Friday, 10 September 2010

Family Court case: what happens when a party dies in a property settlement case?

In the recent Family Court case of Van den Linden and Kordell, the wife died in the midst of property settlement proceedings. The issue at trial was what adjustment, if any, should be made differently because the wife had died, rather than if she were still alive.

The trial judge considered that there ought to be a 70/30 split in favour of the husband. This was based on a 60/40 division on contributions, and a further 10% in favour of the husband for s.75(2) or future factors.

The husband did not like this outcome and appealed. The Full Court rejected the appeal. The court had a long discussion about what impact the death of a party has to s.75(2) factors (emphasis added):


In support of his contention that an adjustment of 10 per cent was inadequate, it was submitted on behalf of the husband that the Estate has no needs whereas the husband has the significant and ongoing responsibility to support and accommodate himself and the two children. It was submitted that the needs of a surviving spouse have a “decisive impact” and that an adjustment of 10 per cent was inadequate, especially given that the dollar value of the adjustment is only approximately $99,000. Counsel contended that the pool of property available for distribution in this matter is not large, and that as such there should have been a greater adjustment. In support of this contention counsel referred us to the decision of Tasmanian Trustees Ltd and Gleeson (1990) FLC 92-156 per Full Court (Nygh J with whom Strauss and Baker JJ agreed).

In that case, the husband died while judgment with respect to property settlement was reserved. The Full Court recognised that the most obvious difference caused by the husband’s death was the fact that the deceased no longer had any s 75(2) needs for the future, while the survivor continued to have such needs. While the Full Court recognised (at 78,086) that the deceased had “a prima facie moral entitlement to the share gained by contribution during his or her lifetime and, if this is so desired, to dispose of that share by will to persons who are strangers to the marriage”, the surviving wife’s needs were found to be large enough to justify an adjustment in her favour of the share to which the husband might have been entitled to by way of contribution had he not died, in circumstances where the estate was very small and the wife’s needs were “overwhelming”. The trial judge had found it was no longer appropriate to make an order with respect to the former matrimonial home which the wife would retain by survivorship.

Again, in Re Parrott v Public Trustee of NSW (1994) FLC 92-473 it was recognised (at 80,906) that:
it is clear enough that the death of one party has a profound effect upon the balance of sec 75(2) factors, as the Full Court pointed out in Tasmanian Trustees Limited and Gleeson (1990) FLC 92-156.

However, although it is clear that when a spouse dies there are generally no s 75(2) factors that can be taken into account in favour of the estate, and that that should highlight the needs of the surviving spouse and the fact that they have to be met, it is equally apparent that that should not detract from the need to recognise the entitlement of the deceased spouse (which devolves onto that spouse’s estate) arising from a consideration of the respective contributions of the parties.

This issue was highlighted by Smithers J in Menzies and Evans (1988) FLC 91-969 where his Honour said this (at 77,010):

The only significant difference in the analysis of the case arising out of the death of the deceased, is the obvious one that, when comparing the position of each of the parties, the deceased no longer has sec. 75(2) needs for the future, while the husband continues to have such needs. This does, in my view, alter the situation in a way which should be reflected in the outcome of the case. Even though his needs can be met out of income, the fact that he does have to meet them, and that the deceased does not have such needs, is the significant factor here. This aspect of the case should be of moderate significance only however in view of the amount of the assets, the age of the husband, and the extent of his future needs. Save to the extent necessary to reflect this aspect of the case it would in my view be wholly inappropriate that the deceased should be deprived of the benefits of her contributions over so many years. That is to say that it is still appropriate, following the death of the deceased, that the outcome of the case should depend, largely, upon the extensive contributions of the parties over so many years.

We observe that this was referred to with approval by the Full Court in Tasmanian Trustees Ltd and Gleeson at 78,085-086.

In this case, as referred to above, her Honour found that given his income, expenses and savings the husband was in a “comfortable position” and that on the assumption that his superannuation would continue to grow he “can look forward to financial security in his retirement”. Thus, as counsel for the wife said, it is not readily apparent what the husband’s real needs are, and in any event, to use the words of Smithers J, “[t]his aspect of the case should be of moderate significance only” and “the outcome of the case should depend largely upon the extensive contributions of the parties over so many years”.

