Baxter and Warren and Anor
[2008] FMCAfam 192
•22 May 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BAXTER & WARREN & ANOR | [2008] FMCAfam 192 |
| FAMILY LAW – Property – short marriage – trust – loan account. |
| Family Law Act 1975 – ss.4(1), 75(2) and 79 |
| Bushby & Bushby (1988) I FLC 91-919 Beneke & Beneke (1996) FLC 92-698 NCH & RCH (2004) FLC 93-204 Ely & Ely [2006] FMCAfam 512 Hickey & Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Townsend & Townsend (1995) FLC 92-569 |
| Applicant: | MS BAXTER |
| Respondent: | MR WARREN |
| Second Respondent: | [V] PTY LTD & [V] PTY LTD AS TRUSTEE FOR [WARREN] FAMILY TRUST |
| File number: | BRC 8220 of 2007 |
| Judgment of: | Howard FM |
| Hearing dates: | 15 & 16 November 2007 |
| Date of last submission: | 6 March 2008 |
| Delivered at: | Brisbane |
| Delivered on: | 22 May 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr George |
| Solicitors for the Applicant: | Pippa Colman & Associates |
| Counsel for the Respondent: | Mr Hodges |
| Solicitors for the Respondent: | Family Law Solutions |
ORDERS
I direct that the parties file and serve a proposed final order to reflect these Reasons for Judgment by no later than 4.00 p.m. on 28 May 2008.
I direct that in the event that the parties are unable to reach agreement as to the terms of the order the matter shall be relisted for further hearing.
IT IS NOTED that publication of this judgment under the pseudonym Baxter & Warren & [V] Pty Ltd as Trustee for the [Warren] Family Trust is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC 8220 of2007
| MS BAXTER |
Applicant
And
| MR WARREN |
First Respondent
| [V] PTY LTD & [V] PTY LTD AS TRUSTEE FOR [WARREN] FAMILY TRUST |
Second Respondent
REASONS FOR JUDGMENT
Background
Ms Baxter was born in 1954.
Mr Warren was born in 1955.
The parties commenced cohabitation in February 2003 and married later that year.
Having observed both parties in the witness box I accept the evidence of the wife that separation occurred on 31 July 2005 when the husband moved out of the former matrimonial home.
The parties were divorced in June 2006.
The parties cannot agree on how to divide their property.
The Applicant wife seeks orders for property settlement and also spousal maintenance.
In terms of the property settlement proceedings, the well settled four step approach needs to be followed. In particular:-
a)the net asset pool of the parties needs to be determined;
b)there must be an assessment of how each party contributed to that property pool;
c)next, a consideration of the parties’ current financial and family circumstances and a further consideration of their needs both now and in the future; and
d)the overriding requirement that the order be just and equitable.[1]
[1] These four main issues to be determined by the Court reflect the well known four step approach in cases concerning s.79 of the Family Law Act (1975). Note Hickey & Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 and Ely & Ely [2006] FMCAfam 512.
The proceedings against [V] Pty Ltd, [V] Pty Ltd as trustee for the [Warren] Family Trust and Mr C were discontinued on 24 August 2007.
Assets and liabilities
a)I consider that this is an appropriate case for the superannuation interests to be included in the same pool as the non-superannuation interests.
b)I find that the property pool (including superannuation) is as follows:-
Ownership
Asset
Value
Wife
Motor vehicle
$15,000.00
Wife
Superannuation
$10,000.00
Wife
Relocatable home
$92,500.00
Wife
Credit card debt
($50,000.00)
Wife
Debt on relocatable home
($92,500.00)
Husband
Superannuation
$36,754.00
Husband
Loan account in the [Warren] Family Discretionary Trust
$276,788.00
Total net property (including superannuation)
$288,542.00
c)I accept that the parties may have some furniture and chattels in their possession which they own personally and I also accept that their value is minimal and for the purposes of this process, no value should be ascribed to those furniture and chattels.
d)I note that the husband concedes in his Outline of Case document that his current superannuation entitlement is $36,754.00.
e)I note that the husband has no liabilities.
f)“Property” is defined in s.4(1) of the Family Law Act 1975 as follows:-
“Property, 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.”
