Military Super Split Justice: Wife Wins Appeal Over Defence Pension in Landmark Property Case

In Cherokee & Cherokee [2025] FedCFamC1A 191, Justice Christie of the Federal Circuit and Family Court of Australia (Division 1, Appellate) overturned a trial decision that had wrongly excluded a Defence Force Retirement and Death Benefits (DFRDB) pension from the divisible property pool. The appeal clarified that even when a pension is non-commutable and in payment phase, it remains “property” under the Family Law Act 1975 (Cth) and must be properly considered under s 79(4). The judgment reinforces the distinction between “property”, “income”, and “financial resources”, and provides a blueprint for handling complex defined-benefit superannuation interests in property settlements.

Facts and Issues

• Parties: Ms Cherokee (appellant wife) and Mr Cherokee (respondent husband).
• Relationship: 6 years and 3 months.
• Key Assets:
• Husband’s DFRDB pension valued at $2.87 million (payment phase).
• Wife’s defined benefit fund valued at $576,800 (growth phase).
• Real property, cash, vehicles, and accumulation superannuation funds.
• Trial Outcome: The primary judge treated the DFRDB pension as a “financial resource” and declined to make a splitting order, awarding the wife $400,000.
• Grounds of Appeal:

1. Mischaracterising the DFRDB pension as a financial resource rather than property.
2. Failing to consider s 79(4) contributions regarding the DFRDB pension.
3. Inconsistent treatment of the wife’s and husband’s defined benefit funds.
4. Overweighting the husband’s initial contributions without recognising a $450,000 gift he made early in the relationship.
5. Failing to consider justice and equity where the wife’s settlement was locked in inaccessible superannuation.

Law

Relevant provisions:

• Family Law Act 1975 (Cth) ss 75(2), 79(4)–(5), 90XC, 90XS–XT.
• Family Law (Superannuation) Regulations 2001 (Cth).
• Defence Force Retirement and Death Benefits Act 1973 (Cth).
• Federal Proceedings (Costs) Act 1981 (Cth) s 9.

Key authorities:

• Hall v Hall (2016) 257 CLR 490 — “financial resource” defined as an expected source of support.
• Robb & Robb (1995) FLC 92-555 — recognising contributions to stepchildren under s 75(2)(o).
• Preston & Preston (2022) FLC 94-108 — distinguished as involving a medical pension and no split sought.
• Project Blue Sky Inc v ABA (1998) 194 CLR 355 — applied to reconcile statutory interpretation.
• Semperton & Semperton (2012) 47 Fam LR 626 — misapplied by the trial judge.

Application

Issue 1: Characterisation of the DFRDB Pension

Justice Christie held that the trial judge erred in law by treating the husband’s pension solely as a financial resource. Under s 90XC, superannuation interests “are to be treated as property.” The correct approach was to regard the pension as property with the characteristics of an income stream, not as an unsplittable resource (¶¶ 24–31).

Issue 2: Failure to Apply s 79(4)

Because the primary judge mischaracterised the pension, she failed to evaluate contributions under s 79(4) as they related to that asset (¶ 32). Justice Christie emphasised that property is amenable to adjustment; financial resources are not.

Issue 3: Inconsistent Treatment of Defined Benefit Funds

The trial judge included the wife’s defined-benefit fund as an asset but excluded the husband’s similar pension. This asymmetry amounted to error (¶¶ 32–35).

Issue 4: Contribution Assessment Error

The husband’s initial contribution was overstated because the trial judge ignored his $450,000 gift to his sister soon after cohabitation (¶¶ 36–39).

Issue 5: Justice and Equity

Nearly half of the wife’s award was locked in superannuation she could not access until retirement (¶ 40). The Court held that justice and equity required recognition of liquidity differences between assets, particularly for a 51-year-old spouse with limited access to funds.

