Fletcher & Maloney - [2008] FamCA 864

FAMILY COURT OF AUSTRALIA

FLETCHER & MALONEY

[2008] FamCA 864

FAMILY LAW – TRUSTS - whether trust was a sham – whether trust should be treated as alter ego of husband or financial resource of husband – whether corporate beneficiary of trust should be treated as property of the husband – trust is not the alter ego of the husband – trust and corporate beneficiary of the trust are financial resources of the husband

FAMILY LAW – TRUSTS – treatment of assets of trust - trust is financial resource of the husband therefore cannot add the value of the assets of the trust to the pool of assets to be divided –if appropriate wife to be provided with an extra amount out of the assets of the parties to allow for this

FAMILY LAW – PROPERTY SETTLEMENT – determination of asset pool – whether capital gains tax on anticipated sale of properties should be included as a liability – no basis for taking CGT into account

FAMILY LAW – PROPERTY SETTLEMENT – Contributions - asset by asset approach – significant assets – whether income of business should be attributed almost solely to wife’s efforts since she commenced working there - contributions to business assessed as equal

FAMILY LAW – PROPERTY SETTLEMENT – contributions to financial resources – whether s 75(2)(j) can apply to property settlement proceedings – caution in not double counting under 79(4) – consideration of parties’ non-financial contributions to financial resources of husband – wife’s approach of seeking 80% of husband’s entitlement to trust is not open to the Court – minimal adjustment in favour of the wife justified

FAMILY LAW – PROPERTY SETTLEMENT – 75(2) adjustment - whether wife has reduced earning capacity as a result of having three young children (not of the marriage) and reducing workload – wife maintains same earning capacity therefore no basis for any adjustment in her favour – consideration of financial resources pursuant to s 75(2)(b) - adjustment in favour of the wife of $400,000

Family Law Act 1975 (Cth) ss 75, 79

O’Chee and Anor v O’Chee (2006) FLC 93-275
Rosati and Rosati (1998) FLC 92-804
JEL and DDF (2001) FLC 93-075
Ascot Investments v Harper (1981) 148 CLR 337
Ashton and Ashton (1986) FLC 91-777
Stein and Stein (1986) FLC 91-779
Davidson and Davidson (1991) FLC 92-127
Goodwin and Goodwin-Alpe (1991) FLC 92-192
Webster and Webster (1998) FLC 92-832
Milankov and Milankov (2002) FLC 92-095
Stephens and Stephens and Ors (2007) FLC 93-336
Townsend and Townsend (1995) FLC 92-569
Zalewski and Zalewski (2005) FLC 93-241
Kildea and Kildea (2008) FamLR 347
GT and KW [2006] FamCA 638
Walters and Walters [2007] FamCA 324
Waters and Jurek (1995) FLC 92-635
Phillips and Phillips (2002) FLC 93-184

APPLICANT:

Ms Fletcher

RESPONDENT:

Mr Maloney

FILE NUMBER:

SYF

3168

2005

DATE DELIVERED:

2 October 2008

PLACE DELIVERED:

Adelaide

PLACE HEARD:

Darwin & Adelaide

JUDGMENT OF:

Strickland J

HEARING DATE:

29-30 March 2007
2-3 April 2007
2-6 July 2007

6-7 September 2007

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Fletcher & Maloney

Details

AGLC: Fletcher & Maloney [2008] FamCA 864
Case: [2008] FamCA 864
Decision Date: 2 October 2008

CaseChat Overview and Summary

In *Fletcher & Maloney*, Strickland J of the Family Court of Australia considered a property settlement dispute between the parties. The case involved complex issues surrounding the treatment of assets held within a trust and a corporate beneficiary, as well as the assessment of contributions and the application of section 75(2) of the *Family Law Act 1975* (Cth).

The primary legal issues before the court were whether a trust and its corporate beneficiary should be treated as the husband's "alter ego" or as a "financial resource," the appropriate method for determining the asset pool, the inclusion of capital gains tax liabilities, the assessment of the parties' contributions to their respective businesses and financial resources, and the applicability of section 75(2) factors, particularly concerning potential double-counting of contributions. The court also had to determine whether the wife's reduced workload due to childcare responsibilities warranted an adjustment under section 75(2).

