduction of the wife’s entitlement for factors to which I will refer below), submitting that of the value of Pool 2, $326,506, the husband should be apportioned roughly 66% and the wife roughly 33%, so that the wife should have (on Mr Burridge’s figures) about $108,835 (subject to the reductions to which I will refer below) and no splitting order be made to enable the husband to continue to receive his whole pension, $371 per week, being the husband’s preferred position at the trial.

    49Mr Burridge submitted that for the husband to keep all of his DFRDB pension, the wife would be required to “surrender” her 33% of Pool 2 and be given a sum of money instead, as a “cash adjustment to the tangible asset pool” (Pool 1)…

    50Mr Burridge submitted that there then should be a discount for the wife’s present receipt of the cash sum, of the order of 10%-15%, and a further discount under s 75(2) in relation to Pool 2 only having regard to the wife’s long service leave entitlement (to which I will refer below) so that the wife should receive overall a cash adjustment to the tangible pool of $91,800 representing a 15% discount of $108,835 (Mr Burridge’s figures) but further discounted in relation to the wife’s long service leave entitlement.

    51Mr Laurie of Counsel, for the wife, readily adopted (in reply) that the wife have a cash adjustment to the tangible pool rather than a splitting order to reflect her contribution based entitlement to Pool 2, however, urged that the discount figure of 8.2% should be used.…and stated (in reply) that the wife adopted Mr Burridge’s proposed method, and invited that approach, but on the basis that the wife’s contribution assessment be valued at 45 per cent (the same basis as pool 1)…$134,997 after discounted 8.2 per cent.

    …

    54Further, both Counsel urged expressly that the cash adjustment be calculated on the contribution basis (rather than on the basis used by Coleman J in Cahill, which I have explained above).  Again, as both Counsel urged this approach, I propose to apply it.

    55As to whether the “starting point” for the cash adjustment should be 33% as urged by Mr Burridge or 45% as urged by Mr Laurie (before discount, as urged by both Counsel) it seems to me that it would be illogical to assess the parties’ contributions to Pool 2 on a different basis from my assessment of their contributions to Pool 1.  In particular, there is no rational basis to treat contribution to the husband’s weekly pension from now on in any different manner from the weekly pension which he commenced to receive in 1985 nor indeed the lump sum amount which he received in that year when the husband retired because, although his entitlements continued post separation, and will continue in the future, all of the husband’s DFRDB entitlements crystallised in 1985 when he retired.  See at pars 30, 37-45 above.

    56I recognise that in some cases there may well be different contribution assessments to a tangible asset pool (in this case Pool 1) and a pension interest pool (in this case Pool 2) if, for example, there may be assets in the first pool to which a different contribution evaluation is or should be made.  That was the circumstance facing Coleman J, in McKinnon, as I have explained.  However, as I have also explained, in this case the husband’s preseparation DFRDB entitlements, including the lump sum, were used in such a way as to now reflect the totality of Pool 1, with the exception of items 8 and 9, as to which I have made observation.  Leaving aside items 8 and 9, all of the husband’s preseparation DFRDB entitlements and thus his preseparation contribution are now reflected in items 1 to 7 in the schedule and thus have merged into the value of Pool 1.   Thus, there is no basis to assess the parties’ contribution to Pool 2 other than on the same basis as the assessment of contribution to Pool 1, namely wife 45% and husband 55%.

16. Before us, counsel for the husband repeated the argument at trial that O’Reilly J should have applied a West and Green approach to Pool 2.  However, as was pointed out by Kay J during argument, and with which counsel for the husband did not otherwise contend, the proposition is simply against the overwhelming weight of authority.  O’Reilly J herself referred to a number of these authorities, including Pierce and Pierce (1999) FLC 92-844, Figgins and Figgins (2002) FLC 93-122 and Farmer and Bramley (2000) FLC 93-060, where Kay J said:

    68.…the Court’s task is to evaluate all of the contributions from the time of the commencement of the parties’ relationship until the time of the hearing and give such weight to such contributions as the Court thinks is appropriate in the circumstances. All that passage concerned itself with was the contribution that could be measured directly against the lottery winning in a temporal sense. It did not purport to confine the Court from considering the like contribution to the welfare of the family which may have been made over many previous years. 

