JERMAIN & JERMAIN

[2015] FamCA 967

FAMILY COURT OF AUSTRALIA

JERMAIN & JERMAIN [2015] FamCA 967

FAMILY LAW – PRACTICE AND PROCEDURE – Registrar – Review of decision – Where the Registrar refused to make consent orders – Where orders were sought for settlement of property – Where the husband and wife are in an intact marriage – Where the husband and wife are 81 and 79 years of age respectively – Where there had previously been significant distribution of property to family members – Where the orders were to have the effect of giving the wife control over her own financial circumstances – Where the distribution of property was nearly equal – Where it was just and equitable that there be an order for settlement of property .

Family Law Act 1975 (Cth) s 79

Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143
Redman & Redman [2012] FamCA 364
Redman & Redman (2013) FLC 93-563
Stanford v Stanford (2012) 247 CLR 108

APPLICANT: Mr Jermain

RESPONDENT: Ms Jermain

FILE NUMBER: SYC 6073 of 2015

DATE DELIVERED: 23 October 2015

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 23 October 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Livingstone

SOLICITOR FOR THE APPLICANT: Maguire & McInerney

SOLICITOR FOR THE RESPONDENT: Ms Gibson-Tilley (agent)

Orders

1. By consent, orders and notations are made in the terms of the document titled “Consent Orders” (Exhibit 1 dated 29 October 2015), as set out hereunder:

Definitions

A.     In these Terms of Settlement “Ms Jermain” means Ms Jermain.

B.     In these orders “Mr Jermain” means Mr Jermain.

C.     In these orders “B” means B Pty Limited ….

D.     In these Terms of Settlement a reference to a person includes a reference to their administrators, heirs, issue and permitted transferees and assigns.

E.      In these Terms of Settlement a reference to the singular includes the plural and vice versa.

F.      In these Terms of Settlement a reference to anything (including an amount) is a reference to the whole or any part of it and a reference to a group of persons is a reference to any one or more of them.

Legislation

G.     In these Terms of Settlement “the Act” means the Family Law Act (1975) as amended on up to the date on which these Orders are made.

Correctness of Notations and Definitions

H.     The parties acknowledge that the Notations including the Definitions contained therein are correct.

Notations – relationship and other matters 

I.       Mr Jermain was born on … 1934 in the state of New South Wales and is 81 years of age. Mr Jermain suffers a number of age related health issues but is able to receive advice and understand that advice.

J.      Ms Jermain was born on … 1936 in New South Wales and Ms Jermain is in good health.

K.     Mr Jermain and Ms Jermain were married in 1969.

L.      Mr Jermain had been previously married and there were two children of that marriage namely Mr C Jermain and Ms D Jermain.

M.    Ms Jermain cared for Mr C and Ms D from the date of her marriage to Mr Jermain and for many years before.

N.     Mr Jermain and Ms Jermain are each directors of B.

O.     Mr Jermain and Ms Jermain are each shareholders of B.

P.      B developed lands at E Town in the state of New South Wales as well as conducting farming properties at that locality.

Q.     On or about 30 September 2013 Mr Jermain and Ms Jermain moved from their property at F Street, E Town to accommodation conducted by the G Trust (GT) at H Street, Wollongong.

R.     Mr Jermain resides in a High Care Unit within GT.

S.      Ms Jermain resides in Apartment 1, H Street Wollongong.

T.      The marriage between Mr Jermain and Ms Jermain still subsists and neither plans to seek the dissolution of the marriage.

U.     Ms Jermain has requested that she and Mr Jermain enter into a property settlement so that Ms Jermain can control her own financial circumstances.

V.     Mr Jermain has agreed to Ms Jermain’s request and the parties each seek that the Court make orders as set out hereunder.