Strickland J determined that the trust and its corporate beneficiary were financial resources of the husband, rather than his alter ego, meaning their value could not be directly added to the divisible asset pool but could be considered in making adjustments. The court found no basis for including anticipated capital gains tax liabilities in the asset pool. Contributions to the parties' businesses were assessed as equal. Regarding section 75(2), the court acknowledged the potential for its application in property settlement proceedings, citing relevant Full Court decisions, but cautioned against double-counting contributions already considered under section 79(4). The wife's reduced workload was not found to have reduced her earning capacity, thus not justifying an adjustment on that ground. However, an adjustment of $400,000 was made in favour of the wife under section 75(2)(b) in consideration of financial resources.

The court made detailed orders dividing the parties' assets and liabilities, including the allocation of professional practices, various properties, bank accounts, superannuation entitlements, and loan accounts. Notably, the wife was ordered to pay the husband $713,903.00, and the husband was ordered to pay the wife $34,537.00, with provisions for indemnities regarding mortgages and other liabilities associated with specific properties.

Orders

Orders of the court

That the wife retain all the right title and interest of the parties to the exclusion of the husband to the professional practice being L Pty Ltd trading as L Practice.

That the husband retain all the right title and interest of the parties to the exclusion of the wife to the professional practice being E Pty Ltd trading as E Practice.

That the husband retain for his sole use and benefit absolutely the following:

(a) All monies standing to the credit of the husband in any bank accounts in the name of the husband;

(b) The property at K being Lot ..., comprised in Certificate of Title Volume … Folio …;

(c) The husband’s right title and interest in the property at S being Lot … comprised in Certificate of Title Volume … Folio …;

(d) The husband’s right title and interest in the property situated at G;

(e) The husband’s furniture and household effects;

(f) The husband’s Toyota Landcruiser utility motor vehicle;

(g) The husband’s superannuation entitlement in BT Business Superannuation member no. …;

(h) The husband’s superannuation entitlement in the Public Officials’ Superannuation Trust;

(i) The husband’s loan account in the T Trust;

(j) The husband’s loan account in R Pty Ltd;

(k) The proceeds of sale of the husband’s interest in the share portfolio.

That the wife retain for her sole use and benefit absolutely the following:

(a) All monies standing to the credit of the wife in any bank accounts in the name of the wife;

(b) The property situated at B being Lot … comprised in Certificate of Title Volume … Folio ….

(d) The wife’s BMW motor vehicle;

(e) The wife’s jewellery;

(f) The wife’s superannuation entitlement in BT Business Superannuation member no. …;

(g) The wife’s loan account in TS Pty Ltd.

That the money standing to the credit of the parties in any bank account held in their joint names be forthwith divided equally between them.

That as to account no. … with Bank SA held in the names of the husband, the wife and Mr MB the wife forthwith transfer or assign to the husband all of her right title and interest in the said account.

That the husband forthwith transfer to the wife all of his right title and interest in the following real property:

(a) The property at W being Lot … comprised in Certificate of Title Volume … Folio …;

(b) The property at unit 1, …, Darwin, being Lot … Town of Darwin comprised in Certificate of Title Volume … Folio …;

(d) The property at P being Lot … comprised in Certificate of Title Volume … Folio ….

That the husband forthwith transfer and assign to the wife all of his right title and interest in the debt due to the parties by the wife’s sister.

That the wife forthwith transfer to the husband all of her right title and interest in the following real property:

(a) The property at 4 M Street Darwin being Lot … Town of Darwin comprised in Certificate of Title Volume … Folio …;

(b) The property at 6 M Street Darwin being Lot … Town of Darwin comprised in Certificate of Title Volume … Folio …;

10.

That the husband indemnify the wife and keep her indemnified from all or any liability for:

(a) The repayment of all mortgages secured over the real properties referred to in paragraph (9) hereof;

(b) All rates taxes assessments and notices payable in relation to any of the said properties referred to in paragraph (9) hereof;

(d) The wife’s loan account in the T Trust;

(e) All monies (if any) owing by the wife to the husband or to the husband’s brother with respect to the distribution of proceeds received from the sale of shares.

