Baldwin and Baldwin

FAMILY COURT OF AUSTRALIA

BALDWIN & BALDWIN

[2009] FamCA 207

FAMILY LAW – PROPERTY

APPLICANT:

Ms Baldwin

RESPONDENT:

Mr Baldwin

FILE NUMBER:

BRC

6089

2007

DATE DELIVERED:

26 February 2009

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Brisbane

JUDGMENT OF:

Bell J

HEARING DATE:

23, 24, 25 February 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Ms J Brasch of Counsel

SOLICITOR FOR THE APPLICANT:

Hopgood Ganim Lawyers

SOLICITOR FOR THE RESPONDENT:

Mr C A Cooper, Solicitor, of Charles Cooper Lawyers

Orders

Macfie Curlewis Spirio Solicitors do forthwith pay to the Applicant Wife the sum of $1,331,981 as and by way of property settlement.
The receipt of the solicitors for the Applicant Wife shall be good and sufficient discharge to the solicitors for the Respondent Husband.
The ownership of the property in the possession of each of the parties do vest in them.
That there be no order as to costs.

IT IS NOTED that publication of this judgment under the pseudonym Baldwin & Baldwin is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 6089 of 2007

MS BALDWIN

Applicant

And

MR BALDWIN

Respondent

REASONS FOR JUDGMENT

On 13 August 2007, the originating proceedings in this case were amended by the filing of an application on that day. That application sought, on behalf of the applicant, one Ms Baldwin (“the wife”), orders in relation to parenting and also property. There were other machinery provision orders including the appointment of a single expert and discovery and others. However, briefly the facts surrounding this application are that the mother was born in England but resided most of her life in Canada and a relationship developed between herself and the respondent, Mr Baldwin (“the husband”) which culminated in marriage in October 1989. She was resident in Toronto at or about the time of the commencement of the relationship and he was resident in Los Angeles, being an employee of an international Australian company in a managerial position. She was in an American company and in a managerial position.
They commenced cohabitation in or about the month of February 1989 and married, as I have said, in October 1989. As a result of the union as aforesaid, two children of the marriage were born, they being L in October 1991 and W, born in May 1995. They reside with the mother and consent parenting orders were made last year which enabled the father, should he so desire, to spend time with the children and, obviously, the children to spend time with him. It appears as though there may have been some breakdown of communication between the father and L and that unfortunately, the father does not see as much of L, the elder of the two. L now has left school and is working for the wife’s former employee [sic] as a telesales person or something.
This case is peculiar in a way in that it is quite clear on the evidence before me and I do not believe that it is gainsaid by the applicant wife that by far the greater majority of the contributions to the assets of the parties or either of them during the marriage, which have accumulated, were brought about as a result of contributions made, not necessarily by the father but by entities or trust entities in which he was involved. I will briefly touch upon them at this stage because, notwithstanding that the case has been somewhat complicated, it has come down to something which is comparatively simple and that is, the moneys which were advanced to the father and used by the father generally in the advancement of the assets of acquisition of the parties, was it a loan, “drawings” or distributions. If it was either of those, what is the necessary result that follows?
Briefly, I touch upon the entities which are primarily two in number and they are the A Baldwin Family Trust which came into existence, in or about 1974, the trustee company of which is AA Pty Ltd. I believe that the settlor was the respondent’s father and eventually a considerable amount of moneys came, as appears from the affidavit of the grandmother, by way of the sale of a commercial property and it is still in existence. It is a discretionary trust and the principal discretionary beneficiaries, if I can use that word, are in fact the respondent to these proceedings and his brother, N.
It is AA, who also supports the children of N and the husband, the respondent, insofar as their education is concerned and it is still paying and or was paying the fees of L and W at the T school up until the end of last year when L left. The fees are still being paid for W.
Another company was Y Pty Ltd which is a corporate entity and it is a trustee of the YP Trust. The husband and his mother and his brother are directors of that company as are they of AA Pty Ltd. The only asset of Y Pty Ltd now, other than an allegation of moneys owed to it by another entity is a two-fifths interest in “a lovely unit” called P property which, I understand is worth some $2.5 million, now having been bought for an amount in the late eight hundred thousands.
