Cowan & Braun (No 2)

Case [2024] FedCFamC1F 745

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Cowan & Braun (No 2) [2024] FedCFamC1F 745

File number: NCC 1480 of 2022
Judgment of: HARTNETT J
Date of judgment: 6 November 2024
Catchwords: FAMILY LAW – PROPERTY – De Facto Relationship –Where a child of the relationship lives with the wife and spends no time with the husband – Where there is a family trust that owned two properties with the applicant, the first respondent and the third respondent having an interest and/or entitlement in respect of the trust – Where the applicant seeks to wind up the trust and pay out all liabilities from the trust – Where the first respondent and the third respondent did not participate in the trial – Where the applicant has experienced extensive and serious family violence – Where the second respondent intervenor seeks repayment of a litigation loan incurred by the first respondent –– Where the litigation funder’s claim to priority when considering the competing claims of the applicant and first respondent is not accepted - Where the application of the applicant succeeds.
Legislation:

Family Law Act 1975 (Cth) Parts VIII, VIIIAB, ss 90SF, 90SM, 102NA, 117

Personal Property Securities Act 2009 (Cth) s 128

Cases cited:

Chorn & Hopkins (2004) FLC 93-204

Jabour & Jabour (2019) FLC 93-898

Keating & Keating (2019) FLC 93-894

Mallet v Mallet (1984) 156 CLR 605

Stanford v Stanford (2012) 247 CLR 108

Williams v Williams (1985) FLC 91-628

Division: Division 1 First Instance
Number of paragraphs: 174
Date of hearing: 8 October 2024
Place: Melbourne, via videolink
Counsel for the Applicant: Mr Bithrey
Solicitor for the Applicant: Lucy Urach & Associates
The First Respondent: No appearance
Counsel for the Second Respondent: Mr Bennett
Solicitor for the Second Respondent: GG Limited
The Third Respondent: No appearance

ORDERS

NCC 1480 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS COWAN

Applicant
AND:

MR BRAUN

First Respondent

GG LIMITED

Second Respondent

MS N

Third Respondent

ORDER MADE BY:

HARTNETT J

DATE OF ORDER:

6 NOVEMBER 2024

THE COURT ORDERS THAT:

1.The first respondent be removed as the guardian of the Braun Family Trust (“the Trust”).

2.The applicant be appointed as the guardian of the Trust.

3.The first respondent is restrained from:

(a)removing the applicant as the guardian of the Trust.

(b)removing the applicant as the trustee of the Trust.

4.The applicant, in her capacity as Trustee of the Trust, as soon as is practicable, shall cause to be paid from the funds held on trust by the solicitor for the applicant, being funds of the Trust, the following amounts in the following order of priority:

(a)$119,308 to the applicant’s father, Mr KK, in full satisfaction of any and all alleged amounts owing to either Mr KK and/or, LL Pty Ltd, and/or, MM Pty Ltd by the Trust, and/or, the first respondent, and/or the third respondent and the applicant will indemnify the trust, and/or the first respondent and/or the third respondent against any and all…

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AGLC
Cowan & Braun (No 2) [2024] FedCFamC1F 745
Case
[2024] FedCFamC1F 745
Decision Date

CaseChat Overview and Summary

In the Federal Circuit and Family Court of Australia, the case of Cowan & Braun (No 2) involved Ms Cowan, the applicant, and Mr Braun, the first respondent, in a dispute concerning the Braun Family Trust and the distribution of its assets. Ms Cowan sought to wind up the trust and distribute its assets, while Mr Braun, who had not participated in the trial, and Ms N, the third respondent, did not contest the application. Additionally, GG Limited, the second respondent, sought repayment of a litigation loan it had provided to Mr Braun. The court had to determine the appropriate method for considering the competing claims of Ms Cowan and GG Limited. The primary legal issue was how to prioritize the repayment of Mr Braun's debt to GG Limited when distributing the trust's assets. The court found that GG Limited's claim to priority was not acceptable and instead adopted an approach that prioritized the wife's entitlement to matrimonial assets. The court noted that Mr Braun's debt to GG Limited was a liability of Mr Braun only, and it was inappropriate to reduce Ms Cowan's share of the trust's assets to account for this debt. The court also highlighted the severe family violence perpetrated by Mr Braun against Ms Cowan, which significantly impacted her contributions to the relationship. The court ordered that Mr Braun be removed as the guardian and trustee of the Braun Family Trust, with Ms Cowan appointed in his place. The trust's assets were to be distributed according to specific priorities, with Ms Cowan receiving the majority share. The court further ordered that the parties indemnify each other against various debts and liabilities.

Orders

Orders of the court

NCC 1480 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS COWAN

Applicant

AND:

MR BRAUN

First Respondent

GG LIMITED

Second Respondent

MS N

Third Respondent

ORDER MADE BY:

HARTNETT J

DATE OF ORDER:

6 NOVEMBER 2024

THE COURT ORDERS THAT:

1. The first respondent be removed as the guardian of the Braun Family Trust (“the Trust”).

2. The applicant be appointed as the guardian of the Trust.

3. The first respondent is restrained from:

(a) removing the applicant as the guardian of the Trust.

