Tomaras & Tomaras
[2021] FedCFamC1A 82
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Tomaras & Tomaras [2021] FedCFamC1A 82
Appeal from: Tomaras & Tomaras & Anor (No.2) [2019] FCCA 2830 Appeal number: NOA 95 of 2019 File number: BRC 11325 of 2013 Judgment of: AINSLIE-WALLACE, ALDRIDGE & WATTS JJ Date of judgment: 13 December 2021 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Majority decision – Whether the respondent’s entitlements under a total and permanent disability insurance policy is property for the purposes of s 79 of the Family Law Act 1975 (Cth) – Assignability of property – Apprehension of bias – Procedural fairness – Findings of credit – Weight challenge – Where the primary judge did not err in finding that the entitlements were not property and not capable of division – Where there was no error in the primary judge’s approach – Appeal dismissed – No order as to costs. Legislation: Australian Constitution s 109
Conveyancing Act 1919 (NSW) s 12
Family Law Act 1975 (Cth) Pts VIIIAA, VIIIB, ss 4, 74, 75(2), 79, 80, 90AC, 90AE, 114
Life Insurance Act 1995 (Cth) s 9, 9A, 200
Property Law Act 1969 (WA) s 20(3)
Property Law Act 1974 (Qld) s 199
English Judicature Act 1873 (UK)
Law of Property Act 1925 (UK)
Minnesota Statutes s 518.003, subdivision 3b (2010)
Property (Relationships) Act 1976 (NZ) ss 2, 8, 75(2)
Family Law (Superannuation) Regulations 2001 (Cth)
Commonwealth, Second reading speech Family Law Legislation Amendment (Superannuation) Bill 2000, House of Representatives, 13 April 2000
Explanatory Memorandum, Family Law Legislation Amendment (Superannuation) Bill 2000
Cases cited: Antonarkis v Delly (1976) 10 ALR 251
Antoun v TheQueen (2006) 224 ALR 51; [2006] HCA 2
Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337; [1981] HCA 1
Benson v Drury (2020) 62 Fam LR 1; [2020] FamCAFC 303
Best and Best (1993) FLC 92-418; [1993] FamCA 107
Bianchi v Boserio [2001] QCA 462
Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49
British Union and National Insurance Co v Rawson [1916] 2 Ch 476
Campbell v Superannuation Complaints Tribunal (2016) FLC 93-724; [2016] FCA 808
Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386; [2006] HCA 41
Carter v Hyde (1923) 33 CLR 115; [1923] HCA 36
Charisteas & Charisteas and Ors (2020) FLC 93-971; [2020] FamCAFC 162
Coghlan and Coghlan (2005) FLC 93-220; [2005] FamCA 429
Collins and Collins (1977) FLC 90-286; [1977] FamCA 54
Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12
Commissioner of Taxation (Cth) v Everett (1980) 143 CLR 440; [1980] HCA 6
Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577; [2006] HCA 55
Crapp & Crapp (1979) FLC 90‑615; [1979] FamCA 17
Creighton v Creighton HC Auckland CIV-2003-404-6892, 10 September 2004
Don King Productions v Warren [1998] 2 All ER 218
Donovan v Department of Family and Community Services [2003] FCA 438
Duff and Duff (1977) FLC 90-217; [1977] FamCA 24
Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63
F Firm & Ruane and Ors (2014) FLC 93-611; [2014] FamCAFC 189
Gett v Tabet (2009) 254 ALR 504; [2009] NSWCA 76
Glegg v Bromley [1912] 3 KB 474
Grace v Grace (1998) FLC 92-792; [1997] FamCA 59
Greaves v Baldwin (2019) NZFLR 473
Green v AMP Life Ltd [2005] NSWSC 370
Hall v Hall (2016) 257 CLR 490; [2016] HCA 23
Hayton v Bendle (2010) 43 Fam LR 602; [2010] FamCA 592
Hickey and Hickey and Attorney-General (Cth) (Intervener) (2003) FLC 93-143; [2003] FamCA 395
Hicks & Trustee of the Bankrupt Estate of Hicks (2021) FLC 94-006; [2021] FamCAFC 19
Hoare v Mercantile Mutual Life Insurance Co Ltd [2000] NSWSC 1026
Holden and Holden (1987) FLC 91-842; [1986] FamCA 65
Holmes and Holmes (1988) FLC 91-944; [1988] FamCA 3
House v The King (1936) 55 CLR 499; [1936] HCA 40
In re Crothers; Crothers v Crothers (1930) VLR 49
In re the Marriage of: Lori L. Luginbill, petitioner, Respondent vs. Brent S. Luginbill, appellant (Minn Ct App, A10–220, 25 July 2011)
Jones v Skinner (1835) 5 LJ Ch 87
Kelly and Kelly (No 2) (1981) FLC 91-108; [1981] FamCA 78
Kennon v Spry (2008) 238 CLR 366; [2008] HCA 56
Kioa v West (1985) 159 CLR 550; [1985] HCA 81
Law-Smith and Seinor (1989) FLC 92-050; [1989] FamCA 104
Lee v Lee (2019) 266 CLR 129; [2019] HCA 28
Lenehan and Lenehan (1987) FLC 91-814; [1987] FamCA 8
Loxton v Moir (1914) 18 CLR 360; [1914] HCA 89
Marchant & Marchant (2012) FLC 93-520; [2012] FamCAFC 181
McGowan v Commissioner of Stamp Duties [2001] 2 Qd R 499; [2001] QCA 236
Miller v Miller (1791) 4 T.R. 32
Mullane v Mullane (1983) 158 CLR 436; [1983] HCA 4
Naisby & Naisby [2021] FamCAFC 92
National Provincial Bank Ltd v Ainsworth (1965) A.C. 1175
Nelson and Nelson (1977) FLC 90-204
Nguyen v Nguyen (1990) 169 CLR 245; [1990] HCA 9
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Norman v Commissioner of Taxation (Cth) (1963) 109 CLR 9; [1963] HCA 21
One.Tel (In Liq) v David Watson and Anor [2009] NSWCA 282
Palmer and Palmer (1985) FLC 91-606; [1985] FamCA 12
Pates & Pates [2018] FamCAFC 171
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Peters v General Accident Fire and Life Assurance Co Ltd [1938] 2 All ER 267
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Pope & Pope [2012] FamCA 204
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Robinson Helicopter Company Inc v McDermott (2016) 331 ALR 550; [2016] HCA 22
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Saba and Saba (1984) FLC 91–579; [1984] FamCA 42
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Number of paragraphs: 310 Date of hearing: 13 May 2021 Place: Brisbane, delivered in Sydney The Appellant: Litigant in person The First Respondent: Litigant in person The Second Respondent: Did not participate in the appeal The Intervenor: Litigant in person ORDERS
NOA 95 of 2019
BRC 11325 of 2013FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS TOMARAS
Appellant
AND: MR TOMARAS
First Respondent
OFFICIAL TRUSTEE IN BANKRUPTCY
Second Respondent
COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA
Intervenor
DATE OF ORDER:
13 DECEMBER 2021
THE COURT ORDERS THAT:
1.The Application in an Appeal filed on 12 August 2020 by the appellant is dismissed.
2.The Application in an Appeal filed on 27 April 2021 by the appellant is dismissed, save for the reception into the appeal of the transcript of proceedings on 28 March 2014, 9 May 2014 and 27 November 2014 and the text message of 27 July 2019.
3.The appeal is dismissed.
4.There be no order as to costs.
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).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Tomaras & Tomaras has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
AINSLIE-WALLACE & ALDRIDGE JJ:
After preparing our reasons for judgment, we have had the benefit of reading the reasons for judgment of Watts J.
INTRODUCTION
On 8 October 2019 a judge of the Federal Circuit Court of Australia (as it then was) made final orders in property settlement and spousal maintenance proceedings between Ms Tomaras (“the appellant”) and Mr Tomaras (“the respondent”).
The proceedings under s 79 of the Family Law Act 1975 (Cth) (“the Act”) were dismissed because the primary judge found that there was no property of the parties to be divided. In doing so, the primary judge rejected the appellant’s contention that an income protection policy, specifically a total and permanent disability insurance policy (“TPD policy”) held by the respondent, was property capable of division. Her Honour also did not accept that assets held by companies associated with the respondent’s family and his new spouse were, in reality, owned by the respondent.
The appellant’s application for spousal maintenance was dismissed because the primary judge was not satisfied that the appellant had demonstrated that she was unable to support herself.
The appellant appeals against both orders.
BACKGROUND
The proceedings have had a most unfortunate and lengthy history. The final hearing commenced on 9 July 2015, but it was not concluded until 21 February 2019. Much, but not all of the delay is explained by the application of the Commissioner of Taxation (“the Commissioner”) to intervene in the proceedings, which was made on 7 December 2015. After the Commissioner became a party, the appellant sought an order under s 90AE of the Act to substitute the respondent as the person owing a tax debt to the Commissioner in lieu of the appellant. The Commissioner then successfully asked the primary judge to state a case to the Full Court of the Family Court of Australia (“the Full Court”) (as it then was) as to whether the Court had power to do so.
On 13 October 2017, the Full Court held that such an order could be made. The High Court of Australia (“the High Court”) granted the Commissioner special leave to appeal on 23 March 2018 but dismissed the appeal on 13 December 2018.
On 30 April 2019, in a separate set of reasons, the primary judge dismissed the appellant’s claim under s 90AE of the Act, thus ending the Commissioner’s active role in the proceedings. There was no appeal from that decision.
As to spousal maintenance, on 28 March 2014, the primary judge ordered the respondent, as an interim measure, to pay the appellant spousal maintenance of $3,900 per month from his monthly payments under the TPD policy. That order was not discharged until the final orders were made on 8 October 2019. The order was not discharged retrospectively. Notwithstanding the order, the respondent ceased making the payments on 31 May 2019. This led to the appellant filing contravention applications on 10 June 2019, 5 July 2019 and 6 September 2019 and an enforcement application on 11 June 2019.
Despite the unequivocal fact that there was an order for the payment of spousal maintenance in place until October 2019, when it was set aside as from that date only, these applications were not dealt with by the primary judge when final orders were made and, indeed, are yet to be heard. This is so notwithstanding the respondent was continuing to receive the benefits of the TPD policy and that he had informed the appellant that he had decided that he would no longer continue to comply with the order. The applications were last before the Court on 12 March 2021 when they were again adjourned to a date after the delivery of judgment in this appeal. That delay is most regrettable and we see no reason why the resolution of the appeal has any bearing on the consideration of the contravention applications.
The hearing of the appeal itself was delayed by the procedural hearings not taking place as expected due to the difficulties caused by COVID-19 and by the late filing on 15 October 2020 of an Application in an Appeal by the respondent seeking security for costs.
The respondent became a bankrupt on 5 November 2013. His trustee in bankruptcy did not take any part in the hearing or the appeal.
APPLICATIONS TO ADDUCE FURTHER EVIDENCE
The appellant filed an Application in an Appeal on 12 August 2020 to adduce further evidence. On the day of the hearing, she did not press this application and accordingly it will be dismissed.
The appellant filed a Second Further Amended Application in an Appeal on 27 April 2021 to adduce a bundle of documents which included company searches, title searches, commutation guidelines, various journal articles, government reports, Financial Statements filed by the respondent in response to the appellant’s withdrawn applications and transcripts of proceedings amongst others. The appellant contends that the bundle, if adduced, would support the grounds of appeal, namely Grounds 2, 4, 5, 6 and 7 and show the respondent’s lack of disclosure and attempts to mislead the Court.