The third entity which I just casually passed is the D Baldwin Family Trust which the controlling company is S Company which was brought into existence in or about 1992 of which the applicant and the respondent are the shareholders and, as I understand, directors.
The applicant bought little into the marriage consisting, as she sets out in par 8 of her affidavit, of a Mazda RX7 which she said was the price she paid for the vehicle. It probably would not be worth that much. I think it was traded in on a Volkswagen, RAV or something of that nature at a later stage, a small superannuation and she had credit card liabilities. She had had an interest in a house or unit in Toronto which was owned by herself and her parents. I believe she was paid out by her parents and she purchased the motor vehicle with that payment out but she continued to live in there, that place, for a period and she paid rent or she should have paid rent for the use of those premises.
The position as sales manager required her subsequent to engagement, to commute between Los Angeles and her place of business, Toronto. However, eventually they got married and she went to live with the respondent in Los Angeles in a unit provided by his employers.
The wife believes, I think this is probably correct, that as at the date of the commencement of the relationship, the respondent had a property at V in Victoria which was worth around $350,000. This property had either been purchased by the respondent’s father or gifted to him by the respondent’s father, however, the property is his or was his and was unencumbered at the time. He had the shares in the companies to which I have referred, they being AA Pty Ltd and Y Pty Ltd. He had a motor vehicle and a boat. It is suggested by the wife, and I do note that it is opposed by the husband, that he was interested in fishing and boating and that the boat has now been sold, however, it was- - -
RECORDED : NOT TRANSCRIBED
- - - in America. They returned to Australia in about February 1991 and I say, in passing, that she was unable to work while she resided in United States, not having a green card. The respondent left his employment in 1992. They looked around for a house and purchased one at R for about $390,000. He left his employer in 1992 and he was receiving, at that time, distributions from the discretionary trusts and it was AA Pty Ltd. I have discussed, briefly, the P property which is a unit owned by YP Trust. That was purchased in or about 1995 for some $895,000.
The husband sold his property in Victoria and the net proceeds of that sale which were about 372,000 (see para 20 of his affidavit of 4 January 2009).
In 1992, the parties purchased a property at R for some 200,000‑odd thousand and then subsequent thereto by about three or four months they purchased an adjoining block at R2. They used proceeds of the sale of the property at V and moneys received from the A Baldwin Family Trust to purchase that land.
They then commenced construction of a house on that property which, in total I mean including the cost of the land and the cost of the property and other outgoings in relation thereto, amounted to something like 1.4 million. It was sold in 1997 and they received about 1.35 for it which was really about what they expended. They either made – well they make no profit and they may not have made a loss. If anything, they came out about square.
In 1995, they decided they wanted the reverse of a sea change and purchased the home at E. This was an area of some 130 acres and appears to be somewhat idyllic. The property was purchased for $850,000. Moneys were used from Westpac and as he says with some of his superannuation from his employer which I do not think was very much but I cannot remember exactly what the figure was and they endeavoured to create a wedding reception area and a property. There was also a restaurant attached.
The parties, as I find, worked very hard in this business. It is well known and they, of course, recognise it now, the hospitality industry entailed the enormous working hours that they did. It was successful insofar as winning awards were concerned but it appears as though it was definitely not successful as a money making enterprise. It is set out in para 38 of the affidavit of the respondent husband, moneys which he says were advanced by AA Pty Ltd and, to a lesser extent, Y Pty Ltd to either keep the business going or to expand it.
Here is really the lynchpin of the whole problem, enormous amounts of money were advanced that the wife says by way of distributions and/or gifts and/or drawings from these entities and they amount to, according to Mr H in his report, something like 1.9 total owing to AA Pty Ltd and Y Pty Ltd- - -
RECORDED : NOT TRANSCRIBED
- - - 1.727 that is after certain moneys came into the hands of Y Pty Ltd by way of a mistake which is set out in para 33 of the husband’s affidavit. That now amounts to something like $943,000 owing by that company to the husband.