W.    Ms Jermain has had the benefit of independent legal advice.

X.     Mr Jermain has had the benefit of independent legal advice.

Y.     Mr Jermain and Ms Jermain each acknowledge that they made, jointly, a series of gifts of valuable real and other property prior to the making of these Orders including:

a.Transferring to Mr I Jermain the former matrimonial home at F Street, E Town the value of which was about $1,550,000.00 at that time;

b.Transferring to Mr C and Ms J Jermain in or about October 2014 property at Lot 1 E Town Road at E Town which was worth about $1,600,000.00 at that time;

c.Transferring to Mr C and Ms J Jermain in or about October 2014 property at Lot 2 E Town Road at E Town which was worth about $1,300,000.00 at that time;

d.Transferring Lot 1 Suburb K Street, Suburb K to Mr C Jermain as to one half share and to Ms J Jermain as to the other half share. Lot 1 Suburb K was worth approximately $1,900,000.00 at the date of this transfer.

e.Transferring various items of personal property including furniture, machinery, art work to family members.

Z.      Neither Mr Jermain nor Ms Jermain seeks to set aside, vary or otherwise resile from the transfers which have been described in Notation Y above.

AA.   Mr Jermain and Ms Jermain previously entered into a contract to make mutual wills however now agree to release the other from the contract to make mutual wills with a view to each being at liberty to make their own respective wills and to make such testamentary dispositions as they may wish.

BB.   Mr Jermain acknowledges that he has income, property and financial resources available to him on the date of the marking of these orders which enable him to support himself without a means tested pension, allowance or benefit.

CC.   Ms Jermain acknowledges that she has income, property and financial resources available to her on the date of the marking of these orders which enable her to support herself without a means tested pension, allowance or benefit.

DD.     Without limiting the generality of Notation CC above Ms Jermain acknowledges receipt from Mr Jermain, or at his direction, the sum of $50,000.00 on or about 17 September 2015 shortly before these Terms of Settlement were made available to her for her consideration and execution if so advised. 

EE.   Ms Jermain previously appointed Mr Jermain, Mr C Jermain and Ms J Jermain to be her Attorney but has subsequently revoked that power.

FF.    Mr Jermain and Ms Jermain are each Trustees of the B Superannuation Fund.

GG.     Mr Jermain and Ms Jermain each acknowledge that they have been provided with a copy of these orders and that they approve the making of those orders which relate to the B Superannuation Fund namely 6, 7, 8 below. 

HH.     Ms Jermain acknowledges that although she has previously received legal services from Maguire & McInerney Solicitors that no member of that firm has provided her with any advice in relation to the making of these orders and nor has any member of that firm made any warranties or representations to her in relation to the making of these orders.

II.      Ms Jermain waives any right which she may have had, but for this Notation to object to Maguire & McInerney Solicitors acting for Mr Jermain in relation to these orders.

BY CONSENT MAKE A PROPERTY ORDER AS FOLLOWS

1.      That Mr Jermain shall pay to Ms Jermain or as she may direct the sum of $492,868.00, (the principal amount) exclusive of the sum referred to in Recital DD above within 28 days of the making of these orders.

2.      That Mr Jermain shall, within 28 days of the date of the making of these orders transfer to Ms Jermain or as she may direct the whole of his right title and interest in the lease of Apartment 1 at H Street, Wollongong conducted by GT.

3.      That as and from the date of the making of these Orders Ms Jermain is to indemnify Mr Jermain and keep him indemnified in respect of all costs, fees, recurrent charges imposed by GT or otherwise in relation to Apartment 1 at H Street, Wollongong or in respect of any substitute or other accommodation hereafter provided to her by GT or otherwise.

4.      That as and from the date of the making of these orders Mr Jermain is to indemnify Ms Jermain and keep her indemnified in respect of all costs, fees, recurrent charges imposed by GT or otherwise in relation to accommodation provided to him in the high dependency unit at H Street, Wollongong or in respect of any substitute or other accommodation hereafter provided to him by GT or otherwise.

5.      That simultaneously with Mr Jermain’s compliance with order 1 above the wife be and is hereby removed as a trustee of the D Superannuation Fund.

6.      That simultaneously with Mr Jermain’s compliance with order 1 above Ms Jermain do all things and execute all documents, instruments and writings necessary to forthwith retire as a trustee of the D Superannuation Fund.

7. Pursuant to s90MT(1)(A) of the Act, wherever a splittable payment becomes payable in respect of the Ms Jermain’s interest in the D Superannuation Fund Ms Jermain shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations being 100 per cent of the splittable payment and there shall be a corresponding reduction to the entitlement to Mr Jermain to whom the splittable payment would have been made but for this Order.

