Walters & Walters

[1986] FamCA 8

In the marriage of WALTERS, A.G. and WALTERS, P.A.

(1986) FLC ¶91-733

Other publishers' citations: (1986) 10 FamLR 1006

Full Court of the Family Court of Australia at Parramatta.

Judgment delivered 16 May 1986.

Before: Lindenmayer, Joske and Gun JJ.

Lindenmayer J.: This is an appeal by the wife from a judgment and orders of Yuill J., given and made at Canberra on 16 August 1985.

By para. 1, 2 and 3 of his orders of that date his Honour provided for the sale of a home unit at Southport in Queensland, of which the husband is the sole registered proprietor, and the payment to the wife of the entire net proceeds of sale of that property. His Honour made other orders to which I need not refer, except that numbered 6, which is as follows — and that relates to the wife's maintenance:

``That the respondent husband pay the applicant wife maintenance for her support in the sum of $30.00 per week for a period of nine months or until the wife leaves a treatment home known as a half-way house, whichever first occurs.''

Those orders are substantially the subject of the wife's appeal and I shall refer in due course to the wife's notice of appeal and the orders which she seeks therein.

The parties in this matter were married on 12 September 1958. They separated on 16 October 1979, and a decree nisi was pronounced dissolving the marriage on 9 October 1981. There were three children of the marriage, all of whom are now adults. The husband at the time of the hearing before his Honour was aged 50 and the wife 45.

By her original application, filed on 10 August 1981, the wife had sought an order that the husband pay her the sum of $100,000 by way of property settlement. At the commencement of the hearing before his Honour the wife altered her claim from $100,000 to $150,000 and on the next day, that is the second day of the hearing as I understand it, in the light of the evidence then before the Court as to the husband's circumstances, the wife's claim was further amended and the nature of her claim as amended was set out by his Honour in his reasons for judgment as follows:

``The husband pay to the wife on or before 16 November 1989 an amount equal to 30% of the lump sum accumulated superannuation benefits pursuant to the Commonwealth Superannuation Fund which would be payable to him if he resigned from the Commonwealth Public Service at the age of 55 years and he elected to receive the said benefits instead of a pension irrespective of whether he either so resigned or makes the said election.''

That is not the entirety of the wife's claim as amended. She sought, in addition thereto, an order that the husband pay her the sum of $25,000 immediately.

His Honour referred to this amendment and then said this:

``Sadly for the wife, her former expectations cannot be realized: the husband does not have the extensive assets she believed he once had and still had.''

In addition to her proceedings for property settlement the wife, on 2 May 1985, filed an application for leave, pursuant to sec. 44(3) of the Family Law Act, to institute proceedings for periodic maintenance for herself. By that application, if leave were granted, she sought an order for $200 per week by way of periodic maintenance. The application for leave was opposed by the husband but, ultimately, his Honour granted that leave and pursuant to it proceeded to make the maintenance order to which I have earlier referred.

In his reasons for judgment his Honour recited the financial history of the marriage and I think it is unnecessary to refer to that in any detail. None of that was the subject of any challenge in these proceedings.

Essentially, his Honour found that the parties started their married life with practically nothing and that although quite large amounts of money had passed through the husband's hands during the marriage, and after it, generated by borrowings and land dealings nothing, in effect, was left in the husband's hands at the time of the hearing except for the small equity in the Southport unit, which was the subject of the orders made in para. 1, 2 and 3 of his Honour's order to which I have referred.

In relation to that unit, the evidence was that it had a value of about $75,000, although the evidence suggested it may at that time have been somewhat reduced below that figure, and that it was subject to a fixed interest mortgage of $60,000. The equity therefore at that time was a maximum of $15,000 and, indeed, it might be expected that once the property was sold the net equity payable to the wife, or the net return payable to the wife, pursuant to the sale and in accordance with his Honour's orders, would be somewhat less than $15,000, perhaps even as little as $10,000. The effect therefore of his Honour's orders was really to transfer to the wife the sole existing asset of the parties, namely, the small equity to which I have referred in the Southport unit.