Some of these documents are said to demonstrate that the respondent has or has had an interest in race horses and owns shares in two recently registered companies. Even if that premise is accepted, it does not demonstrate error on the part of the primary judge to show that the respondent subsequently acquired property. To the extent that the evidence is said to establish that the respondent had assets at the time of the hearing which he did not disclose, no explanation is given by the appellant as to why this evidence was not available at the hearing.
As the reasons below will explain, the grounds listed above have not been made out for reasons unrelated to the proposed evidence.
Save for the transcript of proceedings before the primary judge on 28 March 2014, 9 May 2014 and 27 November 2014, which is relevant to Ground 2, and the text message dated 27 July 2019 which is also relevant to Ground 2, the application to adduce the remaining evidence will be dismissed.
THE APPEAL
We will refer to the grounds as numbered in the Further Amended Notice of Appeal filed on 11 September 2020, which appear inadvertently to commence from Ground 2.
We shall deal first with the grounds of appeal which raised issues of apprehended bias and procedural fairness (Grounds 2 and 3). As they challenge the integrity of the trial process itself they should be dealt with first (Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577; Royal Guardian Mortgage Management Pty Ltd v Nguyen (2016) 332 ALR 128).
Was there an apprehension of bias? (Ground 2)
The appellant relies on two matters. The first is a series of comments made by the primary judge at preliminary hearings in 2014 and 2015, well before the commencement of the final hearing.
On 28 March 2014, the following exchange took place:
HER HONOUR: - - - but there is no property to divide up other than this income stream that’s currently received. That’s not property.
[COUNSEL FOR THE APPELLANT]: No.
(Transcript 28 March 2014, p.12 lines 25–28)
…
HER HONOUR: …the income stream is not property. I know this, [counsel for the appellant], because I was told that by the Full Court in a judgment that I handed down when I divided up an income stream pending a trial - - -
[COUNSEL FOR THE APPELLANT]: Yes.
HER HONOUR: - - - equally between the parties. So I don’t have to be told twice.
[COUNSEL FOR THE APPELLANT]: No, indeed. And I wouldn’t urge that upon your Honour…
(Transcript 28 March 2014, p.15 lines 12–20)
As can be seen, the appellant’s counsel agreed with the comments made by the primary judge. It can only be inferred that it was not part of the appellant’s case, at that time, that the entitlement under the respondent’s TPD policy was property capable of division.
Comments to a similar effect, with a similar response, were made on 9 May 2014 and 27 November 2014.
The appellant was represented at the subsequent hearing by two different senior counsel on different days, and on the last day, by junior counsel who also prepared the appellant’s final written submissions on 28 May 2019.
No application was made at any time for the disqualification of the primary judge on the basis of her earlier comments and it is now too late to do so (Vakauta v Kelly (1989) 167 CLR 568). A litigant cannot stand by and let proceedings continue for seven to eight years and then raise such a challenge for the first time on appeal.
In any event, her Honour was doing no more than pointing out that there was authority bearing on this issue which she considered, with respect correctly, to be binding. There is a difference between “forthright and robust indications of a trial judge’s tentative views on a point of importance in a trial and an impermissible indication of pre-judgment” (Antoun v TheQueen (2006) 224 ALR 51 at [29]). The comments do not contain any indication that the primary judge would “decide [the] case other than on its legal and factual merits” (Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at [8]). Indeed, they point to the contrary.
The second matter raised is what is said to be an improper communication between the primary judge and the respondent’s barrister “to arrange a meeting to discuss the matter without the [respondent], nor me, nor my counsel present” (Appellant’s Summary of Argument filed on 11 September 2020, paragraph 17). Such a communication may, but not necessarily give rise, to an apprehension of bias (see the cases collected in Charisteas & Charisteas and Ors (2020) FLC 93-971 at [27]–[38] and [134]–[157]).
The appellant relies on the following text message sent to her by the respondent on 27 July 2019:
Not sure if I sent you my complaint to the Chief Judge and Registrar of the Federal Court?
This clearly got to [the primary judge] and within days, she finally reacted to my rant to the submissions agenda.
Then, she actually telephoned my barrister. WTF???
A) She asked could he please attend judgment and what day is he available next week?
…
(Appellant’s tender bundle, p.85) (As per the original)
No judgment was delivered in late July or early August 2019.
Taking the text message at face value, at its highest and ignoring that it is hearsay, it establishes that the primary judge asked the respondent’s counsel what day he could attend Court. The communication, as conveyed by the respondent to the appellant does not appear to be one which discusses the substance of the matter, but is merely procedural and, in our opinion, cannot give rise to an apprehension of pre-judgment. Of course any communication from the Court should be addressed to all parties and thus avoiding the concern expressed by the appellant.
We do not know what actually occurred, because this issue was not raised with her Honour. It is therefore difficult to take this matter further.
Again, it is now too late to raise this complaint.
Finally, we draw no assistance on the above matters from the fact that the primary judge made an order on 28 October 2019 disqualifying herself from hearing any further proceedings in the matter and did not provide reasons for doing so. Simply put, the primary judge’s decision to recuse herself is unexplained.
These grounds do not succeed.
Was the appellant denied procedural fairness? (Ground 3)
The appellant relies on three separate matters in support of this contention.
The first concerns the dismissal of the appellant’s claim against the Commissioner under s 90AE of the Act on 30 April 2019. We understand the appellant’s complaint to be that this judgment was delivered separately and not as part of the final reasons.
We are quite unable to see how such a decision on a separate point gave rise to any procedural unfairness on the hearing of the application under s 79 of the Act. Indeed, the early resolution of this issue would assist the latter hearing by clarifying the respective liabilities of the parties.
The second complaint is that the primary judge erred by not permitting the reopening of evidence to allow an update of the parties’ financial positions. At first blush, that is a powerful submission given that the evidence closed on 10 July 2015 and orders were not made until 8 October 2019. It would be surprising if the financial position of the parties remained unchanged over the course of four years. It is, however, necessary to look at what actually occurred during the period between July 2015 and October 2019, bearing in mind that the appellant was legally represented throughout, to see whether the appellant was not afforded the opportunity to update her evidence.
As we know, the property and spousal maintenance proceedings were effectively put on hold from December 2015 until April 2019 whilst the appellant’s claim against the Commissioner was litigated.
In the appellant’s Outline of Submissions filed on 5 February 2019, which was directed in large part but not completely to the claim against the Commissioner, the appellant’s lawyers said:
12.… given that three-and-a-half years have passed since substantive evidence was received in this proceeding… natural justice demands that directions be made for the delivery of further evidence (to update the Court as to the parties’ current financial positions and to address any factual preconditions identified in the recent judgments of the High Court and the Full Court)…
…
32.… The [appellant] must be given an opportunity to answer those submissions [made by the Commissioner] by reference to the current financial positions of the parties. Otherwise, final orders will be made based on a hypothetical state of affairs which may no longer exist and at least one of the parties will be materially prejudiced.
Oddly, despite the submissions, no application was filed seeking to adduce that further evidence and the precise nature of that evidence was not identified.
The matter came before the Court on 21 February 2019. There, it was suggested to her Honour by counsel for the appellant that there should be “some limited directions about how what [sic] further evidence was to be made” (Transcript 21 February 2019, p.7 lines 23–24). It was then said that there has “been a material change in circumstances which may have a bearing on how the section 79 orders are made and, in particular, whether or not this section 90AE factor is satisfied” (Transcript 21 February 2019, p.8 lines 44–46).
The asserted material change in circumstances was not identified. The exchange continued:
HER HONOUR: Yes, I’m not sure I follow that, but, in any event, so well what other evidence do you say that I would need to hear other than the parties’ financial circumstances, current financial circumstances, because you say that there has been a material change?
[COUNSEL FOR THE APPELLANT]: Well, it would be the parties’ financial – it would be primarily the – evidence of finance, yes.
HER HONOUR: Well, that’s what I’m saying.
[COUNSEL FOR THE APPELLANT]: Yes.
HER HONOUR: It’s just their financial position.
[COUNSEL FOR THE APPELLANT]: And that I believe is - - -
HER HONOUR: To enable me to determine - - -
[COUNSEL FOR THE APPELLANT]: Yes.
HER HONOUR: - - - whether or not there is any reasonable likelihood - - -
[COUNSEL FOR THE APPELLANT]: Yes.
HER HONOUR: - - - of the debt being paid by anybody.
[COUNSEL FOR THE APPELLANT]: Yes, and to hear submissions about that in the context of what other orders your Honour might make under section 79.
(Transcript 21 February 2019, p.9 lines 15–42)
Counsel for the Commissioner then submitted that the proposed further evidence was not relevant to the application under s 90AE of the Act because, on a proper application of the reasoning of the High Court, the application would fail in any event. Counsel for the appellant continued to press for further evidence, which led to the following:
HER HONOUR: Where’s your application to reopen?
[COUNSEL FOR THE APPELLANT]: Well, we would give consideration to that in circumstances where this issue is resolved against us.
HER HONOUR: Well, what have you been doing?
[COUNSEL FOR THE APPELLANT]: Well, we took it that, in effect, the directions proposed by the Commissioner in the event that your Honour was minded to take that course would effectively be a reopening of the matter. I mean there’s no formal application before this court.
HER HONOUR: I don’t know why you took that view.
…
[COUNSEL FOR THE APPELLANT]: Yes.
HER HONOUR: - - - that to – that I need to make some findings under section 79 - - -
[COUNSEL FOR THE APPELLANT]: Yes.
HER HONOUR: - - - if I’m persuaded of that - - -
[COUNSEL FOR THE APPELLANT]: Yes.
HER HONOUR: - - - then I have to make it on the basis of the evidence that I’ve got before me. We’ve had a trial, 2015. Time to move on. I have no application before me to reopen. So if I’m persuaded that I need to do that then I will just do it on the basis of the evidence that I’ve got.
[COUNSEL FOR THE APPELLANT]: Well, the difficulty with - - -
HER HONOUR: One of the findings that I have to make here is a preliminary finding under Stanford, isn’t it? Basically, whether or not - - -
[COUNSEL FOR THE APPELLANT]: Yes.
HER HONOUR: - - - I should make an order at all.
(Transcript 21 February 2019, p.15 lines 3–45)
At no stage was the particular evidence, which was said to be so important, identified. Importantly, despite the clearly pointed comments made by her Honour no formal application to reopen the evidence was foreshadowed and no oral application to do so was made.
As mentioned above at [8], on 30 April 2019, the appellant’s application for orders under s 90AE of the Act was dismissed.
The primary judge also made an order permitting the parties to make further submissions on the proceedings. On 28 May 2019, the appellant’s solicitors filed further written submissions, which said:
5.Moreover, the [appellant] also contends that since events have overtaken the evidence that was led at trial, the Court should consider re-opening the evidence in the interests of justice (to the extent necessary) rather than proceed to draw hypothetical inferences from evidence that the Court knows is now out-of-date.
…
49.Even absent a re-opening to allow for the leading of further evidence as to the [appellant’s] mental health condition and the current financial positions of the parties and the [appellant’s] diminished employment prospects, orders are sought in accordance with the final orders annexed to the Closing Submissions.
(As per the original)
Once again no application to reopen the evidence was made, which, in the light of the clear statements made by her Honour earlier, is remarkable given that the appellant had counsel and a solicitor acting for her.
An updated Financial Statement of the appellant could have easily been prepared. Affidavits setting out the proposed evidence could and should have been prepared, along with the filing of an Application in a Case seeking to reopen the case so as to admit that evidence. These steps were not taken. Instead, the appellant’s counsel sought to cast the obligation on the Court to require the further evidence.