8.      Order 7 shall have effect from the operative time and the operative time is four (4) business days after making of these Orders.

9. Mr Jermain and Ms Jermain, in accordance with the obligations set out under the Act and the Superannuation Industry (Supervision) Act and Regulations 1994 shall do all such acts and things, and sign all such documents as may be necessary to calculate the entitlement of, and make payment to, Ms Jermain in accordance with the provisions herein.

10.    In the event that the splittable payment made pursuant to order 7 amounts to a sum less than $1,557,132.00 then Mr Jermain shall pay to the Ms Jermain within a further 7 days of his receiving notice from Ms Jermain as to the deficiency a sum equivalent to the deficiency.

11.    In the event that the splittable payment amounts to a sum greater than $1,557,132.00 Ms Jermain shall pay to Mr Jermain within 7 days of receiving the splittable payment a sum equivalent to the excess.

12.    That simultaneously with Mr Jermain’s compliance with Order 1 Ms Jermain shall resign as a director of B.

13.    That simultaneously with Mr Jermain’s compliance with Order 1 Ms Jermain shall transfer to Mr Jermain, or as he may direct, her shares in B.

14.    Mr Jermain will indemnify Ms Jermain in relation to all costs, taxes, debts or demands howsoever arising concerning B.

15.    Subject to the matters noted in the Notations and Orders 1-14 above Mr Jermain shall be entitled, as against Ms Jermain to all property, financial resources, personal effects, bank accounts in his possession as at the date of the making of these orders.

16.     Subject to the matters noted in the Notations and Orders 1-14 above Ms Jermain shall be entitled, as against Mr Jermain, to all property, financial resources, personal effects, bank accounts in her possession as at the date of the making of these orders.

17.    No orders are made as to costs to the intent that each party will pay their own costs.

18.    Both of the parties warrant that the information in the Application for Consent Orders to the Family Court of Australia between the parties signed on or about the 2^nd September 2015 is true and correct to the best of their knowledge and both parties acknowledge that they are relying on this warranty in entering these Consent Orders.

NOTATIONS

A.     Ms Jermain does not intend to make any claim for spouse maintenance against Mr Jermain and considers that the orders provide her with sufficient property and income for her present and future maintenance to an appropriate standard.

B.     Mr Jermain does not intend to make any claim for spouse maintenance against Ms Jermain and considers that the orders provide him with sufficient property and income for his present and future maintenance to an appropriate standard.

C.     Mr Jermain and Ms Jermain each release the other from any contractual obligation which, but for this order each of them previously had in relation to the estate of the other, including a contract previously made between them to make mutual wills.

D.     Neither Mr Jermain or Ms Jermain intend to seek to vary these orders on the basis of any change to their living arrangements or relationship status.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Jermain & Jermain has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER:  SYC 6073 of 2015

Mr Jermain

Applicant

And

Ms Jermain

Respondent

REASONS FOR JUDGMENT

1. These are proceedings in relation to an Application for consent orders.  The application was presented in a pro forma which is usually dealt with by a registrar in chambers.  The Application for consent orders and the consent orders themselves were filed on 23 September 2015.  The application came before a Registrar and the Registrar refused to make the orders. 

2. There has been an Application to review that decision, and that Application came before me in chambers.  I directed that the parties appear and that was arranged for today.  The parties are represented but did not attend in person. They each have health problems that prevent them from being here today.

3. The proceedings to review a decision of a registrar proceed by way of a fresh hearing.  I should say at the outset, if the documents that the registrar had were the only documents before the court now, I too would have refused to grant the Application. 

4. In addition to submissions on behalf of the parties, I have had the assistance of two late filed affidavits.  I think they were sworn on 22 October 2015, one by each of the parties, which give a bit more detail in relation to the presenting circumstances.  The orders sought are orders for settlement of property. 

5. The husband and wife are 81 and 79 years of age respectively.  The husband suffers from Parkinson’s disease, has been unwell for some time.  The wife has transient health problems.  I think she might have had a fall recently and she has had some dental treatment and other issues.  Otherwise she is basically healthy.

6. The parties started to live together in 1961 and were married in 1969.  They have never separated.  They are not divorced and in the notations and recitals in the documents filed, they indicate that there is no application or intention on the part of either of them to seek a divorce. 