(b) removing the applicant as the trustee of the Trust.

4. The applicant, in her capacity as Trustee of the Trust, as soon as is practicable, shall cause to be paid from the funds held on trust by the solicitor for the applicant, being funds of the Trust, the following amounts in the following order of priority:

(a) $119,308 to the applicant’s father, Mr KK, in full satisfaction of any and all alleged amounts owing to either Mr KK and/or, LL Pty Ltd, and/or, MM Pty Ltd by the Trust, and/or, the first respondent, and/or the third respondent and the applicant will indemnify the trust, and/or the first respondent and/or the third respondent against any and all claims that Mr KK, and/or, LL Pty Ltd, and/or, MM Pty Ltd has against the Trust, and/or the first respondent, and/or the third respondent.

(b) any Capital Gains Tax liability arising from the sale of DD Street, Town EE (…) and HH Street, Suburb JJ (…).

(c) $115,000 to the second respondent, being GG Limited, on behalf of the first respondent.

(d) costs associated with winding up the Braun Family Trust.

(e) the balance remaining to be distributed as follows:

(i) 32% to the third respondent to be classified as repayment in full of the beneficiary loan account of Ms N; and

(ii) 68% to the applicant.

5. The applicant, in her capacity as trustee of the Trust, shall do all such acts and things including but not limited to passing all Resolutions that are required to wind-up the Trust.

6. The parties shall indemnify and keep indemnified the other parties against:

(a) all debts, liabilities and outgoings jointly incurred by the parties or by or on behalf of the entities, including any assessment for taxation, primary or provisional, and interest penalties and costs thereon up to the date of these orders;

(b) all or any manner of actions, suits, causes of action, arbitrations, debts, dues, costs, interest and demands whatsoever both at law and in equity either now or at any time in the future against the parties or which may arise in respect of any act or thing done or omitted to be done by the parties up to and including the date of making of these orders whether by reason of the parties having been an employee and/or director and/or officer of any one or all of the entities and/or by reason of shareholding within any one or all of the entities and/or any loan account in name and/or the receipt by the parties of any money at any time from the entities or otherwise.

7. Unless otherwise specified in these orders, and except for the purpose of enforcing payment of any money due under these or any subsequent orders:

(a) each party shall be solely entitled to the exclusion of the other to all property in the possession of such party as at the date of these orders including any jewellery, furniture, furnishings and motor vehicles;

(b) moneys standing to the credit of the parties in any bank accounts to be the money of the party in whose name such bank account is held; and

(c) each party foregoes any claims they may have to any superannuation benefit to or owed by the other. The party in whose name any such policy of superannuation or insurances stand shall be deemed to be the owner and the beneficiary of such policy to the exclusion of the other.

8. In the event that either party refuses or neglects to sign any document or documents required to give effect to these orders within 14 days of a written request to do so then, pursuant to s 106A of the Family Law Act 1975 (Cth) the Registrar of the Registry of the Federal Circuit and Family Court of Australia is hereby appointed to sign any such documents on behalf of the defaulting party.

9. Otherwise, all extant applications be dismissed and the matter be removed from the list.

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Section 90SF(3) of the Act provides:(3) The matters to be so taken into account are:(a)the age and state of health of each of the parties to the de facto relationship (the subject de facto relationship); and(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and(c) whether either party has the care or control of a child of the de facto relationship who has not attained the age of 18 years; and(d) commitments of each of the parties that are necessary to enable the party to support:(i) himself or herself; and(ii) a child or another person that the party has a duty to maintain; and(e) the responsibilities of either party to support any other person; and(f) subject to subsection (4), the eligibility of either party for a pension, allowance or benefit under:(i) any law of the Commonwealth, of a State or Territory or of another country; or(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;and the rate of any such pension, allowance or benefit being paid to either party; and(g) a standard of living that in all the circumstances is reasonable; and(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and(i) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and(k) the duration of the de facto relationship and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and(l) the need to protect a party who wishes to continue that party's role as a parent; and(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and(n) the terms of any order made or proposed to be made under section 90SM in relation to:(i) the property of the parties; or(ii) vested bankruptcy property in relation to a bankrupt party; and(o) the terms of any order or declaration made, or proposed to be made, under this Part in relation to:(i)a party to the subject de facto relationship (in relation to another de facto relationship); or(ii)a person who is a party to another de facto relationship with a party to the subject de facto relationship; or(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and(p)the terms of any order or declaration made, or proposed to be made, under Part VIII in relation to:(i) a party to the subject de facto relationship; or(ii) a person who is a party to a marriage with a party to the subject de facto relationship; or(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and(q)any child support under the Child Support (Assessment) Act 1989 that a party to the subject de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the subject de facto relationship; and(r)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and(s)the terms of any Part VIIIAB financial agreement that is binding on either or both of the parties to the subject de facto relationship; and(t)the terms of any financial agreement that is binding on a party to the subject de facto relationship.EVIDENCEThe wife