11.

That the wife indemnify the husband and keep him indemnified from all or any liability for:

(a) The repayment of all mortgages secured over the real properties referred to in paragraph (7) hereof;

(b) All rates taxes assessments and notices payable in relation to any of the said properties referred to in paragraph (7) hereof;

(d) All monies (if any) owed by the parties or either of them to TS Pty Ltd.

12.

That the wife forthwith return to the husband his personal effects, university notes, text books and framed title deed for the property at K.

13.

That forthwith upon the amount of the liability becoming known the husband and the wife equally pay any Capital Gains Tax liability assessed as a result of the sale of the property at D.

14.

That within three [3] months of the date hereof the wife pay to the husband the sum of SEVEN HUNDRED AND THIRTEEN THOUSAND NINE HUNDRED AND THREE DOLLARS [$713,903.00].

15.

That within three [3] months of the date hereof the husband pay to the wife the sum of THIRTY FOUR THOUSAND FIVE HUNDRED AND THIRTY SEVEN DOLLARS [$34,537.00].

16.

That all applications be dismissed and removed from the active pending cases list.

17.

Liberty to both parties to apply as to consequential orders.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

At first blush this paragraph is only relevant to an application for maintenance, not property settlement. However, in Zalewski & Zalewski (2005) FLC 93-241 the Full Court addressed whether it could apply to property settlement proceedings. It was argued on appeal that the trial judge had erred in property settlement proceedings in taking into account irrelevant matters, namely paragraphs 75(2)(j) and (k). After referring to authority addressing the purposes of and application of sub-section 75(2) in various cases, Coleman and Boland JJ said this:“84.The inclusion of the words “whose maintenance is under consideration” in ss 75(2)(j) and (k), prima facie, indicates the subsections relevance to spousal maintenance applications. However s 79(4)(e) does not limit consideration in proceedings under s 79 to any specific s 75(2) factors. The criterion to be applied under s 79(4)(e) is that the matters in s 75(2) must be relevant. It is necessary that assessment of contribution exercise under ss 79 (4)(a),(b) and (c) is not confused with the word “contributed” in s 75 (2)(j), the latter requiring the consideration of a contribution to a financial resource. We accept caution is required to avoid the possibility of “double counting” of an indirect non financial contribution by a spouse as homemaker and parent to the development of a business, and, in addition, making an adjustment relying on s 75(2)(j). However, it follows from our discussion that we do not accept counsel for the husband’s submission that ss 75(2)(j) and (k) were irrelevant factors which the trial Judge should not have taken into account. In this case the trial Judge did not “double count”. His assessment of factors under s 75(2) was directed to relevant matters under ss 75(2)(j) and (k). It was relevant in the circumstances of this case for the trial Judge to have regard to the wife’s contribution to the husband’s earning capacity acquired during the course of a lengthy marriage.” [Emphasis added] This statement was quoted with approval in the recent decision of the Full Court in Kildea & Kildea (2008) FamLR 347. In GT & KW [2006] FamCA 638, Kay J (with whom Coleman and Boland JJ agreed) held that a further 5% adjustment in favour of the husband was justified on account of matters in paragraphs 75(2)(a) and (j) (on account of contributions by the husband to the wife’s earning capacity). In Walters & Walters [2007] FamCA 324, in an appeal with respect to property settlement, one area of complaint was with respect to the trial judge’s findings on sub-section 75(2) factors. In determining this the Full Court, Bryant CJ, Thackray and Chrisford JJ addressed sub-section 75(2) factors, including Section 75(2)(j). Their Honours did not raise any issue that paragraph (j) was not relevant to property settlement proceedings. Thus it seems that the Full Court accepts that paragraph 75(2)(j) can apply in property settlement proceedings, and I need to consider it in this case. The issue of concern though is that there should be no double counting where the Court has already taken into account the contributions claimed under sub-section 79(4) of the Act.