Consequently, as has been pointed out, I think this is agreed between the parties, that there is owing to Y Pty Ltd and to AA Pty Ltd, a net figure of 1.7. There is owing and I emphasise that “owing”. Whether it is a distribution or a loan, I have now to determine.
The overwhelming evidence in relation to those advances made by the respective corporate entities is that they were loans. Notwithstanding that the applicant may have genuinely believed that they were either distributions or drawings, I am more than satisfied that they are loans and they are loans owing by S Company Pty Ltd and that’s the crux of the matter.
This Court has heard for years, the difficulties in relation to family companies, companies which are normally run by the parties as their own personal bailiwick and yet when it is necessary, they will immediately rush around and refer strongly to the question of the corporate personality and that there should not be any lifting of the corporate veil. In this case, I make it quite clear that there is owing to those two entities to which I have referred, the amount of $1,727,358.
RECORDED : NOT TRANSCRIBED
Should the parties or either of them have the assets which are available to this Court to distribute between the parties lessened as a result of that amount on Mr Cooper’s submissions. Mr Cooper appears on behalf of the respondent and has said everything he possibly could but in his behalf says that whilst I do not think he says legally that the assets of the parties should be diminished by that amount, he points to two authorities which says I can in circumstances, Biltoft and Lemnos, I can ignore, in certain circumstances, moneys owing to a third party by another entity.
I must say I find it very difficult to say in this case that the assets of the parties, notwithstanding that the moneys were lent, clearly lent by the entities to which I have referred AA Pty Ltd and Y Pty Ltd. They have a claim only against S Pty Ltd. It is the debtor. It may be that they have another claim against the directors for working the company when it was in debt. Mr Cooper also says that morally it would be wrong if, in fact, I allow the parties to gain an advantage by hiding behind a family company. I do not accept this is a Court of morals. This is a Court of law. It must apply the law as it sees it, modified to a certain extent by an exercise of discretion. If I had that discretion, I doubt, with respect, Biltoft and Lemnos, is in fact they say that I can ignore the rights of third parties and interfere with their rights in certain circumstances. I doubt if that is the case.
Mr North of senior counsel has submitted that notwithstanding if he is found against, he proposes that the debt was drawings or a distribution. He says notwithstanding, if in fact, it is found that they are a loan and that it is owned, it is owned only by S Pty Ltd. He further says that if in fact the other entities being run, in effect, by the paternal grandmother and his brother and, to a certain extent, himself, they have every right under s 79(10) to apply to be joined in this case to protect their interests. They have shown no interest in it whatsoever in that they have not, in any way, attempted to call upon the Court’s jurisdiction to protect their interest and consequently I feel that the general rule must apply and that the moneys owing are owed by S Pty Ltd. I do not believe that I can take into consideration a lessening of the pool to which I refer which is as set out in Mr North’s aide memoir headed “[Baldwin] Matrimonial” at page 4 where he says: “on his calculations, the pool available is 2.71”- - - -
RECORDED : NOT TRANSCRIBED
- - - -2.719, however, there are a couple of matters that I wish to refer to there. One is that I have to add, and I am satisfied that she did get it, the amount that she withdrew from S Pty Ltd, which is 5,395.
RECORDED : NOT TRANSCRIBED
She gave no adequate explanation for the removal of that amount of money from S Pty Ltd and that I would allow that to be added to the amounts to be distributed.
There are other matters which I have to refer to - Mr C. Mr C and the mother had a relationship for a period of something like 18 to 20 months, and during that period as well as subsequent to the cessation of their relationship that he advanced to her as appears by one of the exhibits in this case an amount of $185,000‑odd. She says, and I accept this, that in fact part of that to an extent of about 111,000 was used by way of payment of legal expenses and taking into consideration the authorities, I follow those authorities. That is referred to in the last but three on page 1 of the Baldwin aide memoir which was put before me.
I now deal with the contributions in an endeavour to ascertain what the wife’s entitlement would be pursuant to the provisions of s 79. She has financially contributed to the assets of the parties virtually nothing. She did receive an inheritance of some 66,000 English pounds, $50,000 of which she says was forwarded to England for the use and endeavour in a business which failed miserably. She used the balance of the moneys generally around the parties themselves.