Judgment and Reasoning

Justice Christie allowed the appeal, finding legal error in the trial judge’s treatment of the DFRDB pension. His Honour re-exercised the discretion, concluding:

• The DFRDB pension is property, though its nature as an income stream may justify declining a split on equitable grounds.
• The wife’s defined-benefit fund was of similar nature; both should be excluded from the divisible pool to avoid double counting (¶¶ 77–79).
• A 5 percent adjustment to the wife was appropriate to reflect income disparity, superannuation inaccessibility, and parenting contributions (¶ 80).
• The husband was ordered to pay the wife an additional $413,808, increasing her share of the accessible assets to 35 percent (¶ 85).
• The wife received a costs certificate under s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) (¶ 86).

Justice Christie’s reasoning harmonised precedent and statute: the Act mandates that superannuation be treated as property, but judicial discretion governs whether it is split. The key was not can a split be made, but should it, given fairness and the pension’s characteristics.

Take-Home Lesson

Cherokee & Cherokee [2025] clarifies that:

1. DFRDB and other defined-benefit pensions in payment phase remain property, not mere financial resources.
2. Courts must apply s 79(4) to superannuation even if they ultimately decline a split.
3. Equal treatment of like assets is vital; inconsistent categorisation is error.
4. Liquidity matters — justice and equity require attention to whether each spouse can access their entitlement.
5. The case reaffirms judicial discretion: some pensions may be left unsplit, but never because they “cannot” be; only because splitting them is not just and equitable in the circumstances.

Ultimately, Cherokee & Cherokee restores consistency and fairness to military superannuation settlements, ensuring no asset is placed beyond judicial scrutiny simply because it’s complex.

🔍 Addendum: Application to Military Invalidity Benefits

While Cherokee & Cherokee [2025] FedCFamC1A 191 concerned a standard DFRDB pension in payment phase, its reasoning carries significant implications for military invalidity pensions under the DFRDB Act and MSBS Act.

Justice Christie’s reaffirmation that all superannuation interests are “property” within s 90XC of the Family Law Act 1975 (Cth) strengthens the position that invalidity benefits derived from service-based superannuation schemes — such as those under DFRDB or MSBS — are presumptively property, even when paid on medical discharge.

However, Cherokee also preserves the distinction drawn in Preston & Preston (2022) FLC 94-108 and Semperton & Semperton (2012) 47 Fam LR 626:

• Where the payment functions as income replacement (a continuing retirement pension paid for life), it is property capable of inclusion or splitting.
• Where it operates as personal injury compensation (a lump sum or medical entitlement reflecting incapacity), it remains a financial resource.

The decision thus reinforces a functional test: courts must look to the character of the benefit — not its label — to determine whether it is divisible property or a non-assignable resource.

In practical terms, Cherokee & Cherokee makes it harder for military members to exclude long-term invalidity pensions that effectively serve as retirement income from the matrimonial asset pool. Yet, it also respects that genuine compensation for injury or impairment remains protected.

📚 Key Authorities: Military Invalidity Benefits — Property vs. Financial Resource

Case Scheme / Context Treatment Principle or Outcome

Cherokee & Cherokee [2025] FedCFamC1A 191 DFRDB (service pension in payment phase)

PropertyConfirms all superannuation interests are “property” under s 90XC. Non-commutable status does not exclude it from the pool.

Doran & Doran (No 2) [2021] FedCFamC1F 356 MSBS invalidity pension (mixed)

Part property / part resourceCourt apportioned between compensatory and retirement components.

Preston & Preston (2022) FLC 94-108 Military medical invalidity pension

Financial resource Treated as compensation for incapacity, not retirement income.

Semperton & Semperton (2012) 47 Fam LR 626 Invalidity pension

Mixed approach Distinguished service-derived superannuation (property) from injury-based compensation (resource).

Coghlan & Coghlan (2005) FLC 93-220 General personal injury payment

Financial resource Lump-sum compensation for personal injury not part of the asset pool.

Hall v Hall (2016) 257 CLR 490 Private income expectation

• Financial resource Established test: financial resource = expected source of financial support, not property.

💡 Summary Insight

Under Cherokee & Cherokee, the default position is that all superannuation entitlements — including military invalidity pensions — are property under s 90XC.

However, courts will continue to apply a functional analysis:

• If the payment replaces retirement income → Property
• If it compensates for incapacity or injury → Financial resource

This ensures both fairness between spouses and protection for genuine medical entitlements — maintaining the balance at the heart of Part VIIIB of the Family Law Act.