Next, in addressing the husband’s submissions that the trial judge failed to adequately take into account the fact that since separation the husband has had the sole responsibility for the care of the children, counsel for the wife referred us to the decisions of Georgeson and Georgeson [1995] FamCA 62; (1995) FLC 92-618, V and G (1982) FLC 91-207, and Zdravkovic and Zdravkovic (1982) FLC 91-220. In those cases the Court held that caution should be exercised when considering the impact of the future maintenance needs of children in determining a property settlement for the benefit of a spouse. We agree that this is a relevant consideration and particularly here given the ages of the children

The husband also contends that the trial judge’s reasons do not fully disclose her Honour’s reasoning as to how the $71,433 received by the wife’s daughter was taken into account.

We observe that the primary submission of the husband in relation to this issue was that it should be added back to the pool of assets. Her Honour addressed this (at paragraphs 34-37) and concluded that that amount should not be added back. On that basis her Honour said that instead she would “take into account the fact of this payment to [R] pursuant to s 75(2)”. Then, her Honour revisited this issue when considering s 75(2)(o) of the Act saying this:

It is  noted, [the wife’s] daughter [R] received some $71,000 from her superannuation in 2005. The consequence is that neither [the husband], [C] or [J] can receive any part of that benefit. On the other hand [the wife] elected to direct this money solely to [R], which was her right.

Now, although it is quite apparent from her Honour’s reasons that she took this into account, it is true that her Honour did not for example detail how much of the 10 per cent adjustment that she made for all relevant s 75(2) factors is accounted for by this factor. However, her Honour did not do this for any of the relevant factors that she took into account, and as conceded by counsel for the husband before us, her Honour was not obliged to do so. There is ample authority in this Court to that effect. For example, in Brandt v Brandt (1997) FLC 92-758 the Full Court said this (at 84,343):

This mathematical adjustment suffers from the same defect as that mentioned above. There is a broad discretion to be exercised. The process for properly exercising that discretion has been frequently identified by the Full Court and commented on by the High Court. Whilst the task requires the exercise of a broad discretion capable of being exercised within ‘the generous ambit within which reasonable disagreement is possible’ (per Brennan J in Norbis at p 540) it is not generally an accounting exercise nor is it analogous to an award of damages or compensation which might call for a division into component parts.

As this Court has often recognised (eg see Steinbrenner & Steinbrenner [2008] FamCAFC 193, at paragraph 234), given that the assessment of the relevant factors arising under s 75(2) of the Act inevitably moves from a “qualitative evaluation” of those factors to a “quantitative reflection of such evaluation, there will inevitably be a ‘leap’ from words to figures”. That is the nature of the exercise of discretion

The husband’s challenge in this ground is again to the weight that her Honour gave to the various considerations relevant under s 75(2), and the adjustment made as a result. In this instance, we are satisfied that her Honour took into account all relevant matters, and importantly the husband’s care of the children and his health difficulties. Her Honour also had regard to the husband’s income, his substantial superannuation benefit and the savings he has been able to accumulate. The husband did not seek to challenge the trial judge’s findings on these issues and did not raise any additional relevant matters that her Honour ought to have taken into account in a consideration of s 75(2). As we have said, his challenge was solely to the adjustment made on account of the relevant matters

The trial judge also took into account the superannuation benefit received by the wife’s daughter R. Her Honour had regard to this factor generally in her consideration of s  75(2)(o).

In these circumstances we are not satisfied that her Honour exercised her discretion pursuant to s 75(2) by reference to erroneous facts, nor did she have regard to extraneous or irrelevant facts or circumstances, nor did she fail to have regard to relevant facts or circumstances. No error of principle has been established, and it has not been demonstrated that, despite the absence of demonstrable error, the 10 per cent adjustment was manifestly excessive. Certainly it has not been established to us that in making that adjustment her Honour fell “beyond the ambit of a reasonable exercise of discretion”. Thus there is no merit in this ground.


2 comments:

Anonymous said...

Dear Mr. Page,

Thank you for this article. I am practicing in Barbados and am working on a matter very similar to this one so this was invaluable!

I was wondering if you could please help with the links for "Tasmanian Trustees" and "Re Parrott". They don't seem to work and I would really appreciate being able to read those cases in more depth.

Still, thank you for this wonderful post!

Bynoe

Stephen Page said...

Thank you, Bynoe. You ought to email me direct. Cheers. :)