She relies on three other matters: one is the amount of work she put into the creation of the E house and the improvements therein. She particularises those in her affidavits; her work with the children and also a difficulty which she had with the respondent’s admitted alcohol problem. So far as alcohol problems are concerned, I am more than satisfied the evidence before me that the husband had a bad alcohol problem. I accept the evidence of the wife that, on occasions, his conduct became quite reprehensible, that he exhibited signs of bad temper, that he was uncontrollable and I refer, in particular, to her paras 31 and 38.
He, on two occasions, has entered into private clinics for detoxification in 2002 and 2005/6. The first of them was brought about as a result of the wife leaving him and he went into this clinic in an endeavour, perhaps, to control his drinking and subsequently he entered that clinic after the wife left again. The parties reconciled in 2002.
The business was struggling financially. Generally it was accepted particularly well winning awards, in 2002, 2003 and 2004 and regrettably this was not transferred into income producing material. The respondent, as well as the applicant, found it extremely difficult the enormous amount of work being done, and they endeavoured to sell it. If in fact they had a conditional contract on it for 7.2 or in excess of seven million, they would have been out of a lot of trouble. Unfortunately, they did not and subsequently, it was sold in 2007 something in excess of $3 million. Out of that amount an amount was paid to the ANZ Bank. It was 500,000‑odd and I will be able to indicate at a later stage that there is available McPhee Spiro and Curlewis Trust Account an amount of something like - - -
RECORDED : NOT TRANSCRIBED
- - - 2.823.
It appears to me that the pressure that was brought to bear by the business going bad upon the husband exacerbated his weakness towards alcoholic liquors and he became almost uncontrollable. The wife has put forward an argument which is based, to a certain extent, on the Kennon principle to the extent that his conduct was such, if I might use that word “conduct” was such that it made any contribution she was attempting to make towards her home-making ability even more difficult than it would otherwise be. I am satisfied, on the evidence before me, that that is, in fact, the case, to the extent on one occasion, he lost control of himself, perhaps he was provoked but he lost control when he had a physical fight with L causing injuries to him. That, in itself, is reprehensive even though I do understand that sometimes children of that age can drive people to distraction, particularly about the game known as “World of Warcraft”.
However, the wife’s health has been affected and she says that it has been affected even further by what has taken place subsequent to the cessation of cohabitation which was in November 2005. I refer to para 38 and further that her fears in relation to her employment have, in fact, come to fruit and that she was made redundant in December of last year. There is evidence before me by a psychologist that she is not the woman that she was some two or three years ago, that she has lost confidence in herself, she has a fear for the future and I can fully appreciate that. I do not believe that her condition was brought about solely as a result of the respondent’s conduct but partially as a result thereof. I think that sounds, in contribution, under the Kennon principle.
What then can she say that she is entitled to. It has been put forward by Mr Cooper that the husband’s financial contribution (it must be conceded), was overwhelming and it is. It is overwhelming, however, it was submitted by North of senior counsel that the principles are that these contributions erode over a period of time. Well, they did not insofar as the payments, loans from the other entities to which I have referred. In his paragraphs, which I have already referred, he sets out that moneys from 1999 to 2003, enormous amounts of money were forthcoming, 2004, 2005. It seems like it slowed down then and I would have thought it is because N Baldwin, his brother, became aware of how much moneys were being lost to the trustees and to the companies and I think he put his foot down.
I must say in passing which I have not before, the moneys that were in these trusts mainly consisted of shares and, obviously the husband, the respondent, could not have done this on his own. He would have had to have at least one of the others involved and he has had and that is his mother. The husband’s mother, who is 85 years of age who gave evidence by phone. She gives me the impression of being a very feisty woman but she allowed, unfortunately, her son perhaps to run awry and it may have been that she was hoping that by the injection of funds which perhaps N did not know about, the E property might have been saved. It could not be saved and it went down eventually as I have said.