The husband, however, had a financial resource in the form of his expectant benefits from the Commonwealth superannuation fund. Those expectant benefits were set out in the document which became exhibit 1 before his Honour and I think for present purposes it is unnecessary to refer to that in detail, except to say this, that the husband would first become entitled to any benefits from that fund on 16 October 1989, when, if he survives to that date, he will turn 55 years of age. On that date, and upon the assumption that he then retired, he would become entitled to a pension, a government-financed and indexed pension, equal to 37.26 per cent of his final salary, and in addition he would become entitled to a further pension financed by employee contributions of 9.25 per cent of accumulated contributions. As an alternative to the second of those pension aspects, he could elect to receive a lump sum which, based upon his current salary at the date of the hearing, would have amounted to some $53,644.

The husband, of course, was not obliged to retire at 55. He could retire at age 60, which would, of course, occur on 16 October 1994, and in that event the lump sum to which he would be entitled, if he so elected, as an alternative to the employee-financed pension, would rise, on current salary levels, to $108,452. Finally, if he continued to work and survived to age 65, on 16 October 1999, the husband would be entitled to other benefits and, in particular, the lump sum benefit at that time, on current levels of salary, would rise to something of the order of $208,162.

His Honour dealt with the husband's superannuation entitlements in his reasons. He said as follows:

``As a Commonwealth employee the respondent is eligible for superannuation benefits on his retirement. On his present salary, he will be eligible to receive a lump sum of $53,644.00 were he to retire at age 55.''

His Honour then referred to the orders sought by the wife, to which I have already referred, and then he went on as follows:

``It is not open to the court to make an order in these terms.''

(That is referring to the orders sought by the wife.)

``There was no evidence that the husband intends to do anything other than retire at age 65, or as to his intention to take a lump sum when he does retire. This is not a case where the benefit is to be received within a reasonably short time and in a lump sum. Any interest he may have in the Superannuation Fund could not be categorized as property. At the most it could only be said to be a financial resource. But the time lag before the interest becomes property mitigates against using it as a resource in this case. The husband has no assets apart from the Southport interest, and very little, if any, borrowing power. It would not be fair and reasonable to expect him to borrow money, even if he could, to be met out of his superannuation or long service payments in fifteen years time.

The Family Law Act was amended in 1983 specifically to deal with this kind of situation. Section 79 was amended by inserting subsec. (5) to (7) to deal with significant future changes in the financial circumstances of either party by reason of superannuation. There was no suggestion of an adjournment in this case pursuant to sec. 79(5), presumably because the period of the adjournment would be too long. There may well have been other difficulties.

The upshot is that the husband's superannuation can be taken into consideration only in a very minor way.''

His Honour then went on to refer to the fact that the whole of the net proceeds of sale of the unit should be paid to the wife and he said:

``That is the very most the wife can be given within the limits of the court's discretion.''

In her notice of appeal the wife really seeks to persuade this Court that it has the power to make orders in the form which were sought before his Honour and which, as I said, his Honour expressed the view that the Court did not have the power to make. This is made clear by the orders sought. I do not think it is necessary to refer to those orders sought in detail. Effectively, the wife seeks to pursue her application to his Honour that the husband pay her the sum of $25,000 immediately and, in addition, that he pay her a fixed proportion, namely 30 per cent, of his accumulated superannuation benefits on or before 16 November 1989, upon the assumption that he were to retire and elect to receive a lump sum benefit on that date.

Before proceeding further with the arguments on the appeal I think it is appropriate to refer to the fact that this is an appeal from an exercise of judicial discretion and that the principles which govern the exercise by this Court of its function upon such an appeal have been clearly set out in many cases, and they are binding upon us. It is perhaps sufficient to refer to what was said in the joint judgment of Dixon, Evatt and McTiernan JJ. of the High Court in the case of House v. The King (1936) 55 C.L.R. 499 at pp. 504 to 505 where their Honours said this:

``The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.''

Those are the principles which must determine our decision on this appeal.