In her reasons for judgment, the primary judge said:
65.With respect to the [appellant’s] further written submissions filed 28 May 2019 if the [appellant] was of the view that the administration of justice required a re-opening of the evidence given the time lapse between the taking of oral evidence and delivery of judgment then it was open to her to file an application for leave properly supported by evidence. She did not do so. It is not the court’s role to conduct her case…
The appellant submits that the primary judge erred by “not re-opening the matter to allow updates of the parties’ financial positions” (Appellant’s Summary of Argument filed on 11 September 2020, paragraph 20).
As her Honour pointed out to the appellant’s solicitors on 21 February 2019, no application to reopen the evidence had been made. It is worth repeating that, at that time, the appellant was legally represented by senior and junior counsel, as well as a solicitor. More importantly, at no stage did those acting for the appellant produce an affidavit of the further evidence nor were the circumstances said to have changed from July 2015 and/or early 2017, when both the appellant and respondent filed Financial Statements, identified.
It is difficult, therefore, to see an error in her Honour’s approach. The primary judge was entirely correct to say that it was not the court’s role to conduct the appellant’s case.
There had been ample time and opportunity for the appellant to seek to rely on further evidence. It is difficult, therefore, to see how there was a lack of procedural fairness (Kioa v West (1985) 159 CLR 550).
Given the deliberate course followed by the appellant’s lawyers, we are not persuaded of any error on the part of the primary judge.
This ground has not been established.
Were the appellant’s entitlements under the TPD policy property for the purposes of s 79 of the Act? (Grounds 5 (a) and (b))
In 1997, the respondent took out a TPD insurance policy which included a component for loss of income. It was not disputed that the premiums for that policy were paid from monies earned during the marriage (at [17]).
The respondent, who is a health care professional, injured his wrist in a water skiing accident in December 1997 and received some intermittent payments under the TPD policy. From 2002, he has been in receipt of regular income protection payments under that policy. This includes payments of up to $150,000 per year adjusted by consumer price index increases until the age of 65, provided he is permanently disabled from returning to work as a health care professional (at [19]). That aspect of the policy has no surrender or cash value. It could be commuted by agreement so that the respondent received a lump sum instead of a series of payments, but the insurer was not obliged to commute it.
In addition to the regular payments received, the respondent also received a lump sum payment of $709,201 from the insurer on 24 November 2008.
By the appellant’s Further Amended Notice of Appeal filed on 11 September 2020, her contention is that the respondent’s entitlements under the TPD policy are divisible property under s 79 of the Act and that an order should be made that the insurer “pay to the [appellant] an amount equal to 80% of the full amount that is payable to the [respondent] each month”.
In the primary proceedings, her Honour rejected the appellant’s contention as follows:
92.It is a right to receive income described as “disability income insurance”, income disclosed as such in the [respondent’s] income tax return, on which he is assessed for income tax purposes.
93.It is a “right” to receive payments contingent on the [respondent] meeting certain obligations under the policy whilst the insurer remains of the view that the [respondent] is disabled within the meaning of the policy. If he is not so disabled then the payment ceases.
94.It is an entitlement capable of being reduced or terminated at the insurer’s option, the [respondent’s] payments regulated by the insurer dependent on the medical evidence presented by him, the [respondent] required to complete regular progress forms and his employability assessed by the insurer monthly with a medical assessment undertaken by him every three months.
(Footnote omitted)
In coming to these conclusions her Honour took into account a number of well-known authorities. The appellant did not dispute that analysis, which we shall rehearse shortly, but submitted that three international authorities have confirmed on appeal that an income protection policy is property. The primary judge was not taken to them.
We shall look first at the Australian position before turning to the decisions relied upon by the appellant.
Section 4 of the Act defines property in very broad terms, 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; or
(b)in relation to the parties to a de facto relationship 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.
In an often quoted sentence, Lord Langdale MR said “‘property’ is the most comprehensive of all terms which can be used, inasmuch as it is indicative and descriptive of every possible interest which the party can have” (Jones v Skinner (1835) 5 LJ Ch 87 at 90). That is an apt description of the above definition.
Nonetheless it has been said that “[t]he question [of] whether a particular right or entitlement can or should be categorised as property has been one of continual difficulty which has troubled courts on many occasions”, and to answer that question it is “necessary in each case to first examine and carefully identify the precise nature of the particular entitlement in question” (Perrett and Perrett (1990) FLC 92-101 (“Perrett”) at 77,659).
In undertaking that exercise it is important to bear in mind the following statement by the High Court in Mullane v Mullane (1983) 158 CLR 436 (“Mullane”) at 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: Stow v. Mineral Holdings (Aust.) Pty. Ltd. (29); Reg. v. Toohey; Ex parte Meneling Station Pty. Ltd. (30). It does not exclude every interest which is not assignable or transferable (cf. per Mason J. in Meneling Station (31)). Thus an order under s. 79 may give rise to an interest in property which is defeasible on assignment or transfer to a third party, or on the occurrence of some other event, or which the holder is enjoined from assigning or transferring…
A particular difficulty arises in relation to future interests. Until the superannuation splitting provisions were introduced into the Act in 2002 (the Family Law Legislation Amendment (Superannuation) Act 2001 (Cth)), the superannuation entitlements of the parties was an obvious example of those difficulties. As quoted in Marchant & Marchant (2012) FLC 93-520 (“Marchant”) at [66], Fogarty J in Crapp & Crapp (1979) FLC 90‑615 (“Crapp”) at 78,176 explained it thus:
… an order can only be made… under sec. 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 a property in the future provided that certain events occur and/or provided that certain disqualifying events do not occur in the meantime.
The Full Court said in Marchant that cases such as Crapp and W and W (1980) FLC 90-872 “have long settled the principle that an expectation of future income, however real and imminent, does not constitute property under the Act” (at [67]).
Perrett concerned a defence force retirement benefit pension. There, the husband’s entitlement was to be paid at $255 net per week after tax. The parties agreed, based on the husband’s life expectancy, that the capitalised present value of that entitlement was $45,744. However, it was not open to the husband to take a lump sum benefit, or to assign or otherwise deal with his pension entitlement.
The Full Court found that the husband’s entitlement was “no more than an entitlement to receive a series of fortnightly pension payments for the remainder of his life. At any one time, he has no greater right than to receive the next payment as and when it falls due” (Perrett at 77,659).
The Full Court added at 77,660:
… However, it is, in our view, impossible to characterise the husband's entitlement to a continuing pension as a chose in action referable to some notional capitalised figure. We think it quite wrong to treat a lump sum so arrived at as property however broadly defined. Such a figure is entirely notional and does not in any sense represent property as such. It may never come into the hands of the recipient at all and will never do so as a single capital sum. The beneficiary is unable to assign his pension entitlement and does not have the capability to turn it into a capital sum.
(As per the original)
The Full Court also said in Perrett at 77,658 that:
Where a party has a right to a fixed fortnightly sum but is precluded from capitalising it, assigning it, or otherwise dealing with it, it is straining the language to call such a payment property, rather than what it really is, namely, income.
See also, Semperton v Semperton (2012) 47 Fam LR 626, where a similar approach was taken in relation to payments received under TPD insurance policies.
In Raine & Creed [2013] FamCA 362, Aldridge J said:
33.I note that this approach to the payments received by TAL is in accordance with the decisions in the marriage of Spellson & Spellson & Ors (1989) 30 FamLR 242; Crapp & Crapp (1979) 5 FamLR 47 and Perrett & Perrett (1990) 13 FamLR 464. The cases are not factually identical to the present case but support the view that in circumstances such as these it is of limited assistance to seek to capitalise such a future entitlement by trying to derive a present value of them. It is appropriate to view the disability payments as potentially continuing and probably not permanent income under s 75(2).
The Full Court returned to the issue in Welch & Abney (2016) FLC 93-756. In that case, the wife received a total and permanent disability pension which was payable to her as a component of her superannuation. The pension had been given a capitalised value of $972,959 pursuant to the Family Law (Superannuation) Regulations 2001 (Cth).
There, the wife’s receipt of the pension was not fixed or guaranteed as the wife was only entitled to receive the pension while she was unfit for work. Her rights under the pension could not be converted to a lump sum or be assigned.
It follows that the capitalised value which had been given to the pension was a notional sum only. The Full Court explained it thus:
33.Section 90MT(1) prescribes the kinds of orders that may be made in relation to a superannuation interest (as defined in s 90MD) each of which is directed to splitting a superannuation interest. Section 90MT(2) mandates the determination of an amount in relation to the interest “before the court makes an order under subsection (1)”. That section does not mandate that the amount determined for the purpose of a splitting order is to be adopted for any other purpose.
34.That legislative decision is quite intentional, and understandable. The (essentially actuarial) calculation upon which the amount of an interest is arrived at under the FLSR — or any approved scheme-specific calculation — incorporates assumptions (for example about taxation) that are only valid if there is to be a splitting order. The attributable “value” assumes that a splitting order is to be made and the consequent benefits and burdens, importantly including taxation, will fall upon both parties, although not necessarily equally, when each draws upon the benefit. Conversely, when no splitting order is made, a consideration of factors such as, importantly, taxation must be considered.
The Full Court added:
59.The Full Court’s reasons in Semperton contain a detailed discussion of various authorities which discussion need not be repeated here. Suffice to note that each of May J, in her Honour’s separate judgment, and the plurality (Thackray and Ryan JJ) in a joint judgment, emphasised that whilst a trial judge has a discretion as to how superannuation interests will be treated in a particular case, the discretion is guided by statements of principle; including that the nature, form and characteristics of the subject interest must be considered, whether or not a splitting order of the interest is made.
60.In emphasising these principles the plurality quoted extensively from the judgment of Murphy J in Hayton v Bendle (2010) 43 Fam LR 602, a case concerning a judicial pension. Whilst we need not quote all of the same extracts from Murphy J’s judgment as were quoted with approval by their Honours in Semperton, the following paragraphs have particular resonance in the instant context:
105.…It has always been the task of courts making orders pursuant to s 79 to properly examine the nature, form and characteristics of the property forming part of the pool for division. Variety in the nature of such property is by no means uncommon. That is neither more nor less so because there can now be, as part of the “pool”, a particular item, or items, of a statutorily-defined type with a value (or, more particularly, “amount”) derived by statutory means.
106.There has never been a requirement for different types of property to be treated the same as other types of property, nor has there ever been a requirement for different types of property to be treated differently. The nature, form and characteristics of the property has always been recognised…With great respect, I can see no reason why that should be different with respect to a “superannuation interest” which is defined by statute for a statutory purpose.
107.What is crucial is that the nature, form and characteristics of all components (or groups of components) of the “pool” to which s 79 orders might apply are considered. That is neither more nor less true of “superannuation interest”. “Superannuation interest” — particularly unvested superannuation interests — can be seen as being of a nature, and having a form and characteristics, markedly different from, say, real property. But that neither adds to nor distracts from, the tasks to be applied to those interests any more or less than the tasks to be applied to the property of the parties.
…
117.The characteristics of the pension — which see it as starkly different from, say, the cash proceeds from the sale of the former matrimonial home — need to be taken into account within the broad-based discretion provided for by s 79 in general and the assessment of contributions in particular (difficult though that may be).
61.Crucially, at [175] of their joint judgment the plurality in Semperton emphasised that the mandatory requirement expressed in s 90MT(2) of the Act to determine an amount in relation to a “superannuation interest” as defined arises only when the superannuation interest is to be split.
In Pates & Pates [2018] FamCAFC 171, the Full Court said:
95.In this case, no splitting order was sought in relation to the husband’s pension, so it need not have been ascribed any capitalised value and treated as property (Welch at [33]-[35]; Surridge at [30]).