It is extremely difficult for me to ascertain or to estimate what the contribution of the wife would be. It has been said on frequent occasions that the starting point could be 50:50. It’s not 50:50 in this case. I would have thought that the best that the wife could hope for, and I will find that she is entitled to is 40 per cent. What then or is the wife’s entitlement increased by anything under s 75(2) of the Act. It appears to me that there are two areas in which she could consider to have some support. That is the boys, in particular, the younger of the two who is still with her and will be for some three or four years, he’s 14 in May. She will still have emotional responsibility for the elder boy. She has the difficulty, at this stage, of getting employment. Her health is not the best.
On the other hand, it is said that the respondent still has a financial resource if I can put it way of these trusts behind him. I do not know how much the trusts are going to be worth but I would think that that is not particularly high. His health now, as he says, he is no longer an alcoholic which is regrettable his saying that because it does tend to concern me. He does not recognise it. The only way to beat it is to recognise it and he still drinks on occasions. He is running a small business and, I must say, he looks very well and fit and consequently that there is a margin in favour of the wife there of 10 per cent. I would therefore apportion the assets of the parties 50:50. What are the assets? But I must say in passing, there is another claim by the husband in an amount of some $117,000 for unpaid tax. I do not believe, in the circumstances of this case, that I will take that into consideration. It is his own responsibility that he failed to pay tax and also as has been quite properly pointed out by North that this tax was mainly incurred- - -
RECORDED : NOT TRANSCRIBED
- - - subsequent to separation; I do not accept that but, however, I have decided in the exercise my discretion that I will not allow that to be removed from the assets of the parties.
Consequently, it appears to me now, let me make it quite clear, my maths have always been suspect as people have known for years that I am endeavouring to do the best with the figures which have been put before me and I must mention that but if there are any difficulties with the mathematical calculations, I want you to come to me before you start blustering off and filing notices of appeal. There are enough costs in this case as it is.
RECORDED : NOT TRANSCRIBED
Much was made by North of the fact that discovery was not, as he says, full and frank in this matter and that Mr H who was the accountant, the single expert appointed by the parties, frequently in his three reports complained that his was only a preliminary report. I have done the best I can on the material before me. It is quite clear that so much costs have been expended in this case that any adjournment would only increase the amount of costs and I doubt very much whether anything would be advanced by our adjourning the matter for further and better discovery.
According to my mathematics, it appears to me that there is available for distribution an amount of 2.716 rounded off- - -
RECORDED : NOT TRANSCRIBED
However, the next matter is what has the wife had in her possession, I take off and notwithstanding there does not appear to be added into Mr North’s aide memoir $100,000 which she received as and by way of property settlement.
RECORDED : NOT TRANSCRIBED
The net proceeds of the sale of the property at E, you know as I have said, a trust account and in a way that makes the orders much more simple in that I will direct:
ORDER DELIVERED
RECORDED : NOT TRANSCRIBED
I will give leave to the party to approach me in the working out of the orders.
RECORDED : NOT TRANSCRIBED
This is a matter wherein the general provisions of the Act apply that notwithstanding the provisions of s 117 and that is, each party should bear their own costs. Both parties have sufficient funds with which to bear those costs. Application for costs dismissed, Ms Brasch.

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Bell.

Associate:

Date: 25 March 2009

[2009] FamCA 207

26 February 2009

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Legal Concepts

Costs

Remedies