In relation to the property aspect of the appeal, Counsel who appeared for the appellant wife, whilst conceding that his Honour's orders gave the wife all of the existing property of the parties that there is available, submitted that it was open to his Honour to make, and that in the proper exercise of his discretion he ought to have made, a settlement on the wife of a lump sum which, he submitted, the husband had the capacity to borrow for that purpose.

In relation to the borrowing capacity of the husband it was, I think, found by his Honour that the husband at that time was really stretched to the limit of his resources, but the effect of his Honour's orders for the sale of the Southport unit, once carried into operation, would be that the husband would be relieved of an obligation to pay the differences between the net rents received by him in respect of that property and the mortgage instalments, or rather the interest payments due under the mortgage. In effect, he would be then relieved of an obligation of the order of $340 per month, and it was, in effect, submitted that upon the sale of the Southport unit the husband would have the capacity to borrow a sum which could be repaid by payments of at least that magnitude, that is $340 per month.

In support of his submissions in relation to this aspect of the appeal, counsel for the wife referred to and relied upon certain passages from the judgment of the Full Court, constituted by Asche, Fogarty and McGovern JJ., in the case of Collins and Collins (1977) FLC ¶90-286 at pp. 76,536 and 76,539. I have read those passages and indeed other passages in that judgment, and in my opinion none of those passages assist counsel for the wife's argument in this case. Those passages do not assert, nor is there any other authority, of which I am aware, which so asserts that this Court in exercising its power under sec. 79 of the Family Law Act has power to make an order for the payment of a lump sum when there is neither property available from which such a sum could be raised, either by sale, mortgage or otherwise, nor any fund of money existing from which it could be paid, but only a capacity to borrow in the future. A capacity to borrow money is not property and counsel for the wife did not submit to the contrary.

Whilst it is certainly stated in that case, relying upon a statement by former Chief Justice Barwick in Sanders v. Sanders (1967) 116 C.L.R. 366 at p. 375 that the power of the Court under sec. 79 is ``extensive and flexible'', in my opinion there is no power to convert a capacity to borrow money into property. The simple fact of the matter is that his Honour's orders had the effect of transferring to the wife the only property of the parties that there was and is in existence. The fact that the husband may have a capacity to borrow money does not assist, in my opinion, in the making of an order under sec. 79.

The wording of sec. 79(1), itself, in my opinion clearly limits the application of the Court's power to property existing at the time of the hearing. That section provides as follows:

``In proceedings with respect to the property of the parties to a marriage or either of them, the court may make such order as it thinks fit altering the interests of the parties in the property, including an order for a settlement of property in substitution for any interest in the property and including an order requiring either or both of the parties to make, for the benefit of either or both of the parties or a child of the marriage, such settlement or transfer of property as the court determines.''

In my opinion, that does not give the Court a power to order a settlement out of property which does not exist and could only be brought into existence by the exercise of an alleged borrowing capacity.

In so far as the husband's superannuation — or future superannuation entitlements are concerned, there is ample authority in this Court that such entitlements, until they fall into possession or at least until they become payable, are not property within the meaning of sec. 79. They are undoubtedly a financial resource, but the Court cannot turn a financial resource into property for the purpose of making an order under sec. 79. All that it can do is to take into account that financial resource in deciding how to deal with the existing property of the parties, and in my opinion his Honour did just that in this case. He took into account the husband's financial resource and decided, in the exercise of his discretion, to order that there be transferred to the wife the whole of the existing property of the parties of any significance, namely, the equity in the Southport unit, and I agree entirely with what his Honour said, namely, that that is the very most that the wife could be given within the limits of the Court's discretion.

In my opinion therefore the appeal, in so far as it relates to his Honour's property orders, cannot succeed.

[His Honour then considered the wife's appeal concerning the question of maintenance and held that that part of the appeal should also be dismissed.]

Joske J.: Yes, I agree with the reasons for judgment as expressed by Lindenmayer J. I have nothing that I wish to add; I too would dismiss the appeal.

Gun J.: I agree with the reasons for judgment given by Lindenmayer J. and I agree that the appeal should be dismissed.

Lindenmayer J.: Then the order of the Court is that the appeal be dismissed.