Thus, the capitalised value of the pension is not property capable of division because no such property exists in that sum (save for the prescribed purpose of making a superannuation splitting order). The pension can only be regarded as a financial resource or income. At best, there is no more than a right to receive the next payment provided the relevant disability continues, but that may be no more than to have a right to ensure that the insurer will act within the terms of the relevant policy, so as to make that payment in the absence of a determination that the insured no longer meets the relevant criteria for continued payment.
As noted earlier, the appellant did not seek an order for the division of a capitalised present value of the respondent’s entitlements under the TPD policy, but in effect, an assignment of his entitlement. This was to be achieved by an order directed to the insurer to pay that percentage of each monthly payment to the appellant. In other words, the appellant accepted the propositions enunciated above and did not seek the payment of a lump sum.
A particular difficulty arises in this case because there was no other property to be divided. If there was such property, then of course, the expected receipt of the payments could properly be taken into account as a financial resource in any property division under s 79 of the Act so as to allow the other party to receive more of that other property.
The appellant submitted that as the TPD policy could be commuted and the respondent’s entitlements assigned, this case could be distinguished from those just discussed.
The first is clearly correct, but such a course would require the respondent and the insurer to agree. The respondent’s position was that he would never agree. The evidence indicated that the insurer was amenable to such a course, but no doubt, it would only agree if it saw a commercial benefit in doing so. However, as the respondent’s position was that he would never agree to such a course, there is no possibility of commutation.
The appellant submitted that the benefits under the TPD policy were assignable because it was a “continuous disability policy” under the Life Insurance Act 1995 (Cth) (“the Life Insurance Act”). Section 200 of the Life Insurance Act permits assignment of a policy governed by that Act. Section 9A provides that a continuous disability policy is a contract of insurance under the Life Insurance Act, but such a policy does not include one where “the terms of the contract permit alteration, at the instance of the life company concerned, of the benefits provided for by the contract or the premiums payable under the contract” (s 9A(3) of the Life Insurance Act).
The following are terms of the TPD policy:
Payment of a benefit is subject to proof of the Policyowner’s entitlement in such a manner as [EE Insurance] may reasonably request. [EE Insurance] has the right to require from time to time proof of the Policyowner’s continuing entitlement to any benefit and to reduce or terminate payment if the Policyowner is no longer entitled to the benefit under this Policy.
…
[EE Insurance] may reduce or decline to pay benefits during any period or periods of Disability which are caused by failure to seek or follow medical advice or treatment.
(Exhibit 4, p.16–17)
Thus, the insurer is permitted to alter the benefits provided for in the contract of insurance, and the TPD policy is not a continuous disability policy for the purposes of the Life Insurance Act and is not assignable under it.
Equitable assignment
Although not raised by the appellant we should consider the possibility of equitable assignment. Equity has considered the difference between assigning present property and assigning a mere expectancy (Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 (“Norman”); Shepherd v Commissioner of Taxation (Cth) (1965) 113 CLR 385 (“Shepherd ”)). Justice Kitto referred to existing contractual rights to receive payments as “the tree” and the payments which might accrue to the assignor under the contract as “the fruit” (Shepherd at 396). The need for such distinction is not required in this matter as the husband’s payments under the policy (the fruit) and the policy itself (the tree) are one of the same thing. They cannot be separated as the husband either receives the payment or he does not.
The more apt authority is Glegg v Bromley [1912] 3 KB 474, where the assignor successfully assigned the fruits of certain litigation which was on foot, that being sums she may become entitled to by virtue of the litigation. The fact that the assignment involves personal considerations does not render it incapable of assignment, where only the benefits of that contract are being assigned (McGowan v Commissioner of Stamp Duties [2001] 2 Qd R 499 at [14]; British Union and National Insurance Co v Rawson [1916] 2 Ch 476 at 481-482).
It follows then that an order could be made for a portion of the husband’s insurance payments to be paid to the wife, on the assumption that such an order can be made under s 80 of the Act. Nevertheless, the question remains - is that a property order or a spousal maintenance order?
Although we accept that there may be rights of assignment of the insurance payments when they are received, it does not persuade us that we should depart from the above authorities which have consistently said that continuous payments are income.
The word “interest” like the word “property” is a word of many potential meanings and the word must take its meaning from the specific context in which it is used (Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 712-713; Re Hemming (dec’d); Raymond Saul & Co (a firm) v Holden [2009] Ch 313 at [55]).
Therefore, we think that the husband’s insurance payments, when considered in light of the meaning of “property” under the Act, should best be categorised as income.
Authorities from other jurisdictions
The appellant relies first on two decisions from New Zealand, which are Greaves v Baldwin (2019) NZFLR 473 (“Greaves”) and Creighton v Creighton HC Auckland CIV-2003-404-6892, 10 September 2004 (“Creighton”). We shall only discuss Greaves as, in the appeal, the High Court was asked to reconsider the correctness of Creighton.
Mr Greaves was in receipt of payments pursuant to an income protection policy, where the benefits were neither commutable nor assignable. The hearing was an appeal from a judge of the Family Court of New Zealand who made an order dividing the present value of the benefits of the policy, calculated as at the date of separation, between the parties.
The decision must be seen in the context of the scheme for division of property in New Zealand pursuant to the Property (Relationships) Act 1976 (NZ), which is significantly different to that provided by the Family Law Act 1975 (Cth) in Australia.
Indeed, Walker J, who heard the appeal in Greaves, derived no assistance from the Australian cases which were cited to her saying that the different statutory regime restricted their usefulness (at [45]).
The definition of property under s 2 of the Property (Relationships) Act 1976 (NZ) is more extensive than the definition in the Family Law Act 1975 (Cth) and includes both “any debt or anything in action” and “any other right or interest”. Justice Walker considered that this definition was arguably an extension of the normal concept of property so as “to include a ‘right’ or an ‘interest’, even if it is not a right or interest in property” (at [49]).
Importantly, the definition of “relationship property” under the Property (Relationships) Act 1976 (NZ), which is prima facie the property to be divided between the parties, includes “all property acquired, after the marriage… for the common use or common benefit of both spouses…” (s 8(1)(ee)), “any policy of insurance in respect of any property described in paragraphs… to (ee)” (s 8(1)(h)) and life policies (s 8(1)(g)).
It can readily be seen in the light of those provisions that Walker J had little difficulty in finding that:
54.The policy, like any contract, is a bundle of rights and obligations. A right or entitlement to lump sum payments or periodic payments arises when a defined event occurs. In this case, when the insured suffered a medical event leading to disability within the terms of the policy. At that point, a right to claim arose. That right to claim is itself a property right.
However, that finding was made under a different statutory scheme which incorporates a different definition of property, and includes legislative provisions that specifically provide for the allocation of such property. We do not consider it to be of any assistance in identifying what is property for the purposes of the Family Law Act 1975 (Cth).
The appellant also relied upon In re the Marriage of: Lori L. Luginbill, petitioner, Respondent vs. Brent S. Luginbill, appellant (Minn Ct App, A10–220, 25 July 2011), which is a decision from the United States of America. As is plain from the reasons for judgment of Judge Collins, speaking for the Court, the courts of Minnesota have consistently treated the benefits of disability insurance as property which can be divided. Judge Collins, at 3, explains this is because of the application of the relevant statutory provision which was described as follows:
“‘Marital property’ [is] property, real or personal, including vested public or private pension plan benefits or rights, acquired by the parties, or either of them.” Minn. Stat. § 518.003, subd. 3b (2010).
Again, the different statutory context renders this decision, and those referred to in it, of no assistance.
The appellant submitted that we should apply these decisions in preference to the Australian authorities we have discussed earlier. As we have explained there is no basis for doing so. In any event, we are obliged to follow these earlier decisions of the Full Court unless we consider that they are plainly wrong (see Nguyen v Nguyen (1990) 169 CLR 245 at 268–270; Gett v Tabet (2009) 254 ALR 504 at [261]–[301]; Re: Kelvin (2017) FLC 93-809 at [168]–[169] and F Firm & Ruane and Ors (2014) FLC 93-611 at [163]). We do not.
No error has been identified in the approach of the primary judge to the TPD policy.
This then raises the issue discussed in Mullane, as to whether the order proposed by the appellant is an order altering the interests of the appellant in property or as an order adjusting income, namely spousal maintenance.
We consider it to be the latter because it is an application to receive a transfer of a portion of each payment as it is received, which is, in reality income.
As we have said, the appellant sought an order for her maintenance which was dismissed by the primary judge and in respect of which the appellant appeals.
Was the primary judge wrong to conclude that the appellant had not demonstrated she was unable to support herself adequately?
There is no ground of appeal which raises this question although it is described as an issue for consideration in the appellant’s Summary of Argument. It is not expanded upon other than by way of submissions directed to Grounds 4, 5(c), 6, 7 and 8. As we shall shortly explain they do not bear on the primary judge’s central finding that the appellant had the capacity adequately to support herself. Nonetheless, as the appellant who is acting for herself, raised the point, we shall deal with it as best we can.
The primary judge described the appellant’s financial circumstances in some detail and accepted that she was unemployed and her income derived from a share of the respondent’s income protection payments. Leaving aside issues of whether the appellant was living with her partner and sharing expenses with him, the primary judge found the appellant’s weekly reasonable needs to be $857.
As to the appellant’s capacity to support herself, while expressing dissatisfaction at the imprecision of her evidence, it appears that the primary judge accepted that the appellant had been studying for many years in an effort to obtain a qualification which would lead to employment but had not yet graduated. The appellant was unable to explain how many subjects she had completed. Her Honour commented that the appellant’s failure to secure any sort of employment demonstrated a “lack of motivation and purposeful endeavour” (at [184]). The primary judge did not accept that the suggested emotional distress and associated physical symptoms would preclude the appellant from employment (at [191]).
The primary judge found that the appellant had provided significant administrative assistance to the respondent while he was practising as a health care professional and did not accept, as the appellant posited that it was nominal and insignificant (at [194]).
Her Honour said that no explanation had been given as to why the law degree had not been completed or “why she was unable to obtain some employment in the area of administration whilst pursuing part time study or during periods of interrupted study” (at [182]). There was no evidence as to when the degree was likely to be completed so as to consider allowing her a reasonable time to do so.
The appellant had not made an application for any job.
The primary judge was unpersuaded that any of the appellant’s asserted difficulties would prevent her from re-entering the workforce. Thus the primary judge concluded that the appellant was not unable to support herself.
The appellant submitted that in coming to that decision, the primary judge gave insufficient weight to the circumstances leading to her presently being unemployed and the submissions refer to, for example, her role as homemaker and parent during the marriage and her contention that during the marriage and afterwards she was subject to family violence by the respondent. It is certainly clear from the reasons that the primary judge was aware of the appellant’s role adopted during the marriage (although her Honour made no findings about the asserted family violence).
These matters were relied upon by Mr Z, a psychologist, who prepared a report at the request of the appellant as to her capacity to work. Her Honour placed little weight on his evidence because it was “not supported by the evidence at trial” (at [188]). Instead, the primary judge gave greater weight to the matters which we have set out above. That was a course that was open.
The appellant contended that her Honour’s conclusion that the appellant had not demonstrated that she could not adequately support herself, coupled with the discharge of the order, then extant, that the respondent pay her $900 per week resulted in the appellant having no source of income other than government benefits. That is so, but that is the effect of the order and does not, of itself show error. It is a consequence of the findings as to capacity.
We have to note the unfortunate unreality as to the determination of this aspect of the matter as it was decided on the basis of evidence that was years old and which, quite possibly, bore little relation to the appellant’s circumstances at the time of the hearing. That was, however, the consequence of the failure of the appellant and her lawyers to produce and seek to rely on updated evidence as explained earlier. This was a matter expressly noted by her Honour at [192].