Decision

Reasons for decision

The wife’s approach to the way GG Limited’s claim is to be determined is considered by the Court to be more appropriate. Indeed, the only just and equitable approach. The Court is only required to consider the ability of GG Limited to recover its debt from the husband so far as that is relevant. The legislation does not prioritise GG Limited’s claimed debt. This is further addressed in the conclusion hereafter.CONCLUSION I am satisfied that in all the circumstances of the case it is just and equitable to make orders adjusting the parties’ property interests. GG Limited submitted that the Court should consider the existence of the debt to it an entitlement and consider an order for payment of that debt before the net assets are otherwise divided between the remaining parties. That is, prioritise the interests of GG Limited as a third‑party creditor. That is an approach the Court shall not adopt. The alternative method as posited by GG Limited is however one acceptable to the Court namely, to determine what is owed to the husband, and see to it, possibly, that the intervenor is paid out of that eventual distribution. While GG Limited is a bona fide creditor, GG Limited is a bona fide creditor of the husband only. The determination I must make is a discretionary one. The usual approach shall be adopted by the Court, namely that the legal fees of the husband shall not appear as a liability on the balance sheet in a manner that will reduce the entitlement of the wife to matrimonial assets.[16] Indeed, the Court has noted:[17]...where funds have been borrowed to pay legal fees, and such liability is still outstanding, neither the payment of the fees nor the liability should be taken into account.[16] Chorn & Hopkins (2004) FLC 93-204 at [32]-[60].[17] Chorn & Hopkins (2004) FLC 93-204 at [55]. In my view, the first approach as sought by GG Limited for the Court to adopt is inappropriate and does not achieve justice and equity for the wife as described above in these reasons. Further, I note the following: (1)Some part, not quantified, but probably a large part, of those legal fees as funded by the litigation funder, were applied to the many criminal proceedings of the husband which related to animal cruelty and serious family violence as perpetrated by the husband upon the wife, including sexual offences. The earlier parenting orders proceeding as discontinued by the wife were not extensive, and the husband failed to participate in this proceeding - thus incurring no legal fees.(2)The genesis of the husband’s debt is a loan agreement entered into between he and GG Limited, which was subsequently varied by the provision of further borrowings to the husband, to be applied for the payment of legal fees incurred by the husband in quantum and application as determined solely by the husband subject to the borrowing limit. The wife was not a party to the contract and its variation and nor did she have any knowledge of those matters. (3)There is no conduct of the wife that required the husband to, out of necessity, seek out the GG Limited loan.

Ratio Decidendi

Legal Principle Established

The severity of the conduct of the husband, which is in evidence before the Court, wherein the husband’s behaviour toward the wife is appropriately described as “dehumanising”, leads the Court to find a significantly adverse impact upon the wife’s contributions as caused directly by the husband’s conduct.[14] [14] See Keating & Keating (2019) FLC 93-894.Post-separation Having moved out of the Suburb E property upon separation, the wife and children were able to move back into that property upon the husband’s forced departure from it. Following final separation, the wife became unable to afford to meet the weekly mortgage repayments in respect of the BFT properties, and in late January 2022, applied for financial hardship with QQ Financial Services. This was approved for a period of three months. At that time, she was completely reliant on her parents for financial support. Neither the husband nor the third respondent would make any contribution to the mortgages or any contribution to her or the children’s support. In May 2022, the wife was approved for further financial hardship relief in respect of the QQ Financial Services mortgages secured by the BFT properties. That arrangement ended in early August 2022. Upon the financial hardship relief period ending, and the wife being unable to afford the mortgage arrears and/ or the mortgage repayments, she determined that the Suburb JJ and Town EE properties should be sold to avoid foreclosure by QQ Financial Services on the BFT properties. The wife, as sole trustee for the sale of the properties made all necessary arrangements to prepare them for sale. In or about late 2022, the wife accepted an offer of $710,000 to purchase the Suburb JJ property. Around that time, the wife was informed there was a liability owing to New South Wales Revenue Land Tax for both properties in the sum of $54,587.90. The land tax notice had been sent to a post office box held under the husband’s name. The husband had ignored the demand for payment. The wife was advised that the land tax liability needed to be paid prior to the sale of the Suburb JJ and Town EE properties. With no offer of payment or part-payment of this liability coming from the third respondent (whom the wife had advised of the liability), the wife approached her parents for further financial support on the basis that they would be repaid any monies so advanced by them to the BFT. The wife’s parents paid the land tax in the sum of $53,768.95 after receiving a discount for paying the full amount prior to late 2022. The land tax bill was higher than it should have been because the husband failed to provide New South Wales Revenue with relevant material. Specifically, the BFT documents, such that New South Wales Revenue declared the BFT a “special trust” which incurred a surcharge. In late 2022, settlement of the sale of the Suburb JJ property occurred. The wife was solely responsible for payment for all costs associated with the selling agent and conveyancer's fees as derived by her from a further loan from her parents to the BFT.Sale of Town EE property