g)The evidence concerning the husband’s loan account is contained in his Affidavit filed 23 August 2007. In “Annexure E” to that Affidavit it is revealed that the husband’s loan account is in credit in the amount of $276,788.00 (note the page entitled “Beneficiaries Accounts for the year ended 30 June 2007”). Hence the trust owes $276,788.00 to the husband. This is noted further on in “Annexure E” under the heading “current liabilities” where it is stated that the trust owes $276,788.00 to Mr Warren, the husband.
h)I find that the sum of $276,788.00 in the said loan account is an amount in respect of which the husband is entitled and hence that amount is “property” within the definition in s.4(1) of the Act. I note that the husband concedes this point.
i)The husband contends that the sum of $45,000.00 (spent by the wife) should be added back into the asset pool. Mr Hodges, counsel on behalf of the husband relies on Townsend & Townsend (1995) FLC 92-569 as authority for this submission.
I do not agree with Mr Hodge’s submission in this regard. In NCH & RCH (2004) FLC 93-204 the Full Court of the Family Court said at paragraph 21:-
“It is important to bear in mind, and indeed should be emphasized, that in Townsend the Full Court was concerned only with the situation where between separation and the hearing of property settlement proceedings, one party has disposed of an asset which could be described as ‘a matrimonial asset’ in the sense that it was an asset which was owned by one or both of the parties at separation and in which the other party would have a legitimate interest, in that, for example, he or she had made a direct or indirect contribution to that asset.”
The $45,000.00 contended as an add back is made up of $20,000.00 which the wife accessed from her own superannuation. The husband made no contribution to the wife’s superannuation.
The balance amount of $25,000.00 was spent by the wife from her own funds.
I am not satisfied that there is sufficient evidence to conclude that the husband made an indirect contribution to that fund of money. He certainly made no direct contribution to that money.
Furthermore, I accept the following evidence contained in the wife’s Affidavit filed 6th July 2007:-
“65.At the time of cohabitation, I had two super funds one of $9,000.00 and one of $14,300.00, totalling $23,300.00.
66.In 2006 I had to draw $20,000.00 to live on out of my superannuation due to financial hardship when I was sick and could not work. I spent the $30,000.00 cash that I had at the beginning of the marriage, during the marriage.
67.In the 18 months to January 2007, I had worked only 18 weeks due to my illness. I suffered various health complaints including bronchitis, pneumonia. I had an operation and then suffered post-operative trauma and complications which made my recovery longer.
68.I am now taking hormone replacement therapy because of the women’s problems I have had. I have had a recurrence of my pneumonia.
69.In the time I was unable to work, I received a government pension.
70.I have a medical condition which affects my eye sight adversely. I am under the care of a medical specialist and a course of treatment has been prescribed. I am unable to afford the treatment.
71.I made no contributions to my superannuation during the marriage, because I had no income.
…
77.Prior to the marriage I earnt $46,000.00 per annum. However during marriage I had no income and no opportunity to build wealth even though I worked hard throughout the marriage, for the trust and for the husband.
78.I suffered health problems and was unable to work for some time after separation.
79.On the 6 May 2007, I commenced working as a [X] on a casual basis. I receive $21.34 per hour and work 25-28 hours a week on average. My wage per annum is $27,742.00 to $31,071.00. My employer gives me a roster and if I am not on the roster, I am on call.
…
92.Since separation, when I was only in receipt of a pension, unable to work and suffering from medical conditions, I have lived by using credit cards. I now have six credit cards with a combined balance of ($50,000.00). I have been using the credit cards to get cash advances so that I could live and then get cash advances so that I could pay off the credit cards. I am now in a position where I cannot borrow any more on the credit cards and I am unable to pay the interest payments.”
In my view it was reasonable for the wife to spend the $45,000.00 on living expenses.
The Full Court in NCH & RCH (supra) cited with approval the following comments by the Full Court in two judgments which post-date Townsend:
“2.11There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial Judge. (Marker [1998] FamCA 42, 1 May 1998, per Baker, Kay and Chisholm JJ.)”