We are unable to discern an error on her Honour’s approach to the question of spousal maintenance.
Were there other errors of fact? (Ground 5 (c))
Next, the appellant contends that a portmanteau of factual errors vitiated her Honour’s reasons.
The appellant’s Summary of Argument filed on 11 September 2020, identified the following asserted errors of fact in her Honour’s reasons for judgment:
·That the appellant had no outstanding liability for legal fees, where the appellant’s legal liabilities were in excess of $200,000;
·That the respondent had no financial resources when, in fact:
·The respondent had a reasonably wealthy partner who supported him and
·The respondent had or would receive an interest in the Q business; and
·That the respondent had no capacity to pay spousal maintenance, where he was actually receiving $16,000 per month.
Legal Fees
In discussing the appellant’s financial position when considering the application for spousal maintenance, the primary judge said:
168.The [appellant] does not evidence any paid legal fees or outstanding liability for legal fees. The evidence supports a finding that the [appellant’s] brother has been a significant financial resource with respect to the provision of her legal services without charge including the payment of Counsel. The [appellant] accepted that she did not pay for the services of [her first barrister] on three occasions, [her second barrister] on one occasion and …, Senior Counsel at trial.
169.She asserted a lack of knowledge with respect to the financial arrangements her brother had put in place with regard to briefing Senior Counsel for the trial other than Counsel was “expensive”. Whether this was because of her relationship with her brother (“We don’t have communication…..I know it sounds weird… it’s a weird relationship.”) or a further example of a lack of forthrightness with the court matters not, the evidence supporting a finding that it is unlikely that the [appellant] would be required to repay her brother or on her evidence the entity which performed the legal services on her behalf.
It is correct that on 9 July 2015 the appellant’s senior counsel informed the Court that the appellant had “incurred legal fees of something in that order” of $200,000 and that the appellant’s lawyer was her brother (Transcript 9 July 2015, p.22 lines 11–44). A statement made by counsel is not evidence.
In any event, this is not inconsistent with the above findings. In particular, it is not an answer to the last sentence of [169] from the primary judge’s reasons extracted above. The appellant did not take us to any evidence as to the likelihood that she would be required to pay those fees.
No error has been demonstrated.
Did the respondent have valuable financial resources?
The findings of the primary judge, which will not be disturbed on appeal, were that there was no property of the parties capable of division and that the appellant had not established that she was unable to support herself adequately. Therefore, any finding that the respondent had financial resources available to him would be of no utility because it could only be relevant if there was property to divide or if the appellant was unable to adequately to support herself. Whilst the primary judge did discuss the respondent’s financial resources, that was in the course of discussing the respondent’s ability to pay spousal maintenance. That was an unnecessary course because it had already been determined that the application for spousal maintenance would fail. Any error that occurred by failing to take into account the respondent’s financial resources would not be material to the outcome.
In the appellant’s Summary of Argument, she said “[i]t is highly probable that the [respondent], who admitted to using sham trusts, hid his beneficial ownership of [Q] until after final orders” (Appellant’s Summary of Argument filed on 11 September 2020, paragraph 52) (Footnotes omitted).
“Q” is a reference to a number of health care businesses owned by the respondent’s step-father, two of the respondent’s friends and companies associated with them. The primary judge found that whilst the respondent was involved in Q, it had not been established that the respondent had an interest, legal or beneficial, in it, or in the companies that operated it.
Ground 4, asserted that her Honour erred in finding that the respondent “presented as an overall witness of truth” and that her evidence should have been preferred to his (Appellant’s Summary of Argument filed on 11 September 2020, paragraph 28). However, if the respondent’s denials as to his involvement in Q and his explanation as to how he spent the lump sum disability payment were not accepted, that would simply mean his evidence would be ignored and not that the opposite of it would be established. The appellant would still be required to adduce evidence that showed he had a beneficial interest in Q and that a part of the lump sum proceeds remained under his control.
The appellant did not otherwise make any submissions as to why the primary judge’s findings as to Q were wrong. We cannot therefore take the matter any further.
We would add however, that no orders could be made dividing any of the “Q” assets simply because none of the legal owners of the assets was a party to the proceedings.
Capacity to pay spousal maintenance
As we have already explained, this was not a matter that needed to be determined by her Honour. Nonetheless, when considering the capacity to pay spousal maintenance, the primary judge took into account the amounts the respondent received from the TPD policy and his other sources of income, but found that his expenses exceeded them (at [212]). Whilst the respondent may have been living with a wealthy partner, to use the appellant’s description, that partner’s income is not the respondent’s. No error in that approach was identified.
It follows that this ground has not been established.
Did the primary judge err in relation to findings of credit, weight to be given to material considerations and make plainly unreasonable and unjust findings? (Grounds 4, 6, 7 and 8)
As already discussed, Ground 4, which asserted errors in the findings as to the credit to be given to the respondent’s evidence, even if established, could have no effect on the outcome of the appeal. Further, the appellant merely invites us to form our own view of the parties’ credit worthiness which we could only do in the limited circumstances, as set out in Robinson Helicopter Company Inc v McDermott (2016) 331 ALR 550 and Lee v Lee (2019) 266 CLR 129. That is not the case here.
The same is to be said about Grounds 6 and 7 which assert that the primary judge failed to take into account considerations such as the role of the appellant as a homemaker and parent, and the history of family violence. As there was no property to be divided there was no occasion for them to be considered.
Ground 8 asserts that the outcome of the appellant’s claim for property settlement and spousal maintenance was plainly unreasonable and unjust because:
·The respondent stole the appellant’s assets during the marriage;
·The appellant’s “homemaker penalty” during and after the 18 year marriage;
·The effects of family violence; and
·The appellant’s future needs.
The appellant also listed a large number of matters that she said should have been considered under s 75(2) of the Act, but which were not. She submitted the failure to do so was unfair.
None of these is capable of bearing on the issues of whether there was any property to divide or whether the appellant could adequately support herself which were the fundamental findings made by the primary judge. Therefore no consideration of them was required.
CONCLUSION AND COSTS
It follows that the appeal will be dismissed.
The respondent did not seek a costs order in that event.
WATTS J:
INTRODUCTION
The central questions in this appeal are whether the husband’s rights under an income protection insurance policy (“the Policy”) with FF Insurance (“FF”) are “property” for the purposes of s 4(1) of the Family Law Act 1975 (Cth) (“the Act”) and if so, whether a property settlement order can be made under s 79(1) of the Act transferring a percentage of those rights to the wife.
The primary judge answered both those questions in the negative. For reasons which follow, the primary judge erred in doing so, and accordingly I would allow the appeal.
RELEVANT BACKGROUND
The parties married in 1992 and separated in 2009. They have three adult children.
The husband worked as a health care professional until 2002. In 1997 the husband took out the Policy with FF Insurance (“FF”) together with a separate trauma and permanent disability policy. Premiums on both were paid from monies earnt during the marriage. It was the husband’s intention at that time to provide for the family in the event of illness or injury.[1]
[1] (Transcript 10 July 2015, p.148 lines 39–43)
In December 1997, the husband injured his wrist in a water skiing accident and thereafter received intermittent payments under the Policy for loss of income.
From 2002, the husband has been permanently in receipt of payments pursuant to his rights under the Policy, which the primary judge found paid $150,000 per annum, as at the date that evidence was given. Payments and CPI increases will continue while the husband is permanently disabled from returning to work as a health care professional and until he attains the age of 65 years, subject to the husband satisfying relevant conditions under the Policy. At the date of her Honour’s judgment the husband was 47 years of age.
In November 2008, the husband received a lump sum payment of $709,201, arising from his rights under his permanent disability policy. The husband expended this money, in part, on 24 overseas trips and lost “considerable funds” on gambling (at [31]). It was the wife’s unsuccessful case at trial that the husband had not provided full and frank disclosure as to what happened to these funds, with the wife asserting that the husband had funnelled monies into businesses ostensibly controlled by others, under the flagship Q Health Pty Ltd and had additionally deposited monies overseas.
Due to the fact that the wife’s arguments in relation to the husband’s undisclosed business interests were unsuccessful, the only remaining significant asset held by either of the parties was the husband’s rights under the Policy.
On 28 March 2014, the husband consented to an order that he pay $900 per week to the wife as interim spouse maintenance.
Order 3 made by the primary judge on 14 August 2015, at a time when the wife’s application was that the husband transfer the whole of his rights in the Policy to her, required the husband and wife to make a request in writing to FF to respond to the following question:
If an order is made by the Federal Circuit Court of Australia requiring the husband to do all acts and sign all documents necessary to assign to the wife his Disability Income Insurance Policy, will [FF] register the assignment?
On 14 September 2015, FF responded that it would record a transfer of ownership of the Policy from the husband to the wife subject to FF being provided with the following documents:
(1)A Memorandum of Transfer of Ownership completed and signed by both parties (and enclosed the form);
(2)The original policy document;
(3)If the original policy document is not available then a statutory declaration relating to its loss and a handling fee; and
(4)A certified copy of the wife’s and husband’s driver’s licences or other form of photo identification.
FINAL ORDERS SOUGHT BY THE WIFE
In the wife’s written submissions filed 20 October 2015, she sought a number of orders relating to the rights under the Policy and, alternatively, the proceeds of the income from time to time received by the husband as the owner of the Policy. The final orders sought by the wife included:[2]
[2] Wife’s written submissions filed 20 October 2015, p.23–p.24 (As per original)
1. That the [wife] retain for her sole use and benefit absolutely the following assets free from any claim of the respondent and any of such assets that are in the possession of the respondent to be delivered by him to the applicant within 7 days after the date of this Order:
(a)
all80% of the proceeds of the income disability insurance policy number … with [FF] (the Policy)…
2.That the [husband] [and the wife] shall do all acts and sign all documents as are necessary to transfer to the [wife] at the expense of [the wife] 80% of the [husband’s] right, title and interest in [the Policy].
…
4.That within 7 days of the date of these Orders, the [husband] do all acts, produce all documents and execute all documents as are necessary to cause the interest the respondent has in the Policy be transferred or assigned to the [wife] and [respondent] as joint owners in the proportion 80% to the [wife] and 20% to the [husband] or as the [wife] shall direct.
5.In the alternative, that within 7 days of the date of these Orders, the [husband] do all acts and execute all documents as are necessary to cause the interest the [husband] has in the Policy to be paid to the [wife] or as the [wife] shall direct.
…
7.That either party have liberty to apply as to the implementation or enforcement of these Orders upon the giving of 7 days written notice to the other.
8.That in the event either party fails, refuses or neglects to sign all such documents and do all such acts and things that may be necessary to give effect to these Orders, pursuant to section 106A of the Family Law Act 1975 (Cth), a Registrar of the Court be appointed to execute all deeds and documents in the name of the parties and do all such acts and things as may be necessary to give validity and operation to all such deeds and documents as may be necessary to give effect to these Orders and the defaulting party shall be responsible for such costs.
The wife’s overarching application is contained in applications 2 and 4, which seek the same order, each in a slightly different form. In the wife’s Initiating Application filed on 20 December 2013 and her Further Amended Initiating Application filed 14 March 2018, she sought the whole of the husband’s right, title and interest in the Policy. In the wife’s written submissions filed on 28 May 2019, the wife made it clear that she reverted to and relied upon the application attached to her written submissions filed 20 October 2015 seeking a transfer to her of 80 per cent and not all of the husband’s rights under the Policy.[3]
[3] At [58].