    69.No doubt there are a myriad of examples that can be used to illustrate the principle that all of the contribution history needs to be examined to reach a conclusion as to what distribution should now be allowed when dealing with the ``second step'' identified in Pastrikos and Pastrikos (1980) FLC ¶90-897 et al. Suppose a wife enters into a marriage with savings of $1,000,000 whilst the husband has nothing. Suppose the marriage lasts 10 years during which the wife is not only the major income earner but also the sole contributor as homemaker and parent. Suppose the husband's contribution is that he manages to gamble away the wife's assets. At separation the parties have nothing. Suppose the husband then wins the lottery, or inherits a fortune or somehow becomes rich. Subject to time limits imposed by s 44(3) clearly the wife could bring a property claim and have brought into account in the determination of what is appropriate, or just and equitable, the contributions she made, not to the current pool of assets but to the marriage and to the pool of assets squandered away by the husband at some time prior to separation. There is nothing in the legislation that requires s 79(4)(a)(b) and (c) contributions to be measured only in terms of ``what did either party contribute to the assets of which they are presently possessed?''

1. In our view, for the trial Judge to have adopted the approach urged upon her by the husband would likely have constituted error.  It would have disregarded many relevant contributions.  In the circumstances of this appeal, we are not satisfied that, in considering that the evaluation of contributions that applied to pool one was also applicable to pool two, her Honour made any error.

That the trial Judge ought have made an adjustment of 5 per cent in the husband’s favour to reflect s 75(2) factors

1. The grounds of appeal relevant here are:

   6.Her Honour erred by failing to make an adjustment in the husband’s favour for future needs when it was reasonable to do so once she found he had significant health problems.

   7.Her Honour erred by failing to make an adjustment in the husband’s favour for future need because the wife, though fit for work, intended to cease working at the age of sixty (60).

2. There is no merit in ground 6, simply because, though her Honour found that the husband had significant health problems and that the wife was in basically good health, there was no other evidence to show any financial consequences which arose from that differential.

3. As to the parties’ employment at trial and prospects in the future, O’Reilly J found:

   Income earning capacities

   64…

   65The husband urged that, at 62 years, he has at most 3 years income earning capacity whereas the wife, at 58 years, has about 7 years income earning capacity, if both should retire at about age 65 years.

   67The wife presently earns about $62,000 per year gross as a nurse […], full time.  However, the wife said that when these proceedings are finalised she would like to reduce to part time employment and in any event would like to retire at age 60, in about 18 months time.

   …

   68Thus, whilst presently the wife has a greater income earning capacity than the husband, both of the parties are at or near retirement age.

4. As findings of fact, her Honour’s observations in the second last and last paragraphs quoted, namely that the wife wished to reduce to part-time employment and that both of the parties were at or near retirement age, were unchallenged.  Having regard to the husband’s greater share of the assets on account of the contributions assessment and his War Service Pension (which her Honour thought should be ignored) and a small adjustment made by rounding down the wife’s cash entitlement from some $132,235 to $130,000 (to adjust for the wife’s leave entitlements) we are satisfied that, once her Honour had made the findings referred to, the decision to make no adjustment on account of income or earning capacities was well open to her.

Conclusion

1. It follows from our conclusions on the individual grounds that the appeal should be dismissed.

Costs

1. The wife sought costs in the event which has occurred and counsel for the husband acknowledged that he would have difficulty in such circumstances resisting an order for costs.  Having regard to the factors set out in s 117(2A) of the Act, in particular the result of the appeal, we think it appropriate that the husband should pay the wife’s costs.

ORDERS

1. That the appeal be dismissed.

2. That the husband pay the wife’s costs of and incidental to the appeal as agreed and in default of agreement, as assessed.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.

Associate: 

Date:  9 March 2007