I find that the $45,000.00 spent by the wife went some way towards paying the wife’s reasonably incurred living expenses since separation. Those monies should not be added back into the pool.
j)Furthermore, I find that the debts the wife incurred on her credit cards post separation were also used to pay for her reasonable living expenses since separation. The debt of $50,000.00 on the wife’s credit cards should be included in the pool of assets and liabilities.
k)Therefore, the evidence discloses (and I accept) that the wife spent on reasonable living expenses (since separation):-
(i)$20,000.00 from her superannuation;
(ii)$25,000.00 from her savings; and
(iii)$50,000.00 put on her credit cards.
$95,000.00
I accept that this was reasonable having regard to her poor health following separation and her consequential inability to work to her pre-marriage capacity. I accept that those amounts spent are reasonable even if the wife also received some payments from Centrelink.
At the commencement of the relationship the wife was earning $46,000.00 per annum. I note that the amounts spent by the wife per year post separation are comparable to her income per annum at the commencement of the relationship.
The trust
I have had regard to the trust deed and to the evidence concerning the trust. I accept the following evidence:-
a)the company, [V] Pty Ltd (“the company”) was incorporated in December 1980;
b)the company is the trustee of the trust;
c)
the [Warren] Family Trust was established by deed dated
19 December 1980;
d)the beneficiaries nominated in the trust deed were the husband, Ms K (the husband’s then wife) and F (the husband’s child from his first marriage);
e)the nominated appointors were Mr C and his then wife Ms J;
f)the husband and the wife were appointed as directors of the corporate trustee company on 24 November 2004;
g)the husband remains a director of the corporate trustee company and owns one share in the company;
h)Mr C remains a director of the company and owns three shares in the company; and
i)the trust was established for taxation purposes and the initial capital was contributed from the sale proceeds of Mr C’s two farming properties.
Having considered the evidence and in particular having observed the wife, the husband and Mr C in the witness box I find:-
a)that Mr C still controls the trust through his control of the corporate trustee and because he is the appointor of the trust;
b)that the chance of the husband continuing to receive substantial distributions from the trust is so high as to amount to a certainty;
c)that there are sufficient assets in the trust to ensure that the husband is able to access forthwith, at call, the sum of $276,788.00 in his loan account;
d)that even if there were not sufficient assets in the trust that Mr C would ensure that such situation was rectified by, if necessary personally contributing any shortfall to enable the husband to immediately access the sum of $276,788.00 from the loan account;
e)that the trust is not a sham but was set up for legitimate taxation purposes by Mr C in 1980;
f)that the capital contributed to the trust from the time it was established has come primarily from assets which were formerly owned by Mr C:
g)that the trust is not the alter ego of the husband;
h)that the assets of the trust should not and do not form part of the property pool in this case;
i)that the husband manages the business of the trust in consultation with his father (Mr C);
j)that Mr C is a creditable witness and I accept his evidence.
I accept the evidence of the husband in paragraph 33 of his Affidavit filed 23 August 2007 where he lists the assets of the trust along with the estimated values. I accept those values as well as the amount of the debts stated. Paragraph 33 of the husband’s Affidavit reads:-
“33. The assets of the Trust are now as follows:-
a. The freehold of the motel Estimated value $1,100,000
b. The motor boat [V] Estimated value $200,000
c. The unit at Property W
Gladstone Estimated value $155,000
d. Holden Rodeo ute Estimated value $15,000
e. Firearms Estimated value$15,000
f. Wine collection $2,000
g. Half share in a farm at
Property C Estimated value $250,000
h. Two trucks, trailer and Drot Estimated value $185,000
i. Debt on trucks, trailer and Drot ($186,000)
NET VALUE $1,736,000”
Contributions to the property pool
Concerning contributions I make the following findings:-
a)during the course of the relationship the wife performed work on behalf of the trust but was not paid by the trust nor by the husband;
b)that at the commencement of cohabitation the wife gave up her employment at the request of the husband because the husband wanted the wife to work in the family businesses, to look after the administration side of the businesses and to look after him and generally to be a “gofer”;
c)the wife performed, at the request of the husband, the book-work for the trust in relation to the motel owned and operated by the trust from 1 April 2004 to August 2005. I accept that the wife continued to do the book work for the husband and for the trust even after separation between 31 July 2005 and 1 September 2005;
d)that the wife taught the husband how to operate the Quick Book system;
e)during the course of the relationship the wife worked at the motel performing the tasks referred to in paragraph 39 of her Affidavit filed 6 July 2007 as directed and as requested by the husband. This work was in addition to the book work referred to in subparagraph (c) herein;
f)I also find that the wife performed work in relation to the administration of the other businesses of the trust as directed and as requested by the husband throughout the course of the relationship;
g)I find that the wife was the principal home maker throughout the course of the relationship;
h)the wife assisted the husband’s father by driving him to doctors’ appointments and generally providing help and assistance to him as needed throughout the course of the relationship;
i)I accept the wife’s evidence contained in paragraphs 32 to 54 (inclusive) in her Affidavit filed 6 July 2007.