The wife’s application in the alternative (application 5) could be interpreted (because of the word “paid”) as an application for an order that the husband commute his rights under the Policy and pay the entire proceeds to the wife. While there is power to make an order requiring a party to do what is necessary to affect a commutation of an income stream as part of making a s 79 order,[4] the husband does not have a right under the contract to require FF to commute the Policy.[5] Whilst some of the husband’s oral evidence might suggest FF might be amenable to a request for commutation of the husband’s rights under the Policy[6], the wife made no submissions in support of application 5. Nor did Order 3 made on 14 August 2015 require the husband to ask FF if they would be prepared to commute the Policy.
[4] Sections 80(1)(k) and 114(3) of the Family Law Act 1975 (Cth) (“the Act”); Law-Smith and Seinor (1989) FLC 92-050; Trott and Trott (2006) FLC 93-263 at [204]–[206].
[5] At [90].
[6] Transcript 10 July 2015, p.129 line 33 to p.131 line 45.
THE PRIMARY JUDGE’S REASONS
The primary judge described the wife’s application in the following way:
58.The wife seeks the orders detailed at pages 23 and 24 of the written submissions filed on her behalf on 20 October 2015 which inter alia provide for her to receive by way of property adjustment 80% of the proceeds of the husband’s Income Protection Policy together with [Motor Vehicle 1] (see also further submissions filed 28 May 2019).
59.She otherwise particularises how that transfer or assignment is to be effected.
60.In the alternative she seeks that the husband cause his interest in the policy to be paid to her.
It can be seen that whilst [58] reflects application 1(a) and [60] reflects application 5 as sought by the wife, the primary judge has not recorded the central part of the wife’s application contained within applications 2 and 4: her pursuit of the transfer to her of 80 per cent of the husband’s right, title and interest in the Policy. It is important in this appeal to recognise that the wife has made an application in that form.
Notwithstanding that oversight the primary judge recorded:
84.It is contended on behalf of the wife that the husband’s entitlement to income protection payments under his policy of insurance is “property” within the meaning of the Act and capable of assignment under the relevant legislation such that the husband’s rights under the policy may be adjusted between the parties as to 80% to the wife and 20% to the husband.
…
117.The court is not otherwise persuaded by the further submissions advanced on behalf of the wife filed on 28 May 2019 as to the husband’s rights constituting an assignable chose in action at law and in equity…
(Emphasis added)
The primary judge found at [86] and [89]–[94]:
86.The wife’s contention that the husband’s insurance benefit is property is rejected.
…
89. The husband’s Income Protection Policy has no surrender or cash value. The wife has never sought to value it.
90. The husband does not have a right to commute the payments.
91. Its (sic) primary purpose of the policy is to provide financial protection in the event of disability caused by injury or illness.
92. It is a right to receive income described as “disability income insurance”, income disclosed as such in the husband’s income tax return, on which he is assessed for income tax purposes.
93. It is a “right” to receive payments contingent on the husband meeting certain obligations under the policy whilst the insurer remains of the view that the husband is disabled within the meaning of the policy. If he is not so disabled then the payment ceases.
94.It is an entitlement capable of being reduced or terminated at the insurer’s option, the husband’s payments regulated by the insurer dependent on the medical evidence presented by him, the husband required to complete regular progress forms and his employability assessed by the insurer monthly with a medical assessment undertaken by him every three months.
(Footnotes omitted)
The primary judge discussed the wide definition of property under s 4(1) of the Act and the seminal statement in Duff and Duff[7] (“Duff”) (at [87] and [88]). Her Honour thereafter refers to statements made in Crapp and Crapp[8](“Crapp”), Perrett and Perrett[9] (“Perrett”), Marchant & Marchant[10] (“Marchant”) and Raine & Creed[11], concluding:
99.For the reasons given the [C]ourt is unable to conclude that the policy is “property” under the Act.
[7] (1977) FLC 90-217.
[8] (1979) FLC 90-615.
[9] (1990) FLC 92-101.
[10] (2012) FLC 93-520.
[11] [2013] FamCA 362.
Having already reached that conclusion the primary judge then turned to the issue of “whether the policy is capable of assignment”:
100.Given that finding [that the Policy is not property], it is not necessary to consider the question of whether the policy is capable of assignment as permitted under s.200 of the Life Insurance Act 1995 (Cth) (“LIA”), although a conclusion that the policy is not assignable can be an important contra-indicator that the policy is “property”.
101.The [C]ourt accepts however that the policy is not assignable by reason of its exclusion under s.9A(3) of the LIA in that the policy cannot be said to be a “continuous disability policy” within the meaning of the LIA.
102.Section 200 of the LIA provides a statutory right of assignment of a policy of insurance regulated by the LIA.
It is important to observe at this point that the primary judge concluded that the Policy is not assignable, but not whether the husband’s rights as owner of the Policy are assignable. The use of that shorthand is apt to mislead if it is not understood that s 200(1) of the Life Insurance Act 1995 (Cth) (“LIA”) is in the following terms:
The rights of a person as owner of a policy may only be assigned at law under this section.
(Emphasis added)
The distinction between the husband’s rights as the owner of the Policy and the amounts paid from time to time under the Policy, which is a product of those rights, is key in the determination of this appeal.
The primary judge next proceeded to discuss the provisions of ss 200, 9 and 9A of the LIA. Her Honour “accept[ed] the submissions on behalf of the husband that the FF policy cannot be characterised as a ‘continuous disability policy’”.[12] The inference that follows is that the primary judge found the rights under the Policy do not attract the provisions of s 200 of the LIA.[13] In explaining that conclusion the primary judge distinguished the reasoning of Rolfe J in Hoarev Mercantile Mutual Life Insurance Co Lts[14] (“Hoare”), upon which the wife relied.[15] Finally, the primary judge rejected the alternate submissions by the wife as to why the husband’s rights as owner of the Policy were assignable even if the Policy did not attract the provisions of the LIA:
117.The [C]ourt is not otherwise persuaded by the further submissions advanced on behalf of the wife filed on 28 May 2019 as to the husband’s rights constituting an assignable chose in action at law and in equity and that those rights answer the description of property under the Act for the reasons earlier given. Even if the right is capable of being assigned under Federal or State legislation that does mean it is “property” under the Act.
118.The [C]ourt accepts the submissions on behalf of the husband with respect to the weight to be attached to the response of [FF] on 14 September 2015 to “record the transfer of ownership”. It is a response that does not confirm that the policy can be assigned, rather one that confirms that [FF] will comply with a court order and register the assignment if the court finds that the policy can be assigned.
[12] At [108] (Emphasis in original).
[13] At [116].
[14] [2000] NSWSC 1026.
[15] At [113]–[116].
APPLICABLE LAW
The definition of marital property under the Minnesota statute[78] provides that “marital property” means “property real or personal, including vested private or public pension plan benefits or rights”. This definition is an exhaustive one but to avoid doubt it provides pension plan benefits or rights are to be taken to fall within the scope of that meaning.[79]
[78] Minnesota Statutes s 518.003, subdivision 3b (2010).
[79] See Dennis C Pearce, Statutory Interpretation in Australia (LexisNexis Butterworths, 9th Ed, 2019) ch 6.9.
Accordingly the authorities to which the wife refers, decided under those statutes, do not speak to whether the rights the husband has under the Policy are property within the exhaustive definition of s 4 of the Act. However the outcome in the three jurisdictions is the same. The rights under the Policy are property under all of them.
“Property” for the purposes of s 79(1)
Section 79(1) of the Act provides:
Alteration of property interests
(1)In property settlement proceedings, the court may make such order as it considers appropriate:
(a) in the case of proceedings with respect to the property of the parties to the marriage or either of them – altering the interests of the parties to the marriage in the property…
including:
(c) an order for a settlement of property in substitution for any interest in the property; and
(d) an order requiring:
(i) either or both of the parties to the marriage…
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
Often, it does not matter if a particular item of property cannot be the subject of transfer or settlement because the parties hold (jointly or separately) other property which can, so that an appropriate, just and equitable settlement of property can be achieved.
However, an insurmountable problem can arise in those cases, such as the present one, where there is a finding made that the only substantial asset is not property and cannot be assigned in whole or in part to the other party.
Assignability/ Alienability
In Norman v Commissioner of Taxation (Cth)[80] Windeyer J explained at 26:
Assignment is the immediate transfer of an existing proprietary right, vested or contingent, from the assignee to the assignor
(Emphasis added)
[80] (1963) 109 CLR 9.
The case of Shepherd provides an example as to how existing proprietary rights in contingent interests are assignable.
In this case, for the Court to have power to make an order under s 79(1) transferring part of the husband’s rights under the Policy to the wife, the husband’s chose in action has to be assignable. As a general rule, contractual rights, being choses in action, which have a proprietary character, are assignable.
However, assignment might be precluded for a number of reasons. First, the contract or legislation may prohibit assignment.[81] As already discussed, that hurdle may be overcome by s 90AC of the Act provided the requirements of Pt VIIIAA are satisfied.[82]
[81] Carter v Hyde (1923) 33 CLR 115 per Knox CJ at 120 – 121, Isaacs J at 124 – 125 and Higgins J at 130 – 133; Don King Productions v Warren [1999] 2 All ER 218.
[82] See for example the husband’s rights to DFRDB payments in Perrett.
Secondly, the assignment may be impermissible if the obligor is prejudicially affected because the purported assignment changed the nature of the contractual obligations to be performed.[83]
[83] Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668; Peters v General Accident Fire and Life Assurance Co Ltd [1938] 2 All ER 267 at 270.
Thirdly, a bare right to litigate may not be assignable because public policy discourages the promotion of litigation. This reluctance was rooted in the notions that assignment may foster litigation and constitute the former crimes of maintenance and champerty. That reluctance may be fading given the High Court’s discussion about the demise of the concepts of maintenance and champerty and the assignment of a right to litigate to a litigation funder not being an abuse of process.[84]
[84] See Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at [61]–[95].
None of these exclusions emerge from the evidence in this case. Neither the contract nor legislation prohibits an assignment. It is apparent that it is of no consequence to FF as to whom monthly payments are made. The wife seeks transfer of rights in the Policy and not a bare right to litigate.
Absolute and non-absolute assignments
An absolute assignment is one by which the entire interest of the assignor in the chose in action is transferred unconditionally to the assignee and placed completely under the assignee’s control.[85]
[85] One.Tel (In Liq) v David Watson and Anor [2009] NSWCA 282 at [96]–[110].
As indicated the wife’s applications filed in 2013 and 2018 sought an absolute assignment of the husband’s rights under the Policy but in final submissions, the wife ultimately sought a transfer of only 80 per cent of those rights.
The assignment of part of a right or debt is not an absolute assignment.[86]
Statutory assignments
[86] Norman per Windeyer J at 29 with whom Dixon CJ agreed; Shepherdv Commissioner of Taxation (Cth) (“Shepherd”) (1965) 113 CLR 385 per Barwick CJ and Kitto J at 396; Commissioner of Taxation (Cth) v Everett (1980) 143 CLR 440 at 449.
With limited exceptions, historically an assignment of a common law chose in action by an assignor to an assignee did not allow the assignee to sue in his or her own name, principally because of public policy concerns (“maintenance” and “champerty”). Equity was not so constrained by such “absurdity”[87] and would compel the assignor to allow an action be brought in his or her own name, with an indemnity for costs. This meant that if the assignor did not allow an action to be brought in their name the assignee needed to go to equity before suing the obligor at law.
[87] Norman per Windeyer J at 26 quoting Butler J in Miller v Miller (1791) 4 T.R. 320 at 340: “courts of equity from the earliest times thought the doctrine too absurd for them to adopt”.