Having regard to the relatively short term nature of the relationship (less than three years) the contributions to the net property pool by (or on behalf of) the husband are significant. There is an emphasis on financial contributions having regard to the short duration of the relationship: Bushby & Bushby (1988) I FLC 91-919; Beneke & Beneke (1996) FLC 92-698. Whilst it was a relatively short relationship it is to be noted that in addition to providing all homemaking contributions the wife also worked without pay essentially on behalf of the trust during the relationship. In that respect the wife was making a financial contribution by foregoing her wages. Whilst it is true that the wife (and the husband) lived rent free in property owned by the trust and received some other benefits from the trust the reality is that the wife (primarily because she was not paid wages for the work which she performed during the relationship for the business owned by the trust) is financially worse off through, I find, no fault of her own.
In the circumstances, I consider that the wife has contributed 10% to the property pool and the husband has contributed 90% to the property pool.
I note the evidence of the husband concerning alcohol consumption by the wife. I find that both parties consumed alcohol together during the course of the relationship. To the extent that the wife may, on occasions, have consumed alcohol to excess during the course of the relationship I do not consider that this was to such an extent that it would have any bearing on the question of contributions.
What are the current circumstances and the future needs of the parties?
Does there need to be an adjustment pursuant to s.75(2) of the Act?
I will refer now to the relevant matters in s.75(2):-
a)The Applicant wife is currently aged 53 years and generally keeps good health. I do accept that she did suffer some health problems and was unable to work for some period of time after separation.
The husband is able to work. The Respondent husband is currently aged 52 years and generally keeps good health.
b)The wife currently works as a [X] on a casual basis earning between $27,742.00 – $31,071.00 per annum. The wife commenced such work on 6 May 2007. I accept that prior to the marriage the wife’s income per annum was $46,000.00. I have already noted that the wife left her employment at the time cohabitation commenced at the specific request of the husband.
c)I refer to my findings in paragraphs 12(b), 12(c) and 12(d) herein.
d)The relationship lasted approximately 30 months. I do note that the wife’s income is now substantially less than what it was at the time of the commencement of cohabitation.
e)I note that the husband has remarried and he and his new partner have jointly funded the purchase of a property at Property C, Queensland. I note that it was in fact the trust which, at the request of the husband, purchased the 50% interest in the property at Property C.
f)To my mind it is important to note:-
i)that the husband requested that the wife cease her prior employment at the commencement of cohabitation;
ii)that the wife was not paid any income for the work that she performed throughout the course of the relationship;
iii)that the wife’s net assets at the commencement of cohabitation were, I find, $76,600.00 (as per paragraph 8 of the wife’s Affidavit filed 6 July 2007).
In the circumstances, I consider that there should be an adjustment in favour of the wife pursuant to s.75(2) of the Act. I consider that the adjustment should be in the amount of 10%.
Justice and equity
An alteration of property interests in this case whereby the wife receives 20% of the net property and the husband receives 80% of the net property pool (including superannuation) is, in all the circumstances, a just and equitable outcome.
Spousal maintenance
Having regard to the duration of the marriage and the property orders proposed I do not consider it appropriate to make any order for the payment of spousal maintenance.
I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Howard FM
Associate: J Witenden
Date: 22 May 2008
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