The English Judicature Act 1873 (now s 136 of the Law of Property Act 1925 (UK)) abolished this anomaly. That statute has been copied in all states and territories in Australia[88] and relevantly in this case in s 199 of the Property Law Act 1974 (Qld) (“Property Law Act”). The creation of this statutory legal assignment only applies to an absolute assignment.
[88] Except in Western Australia where the state legislation extends to non-absolute assignments s 20(3) Property Law Act 1969 (WA).
However, in relation to life policies, s 200 of the LIA provides a statutory legal assignment without the requirement that assignment be absolute. In the event that s 200 of the LIA applies in this case, it prevails to the extent of any inconsistency with s 199 of the Property Law Act.[89]
Equitable assignments
[89] Australian Constitution s 109.
In Commissioner of Taxation (Cth)v Everett[90] (“Everett”), the husband assigned to his wife a 6/13 share of his contractual entitlement to share in future profits of a partnership conducting a legal practice. This contingent right to a future income stream was a chose in action assignable in whole or in part. The whole of it was assignable under s 12 of the Conveyancing Act 1919 (NSW) (the equivalent of s 199 of the Property Law Act). Part of it was not assignable at law, but was assignable in equity. The High Court said at 450:
It is, of course, well established that an equitable assignment of, or a contract to assign, future property or a mere expectancy for valuable consideration will operate to transfer the beneficial interest to the purchaser immediately upon the property being acquired, but not before. On the other hand, an equitable assignment of, or a contract to assign, present property for value takes effect immediately and passes the beneficial interest to the assignee.
(Citations omitted)
[90] (1980) 143 CLR 440 at 447–450.
The consequence in Everrett’s case was discussed at 452:
… that because the respondent assigned present property, a chose in action, being a share of his interest in the partnership which carried with it the right to a proportionate share of future income attributable to his interest, the assignment became effective at once and conferred on his wife an immediate equitable entitlement as against the respondent and the other partners to such income referable to the share assigned as might subsequently be derived.
So, in the event no legal assignment of a percentage of the rights under the Policy is available by the operation of statute, an assignment of that chose in action is still effective in equity.[91]
[91] Shepherd; In re Crothers; Crothers v Crothers (1930) VLR 49.
GROUNDS OF APPEAL
The wife appeared before us without representation. Her Summary of Argument, relied in part, upon written submissions which her previous lawyers made to the primary judge and ultimately were not accepted by her Honour.[92]
[92] Wife’s Summary of Argument filed 11 September 2020, paragraph 45 referring to her written submissions of 20 October 2015 and 28 May 2019.
By Grounds 2 and 3 the wife challenges the primary judge’s orders based on an assertion that the primary judge was biased and failed to afford the wife procedural fairness.
On 28 March 2014, the primary judge at a case management event commented “there is no property to divide up…the income stream is not property, I know this because I was told by the Full Court … so I don’t have to be told twice”.[93] The primary judge made similar comments on 9 May 2014[94] and 27 November 2014[95]. The case the primary judge is alluding to is Marchant, which the primary judge subsequently relied upon[96], and is discussed later in these reasons. Whilst it might be argued that the primary judge had pre-judged the matter by incorrectly assuming that the facts of this case were analogous to those in Marchant, it is too late now to make that complaint.[97]
[93] Transcript 28 March 2014, p. 15 lines 12–14.
[94] Transcript 9 May 2014, p.3 lines 1–6.
[95] Transcript 27 November 2014, p.24 line 16 and p.25 line 25.
[96] At [96] and [97].
[97] Vakauta v Kelly (1989) 167 CLR 568.
I otherwise generally agree with the reasons given by Ainslie-Wallace and Aldridge JJ as to why there is no merit in Grounds 2 and 3.
The challenges in the wife’s Further Amended Notice of Appeal filed 11 September 2020, in Grounds 5(a) and 5(b) are:
The learned trial judge erred in making findings of fact:
(a)That the [FF] policy is not “Property” for the purposes of s 79 of the FLA;
(b)That the [FF] policy is not capable of assignment.
Are the husband’s rights under the Policy property? (Ground 5(a))
Ground 5(a) focuses on the primary judges findings at [86] and [99]:
86.The wife’s contention that the husband’s insurance benefit is property is rejected.
…
99.For the reasons given the court is unable to conclude that the policy is “property” under the Act.
The effect of these conclusions is that not only was the monthly income stream (the fruit) not property, but neither was 80 per cent of the husband’s rights under the Policy (part of the tree) property as defined by s 4(1) of the Act.
As indicated, the primary judge relied upon the following three findings. First, unless FF agreed, the rights under the Policy had no lump sum value. Secondly, the Policy gave the husband the right to receive income. Thirdly, the husband’s right to receive payments was contingent upon him meeting his obligations under the contract and continuing to be disabled from working as a health care professional.[98]
[98] At [89].
The primary judge then relied upon statements in three cases.
First the primary judge quoted Fogarty J’s statement in Crapp which excluded from the definition of property interests in the future that were contingent upon certain events occurring and/ or certain disqualifying events not occurring in the meantime. The jurisprudence that developed following Fogarty J’s exclusion of rights to future contingent interests has been referred to above.
Secondly, at [96]–[97] the primary judge referred to passages at [58] and [72] in Marchant:[99]
58. 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 is impossible to characterise that entitlement as a chose in action referable to some notional capitalised figure… also it would be wrong to treat a notional lump sum as “property’ for the purpose of the Act.
…
72. 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.
[99] As already indicated the primary judge was also the trial judge in Marchant.
As already discussed, the reliance upon Perrett should be tempered given the statements made by the Full Court in Semperton about the nature of entitlements to DFRDB.
In Marchant the primary judge made an interim order, purportedly under s 79, that the husband pay the wife $11,500 each month, “being one (1) half of his personal income derived from joint assets and holdings”.[100] The husband held substantial passive investments (between $15 million and $17 million) in real estate, cash deposits and shareholdings. To better understand the Full Court’s statement at [72] it is appropriate to read it with the paragraphs before and after it:
71.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.
72.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.
73.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”.
[100] At [2].
The effect of the Full Court’s decision was that the husband was ordered to transfer the fruit but not any part of the tree and accordingly the Full Court found that the order was beyond the power provided in s 79.
Subject to the restrictions discussed above, there is no doubt the court can validly make an order under s 79 for one spouse who retains property to pay the other a lump sum by way of a property settlement order.[101] Had the primary judge capitalised the $11,500 each month and not linked it to future income there would be no question that the order could be validly made under s 79 pursuant to the general power in ss 80(1)(a) and (b). It was an error by the primary judge to rely upon [72] in Marchant, because, in this case, the wife was not asking for only a transfer of the fruit but also of part of the tree.
[101] Collins and Collins (1977) FLC 90-286.
Finally, the primary judge relied upon the first instance decision of Aldridge J in Raine & Creed[102] which her Honour summarised at [98]:
98.In Raine & Creed [2013] FamCA 362 in dealing with a TAL Income Protection Policy that paid a benefit to the husband, a policy like the present case where the insurer could at any time reduce or terminate the payment if it concluded that the husband was either partially or no longer disabled and capable of returning to work, the Court determined that the husband’s weekly disability payment was neither property nor a financial resource, the evidence in that case being that the benefits under the policy were not transferrable.
[102] [2013] FamCA 362.
In Raine & Creed, Aldridge J discussed the payments under the husband’s disability insurance policy with TAL at [30]–[36]. It is unclear as to whether the TAL policy in that case was in a similar form to that in the current case. His Honour recorded the benefits were not transferable. Further, his Honour found that “the present value of the income stream of $3,756 per week less tax is neither property of the husband nor a financial resource”[103] and found “[i]t is appropriate to view the disability payments as potentially continuing and probably not permanent income under s 75(2)”.[104] Finally, Aldridge J concluded:
36.In summary, I find that the husband is likely to receive income from the insurer for some time but it is more likely than not that it will not be until he reaches the age of 70. I will not take into account its present value of $1.6 million but will take into account, where appropriate, the income stream.
[103] Raine & Creed at [32].
[104] Raine & Creed at [33].
Aldridge J relied upon Crapp and Perrett to conclude that the husband’s rights under the income policy were not property. For reasons already discussed, I do not share the view that existing rights in contingent interests under a disability insurance contract are not property at common law and in equity.
To the extent that the primary judge in this case, relied upon Aldridge J’s decision in Raine & Creed to find that the husband’s rights under the Policy were not property, the primary judge was in error.
The primary judge should have found the Policy was property within the meaning of s 4(1) of the Act because the husband had a chose in action, being a right under a contract, which gave him particular entitlements if certain contingencies were met.
There is merit in Ground 5(a).
Did the primary judge err in finding that the policy and the husband’s rights under it were not assignable? (Ground 5(b))
As indicated, the primary judge found the Policy was not assignable as permitted by s 200 of the LIA and the husband’s rights under it were not otherwise assignable.[105]
[105] At [100]–[101] and [117].
The question of whether the Policy was capable of assignment was only considered by the primary judge after her Honour had already concluded that the rights under the Policy were not property. Her Honour’s consideration of whether “the policy” was assignable was not in the context of whether an order under s 79(1) was possible but as a “contra-indicator that the policy is ‘property’”.[106]
[106] At [100].
The primary judge made it clear at [117] that even if the rights under the Policy were assignable, her Honour still would have found that those rights were not “property” under the Act. Whilst the primary judge erred in finding the rights under the Policy were not property, the issue as to whether or not that policy is assignable is additionally important because if those rights are not assignable no order can be made pursuant to s 79(1) to transfer part of them to the wife.
It was the wife’s position at trial that the Policy was either a policy governed by the LIA, in which case the rights under the Policy are assignable pursuant to s 200 of the LIA, or if it was not a policy governed by the LIA those rights were otherwise assignable under state legislation or in equity.
As already observed, s 200(1) of the LIA provides that the rights of a person as owner of a policy may be assigned at law. The rights which may be assigned are the rights to make a claim under the Policy.[107] It was not a matter of controversy that if the Policy was one that was covered by the LIA, the rights under the Policy were assignable pursuant to s 200 of the LIA.
[107] Bianchi v Boserio [2001] QCA 462, per Cullinane J at [33].
Under the LIA a “policy” includes a “life policy” which has the meaning provided in s 9 of the LIA.
Section 9(1) of the LIA provides a life policy included:
(a)a contract of insurance that provides for the payment of money on the death of a person or on the happening of a contingency dependent on the termination or continuance of human life;
…
(e)a continuous disability policy…
A continuous disability policy is defined further in s 9A of the LIA. Again, there is no controversy the Policy fulfilled the requirements of that section apart from the dispute as to whether the exemption in s 9A(3) was attracted:
A contract of insurance is not a continuous disability policy if the terms of the contract permit alteration, at the instance of the life company concerned, of the benefits provided for by the contract or the premiums payable under the contract.
(Emphasis added)
Subsection 9A(5) of the LIA provides that s 9A(3) did not apply if the terms of all contracts of the same kind as the Policy, allow alteration on a simultaneous and consistent basis. Whilst the Policy contained a provision that FF could increase premiums, it was only upon the basis provided for in s 9A(5) of the LIA.
The primary judge found that the Policy was not a continuous disability policy because it could be altered “at the instance” of FF and attracted the exemption in s 9A(3).
The Policy provides that the payment of a benefit was subject to ongoing proof by the husband that he continued to meet the criteria which entitled him to a benefit under the contract as reasonably requested by FF. In this case the insurer had a right to reduce or stop payments to the husband if he recovered from his injury and was no longer entitled to benefits or if the husband had breached his obligations under the contract and failed to seek and follow medical advice and treatment.
As mentioned above, both before the primary judge[108] and this Court[109] the wife relied upon a decision by Rolfe J in Hoare [2000] NSWSC 1026 where his Honour dealt with a similar argument in respect of the interpretation of s 9A(3) of the LIA:
79Ms Oakley submitted that the first portion of sub-s.(3), namely the change of benefits, was permissible "at the instance of" the defendant. The submission was that pursuant to Term 6 benefits could be reduced. This is undoubtedly so. However, it seems to me that upon a proper construction of the policy there was an agreement between the plaintiff and the defendant for those reductions, which are not stated to be discretionary deductions, in the events contemplated by that condition and that, accordingly, the reduction takes place not "at the instance of" the defendant, but rather pursuant to the contractual terms.
80In my opinion the words "at the instance of" mean that the benefits may be changed by the defendant unilaterally pursuant to the terms of the contract, rather than the present situation which, in my opinion, is one where the payments are regulated by the terms of the contract and not by any discretionary decision by the defendant.
…
82In the result I am of the opinion that the policy was a life policy falling within s.9(1)(e).
[108] Wife’s written submissions filed 20 October 2015, paragraphs 59 and 60; wife’s written submissions filed 28 May 2019, paragraphs 29 and 30.
[109] Wife’s Summary of Argument filed 11 September 2020, paragraph 45.
The primary judge draws comparisons between the facts in Hoare and those in the present case:
110.Particular reference was made on behalf of the wife to the decision in Hoare v Mercantile Mutual [2000] NSWSC 1026 where Rolfe J discussed the words “at the instance of” in the context of a discretionary element.
111.The facts of that case were that the plaintiff had entered into a contract of insurance which provided, inter alia, for income protection with the defendant insurer with a monthly benefit of $5,000. The plaintiff made a claim. The defendant subsequently reduced payments on the basis that the plaintiff was not totally disabled and had made misrepresentations in entering into the policy.
112.Clause 6 of the policy provided for benefit reductions in the event that the plaintiff received monies from other sources whilst totally disabled and in consequence of that disablement. Thus in those circumstances the policy topped up the difference between the monies received from either worker’s compensation payments or various forms of welfare payments or any payments made under any other disability, injury or sickness policy to $5,000.
113.Rolfe J concluded that upon a proper construction of the relevant policy there was an agreement between the plaintiff and the defendant for the reductions, which were not stated to be discretionary reductions in the events contemplated by that condition, and that accordingly the reduction did not take place “at the instance of” the defendant but pursuant to the contractual terms.
114. It is understandable why His Honour so concluded where whilst it was permissible for the insurer to change the benefit it was not a discretionary reduction with respect to any of the payments specified in terms of clause 6 of the policy.
115. However in the present case payment of the disability benefit in the form of a monthly income in the event of disability is subject to “proof” of the husband’s entitlement “in such manner as (the insurer) may reasonable request” and the insurer has “the right to require from time to time proof of the husband’s continuing entitlement to the benefit and to reduce or terminate payment if the Policy owner is no longer entitled to the benefit under this policy” (page 10 of the policy “Claim Information”). The husband is required to undergo any medical examination or examinations which the insurer may require and the insurer “may reduce or decline to pay benefits during any period or periods of Disability” caused by a failure to follow medical advice or treatment (page 11 of the policy “Medical Advice and Treatment”).
116. In either case the decision of the insurer may be challenged by the insured as to the reasonableness of the decision. The wife’s submission at [65] of written submissions filed 20 October 2015 acknowledges the husband’s right to do so and that he had in fact successfully done so in 2006 as a result of the insurer’s exercise of discretion to unilaterally change the benefit.
(Footnotes omitted)
With respect to the primary judge, what her Honour has done is highlight certain rights and obligations which each party had under the respective insurance contracts in each of these cases.
In both cases the insurer had asserted that it was entitled to reduce payments under the insurance contract pursuant to its terms because particular circumstances had arisen.
There is a difference between an insurer “unilaterally” stopping payments because it asserts circumstances have arisen which gives it a right to do so under the contract and having a right under the contract to unilaterally vary the terms of the contract no matter what the circumstances.[110]
[110] Green v AMP Life Ltd [2005] NSWSC 370 is an example of a case where the terms of the contract allow the insurer to unilaterally terminate upon giving three months’ notice.
In this case, the rights the insurer had to reduce or stop payments, were rights available to the insurer which arose under contract and did not involve a unilateral exercise of discretion at the instance of the insurer.
If the primary judge’s analysis was correct it is hard to envisage how any continuous disability policy could satisfy the definition because insurers have rights under every such policy if certain circumstances arise.
The distinction drawn by the primary judge is not available. The analysis of Rolfe J in Hoare is correct and applies to the facts in this case. The Policy is not one which attracts the provisions of s 9A(3) of the LIA and the primary judge erred in concluding the Policy was not a continuous disability policy.
In the event the Court found that the Policy was not a “continuous disability policy” the wife’s counsel argued that it was still a life policy because it provided for money on the death of the husband which attracted the provision of s 9(1)(a) of the LIA.[111] The primary judge said that she was not persuaded by the wife’s senior counsel’s argument that the Policy was a contract of insurance that provided for the payment of money on the death of the husband but did not say why that was so.[112]The primary judge erred in failing to find that the Policy fell within the definition of s 9(1)(a) of the LIA for two reasons.
[111] Wife’s written submissions filed 28 May 2019, paragraph 31.
[112] At [117].
First, as Campbell J said in Green v AMP Life Ltd:[113]
The Policy is, however, a contract of insurance that provides for the payment of money on the happening of a contingency dependent on the termination or continuance of human life. Benefits under it are payable to a Member who has commenced to suffer from Total Disablement (as defined in the Policy), and continues to suffer from Total Disablement. However, pursuant to cl 6.2 of the Policy [the equivalent to this policy], one of the circumstances in which the benefit can stop becoming payable is if the Member dies. Thus, the payment of money under the policy is on a contingency dependent on the continuance of human life.
[113] [2005] NSWSC 370 at [79].
The Policy in this case contains a term that the income protection cover will expire “upon the death of the life insured” and accordingly was a policy dependent upon the continuance of the husband’s life.[114]
[114] The General Provisions and Conditions of the Policy, Exhibit 4 p.16.
Secondly, amongst the benefits provided by the Policy was:
Benefits …
3.10 Death Benefit
If the Life Insured dies whilst receiving benefits under this Policy then [FF] will pay an additional amount equal to one quarter (1/4) of the total disability annual benefit (TDAB) to his/ her legal representative.
It follows that given the Policy satisfied the conditions of both s 9(1)(a) and (e) of the LIA, the primary judge erred in finding that the provision of s 200 of the LIA did not apply to allow assignments of part of the rights under the Policy to the wife.
Further, the wife argued that if the Policy did not attract the LIA then:[115]
(a)the rights under the Policy were assignable under s 199 of the Property Law Act 1974 (Qld);
(b)interests in the Policy were assignable in equity;
(c)FF’s position (Exhibit 18) contemplates as a matter of contract and its own internal administration procedures, that the policy may be assigned.
[115] Wife’s written submissions filed 28 May 2019, paragraphs 32–34.
Again the primary judge rejected the arguments in (a) and (b) without saying why.[116]
[116] At [117].
In relation to the submission the rights under the Policy were assignable under s 199 of the Property Law Act, the wife’s submission acknowledges that that provision is only applicable to absolute assignments. As already explained the wife’s application in its final iteration before the primary judge, did not seek an absolute assignment. Accordingly, the primary judge did not err when rejecting the submission based upon s 199 of the Property Law Act.
However, the statutory provisions of the LIA and Property Law Act are not exclusive and if they were inoperative in respect of a particular chose in action, equity has a role in perfecting imperfect assignments.
The primary judge was incorrect in rejecting the argument, that, if no statute applied, the husband’s rights under the Policy, were not otherwise assignable in equity.[117]
[117] Everett.
Accordingly Ground 5(b) has merit.
Could an order be made to require the husband to assign rights under the Policy in this case?
The husband has indicated that he does not agree to assign his rights under the Policy to the wife. His attitude, whilst a matter to be taken into account, is ultimately irrelevant.
In the event that the Court has power to make an order altering interests in the Policy pursuant to s 79(1) of the Act, it also has power to make orders under ss 80(1)(k) and 114(3) of the Act to require the husband by way of mandatory injunction to do what is necessary to implement the order, including to sign the necessary documents to effect the assignment. In the case of default, there is power under s 106A of the Act to make an order, as sought by the wife, which allows a registrar to execute the necessary documents on behalf of the husband. Orders can be made against a third party if their rights are not otherwise affected or if they agree.[118]
[118] Antonarkis v Delly (1976) 10 ALR 251.
CONCLUSION
The primary judge erred in finding that the rights under the Policy were not property and erred in failing to find that the rights under the Policy were assignable. In doing so the primary judge failed to take into account material considerations which led to an error in the exercise of her Honour’s discretion.[119] The primary judge’s conclusion that her Honour had no power to entertain the wife’s application for a transfer of 80 per cent of the husband’s rights under the Policy was in error. Accordingly the appeal should be allowed.
[119] House v The King (1936) 55 CLR 499.
APPLICATION TO ADDUCE FURTHER EVIDENCE AND OTHER GROUNDS OF APPEAL
It is strictly unnecessary to consider the remaining grounds of appeal because they are not now dispositive and the resolution of those grounds either will not or ought not affect the re-hearing which must now occur .[120] Because of the conclusions reached in Grounds 5(a) and 5(b) it is not necessary to consider the two applications to adduce further evidence which relates to other grounds except insofar as it provides transcript of case management events on 28 March 2014, 9 May 2014 and 27 November 2014 referred to above.
[120] Boensch v Pascoe (2019) 268 CLR 593 at [7]-[8].
RE-EXERCISE
Because of the errors made by the primary judge, her Honour did not go on to consider the merits of the wife’s application for a property settlement order. The matter will need to be reheard. Given its history it goes without saying how unfortunate that is. Whilst it may appear on its face that the wife’s application for 80 per cent of the rights was an ambit claim it was made by the wife in the context of her ultimately unsuccessful claim, that the husband had other significant undisclosed assets of value. These reasons do not in any way anticipate what the outcome of the rehearing might be.
COSTS
In the event the appeal was successful the parties sought costs certificates in relation to the appeal and the rehearing.
An order was made on 2 September 2020 requiring any parties seeking costs (subject to the outcome of the appeal) to file and serve a schedule of costs no less than seven days prior to the commencement of the first day of the appeal hearing week. Neither party did so.
Accordingly, I would not grant costs certificates in the appeal. Both parties were however represented before the primary judge. The appeal has succeeded on a question of law. I would grant costs certificates for the rehearing.
ORDERS
The orders that I would make are:
(1)The Application in an Appeal filed on 12 August 2020 by the appellant be dismissed.
(2)The Application in an Appeal filed on 27 April 2021 by the appellant be dismissed, save for the reception into the appeal of the transcript of proceedings on 28 March 2014, 9 May 2014 and 27 November 2014.
(3)The appeal be allowed.
(4)Orders 1 and 2 made by a judge of the Federal Circuit Court (as it then was) on 8 October 2019 be set aside.
(5)The matter be remitted to the Federal Circuit and Family Court of Australia (Division 2) for a rehearing by a judge other than the primary judge.
(6)The Court grants to each of the parties a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each of the parties in respect of the costs incurred by them in relation to the new trial ordered.
I certify that the preceding three hundred and ten (310) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Ainslie-Wallace, Aldridge & Watts. Associate:
Dated: 13 December 2021
[43] In Hall v Hall (2016) 257 CLR 490 at [54] the High Court endorsed this definition.
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