7. The authorities have it that, little more than the fact of an agreement and that the parties are represented, it is required for the court to be satisfied that it is appropriate to make an order for settlement of property. An order for settlement of property is made under s 79 of the Family Law Act 1975 (Cth) (“the Act”). Since the decision of Stanford v Stanford (2012) 247 CLR 108, a decision of the High Court, it has been accepted that there is, in effect, a two stage process: The Court is to be satisfied that it is just and equitable for there to be an order and, secondly, taking into account the matters in the section, the order itself has to be just and equitable.

8. A flag arises in relation to property settlement proceedings when parties are not separated.  That is the case because unlike orders in relation to parenting proceedings and other things, the Court’s power is exhausted by the making of an order for settlement of property.  The aspiration would normally be that there would be one property settlement order.  We know from a decision of Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 that the order could be made in components. It could be made on separate dates. But, essentially, the Court’s power in relation to assets, remembering that the power under s 79 is to change interests in property, that power is exhausted by its exercise.

9. There is a window of opportunity, putting aside slip rule considerations and machinery orders and the right of an appeal. There is a provision under s 79A whereby there can be, some interference in that order can be set aside or varied. That can be done where the parties agree and it can be done where the Court is satisfied that there is a miscarriage of justice for various reasons.

10. Section 79A provides narrow scope to interfere with an order. Perhaps for that reason, there are concerns in relation to orders that might not be final orders. Section 81 of the legislation expresses an aspiration that orders under Part VIII will separate the finances of the parties where practicable. One could understand why that would be done after separation rather than during an intact marriage. The fact is, however, there is nothing in the section that requires that property settlement orders be made only after separation.

11. There have been a number of decisions of this Court whereby orders have been presented for making by consent and have been refused in circumstances where there has been no breakdown of the marriage.  Typically that has arisen where there is no real justification for the orders sought, save for the avoidance of stamp duty.  The Family Law Act provides an exemption in relation to stamp duty laws associated with transfers of property in the context of property settlement orders. The concern is that instead of a natural application for the purposes of s 79 and s 81, there is a collateral purpose for the proceedings which is to save stamp duty costs associated with a transfer.

12. That was the situation facing the Deputy Chief Justice when he refused to make an order in Redman & Redman [2012] FamCA 364. Although, I think, ultimately, it was found there was not a significant stamp duty impost, the only reason offered to his Honour for the transfer in an intact marriage, was the avoidance of stamp duty. His Honour refused to make the order and that decision was upheld by the Full Court comprising the Chief Justice, Finn and Watts JJ and that was a decision made on 14 October 2013, (2013) FLC 93-563.

13. I turn to the circumstances of this case and they are unusual.  This is a very long marriage.  The documents that accompanied the consent orders explained the reason for the orders in one line that the wife sought to have control over her own financial circumstances.  In fact, it is one of the many notations in the form of orders:

    [Ms Jermain] has requested that she and [Mr Jermain] enter into a property settlement so that [Ms Jermain] can control her own financial circumstances.

    And the notations go on:

    The parties have generated significant wealth over the term of their marriage.  The husband had children from a former relationship.  It seems to be acknowledged those children were, effectively, treated as children of this marriage.

    The notations record that the parties each acknowledge that they jointly made a series of gifts of valuable real estate and other property prior to making these orders.  They transferred to Mr I Jermain who, I think, might be the husband’s grandson, their former matrimonial home, F Street, E Town.  That is a property in the G Region with a value of about $1.55 million.  They transferred to Mr C and Ms J Jermain, and I think Mr C Jermain is the husband’s son, in or about October 2014, the property at Lot 1 E Town Road, E Town which was worth about $1.6 million.  In or about October 2014 they transferred to Mr C and Ms J Jermain, the property at Lot 2 E Town Road at E Town which was worth $1.3 million.  They transferred Lot 1 Suburb K Street, Suburb K, to Mr C Jermain as to one share and as to Ms J Jermain as to the other share.  That property had a value of approximately $1.9 million.  They also transferred various items of personal property, including furniture, machinery, artworks, to family members.

1. I assume Ms J Jermain is the wife of Mr C Jermain.  The recitals say that there were two children of husband’s first marriage:  Mr C and Ms D Jermain.  Thus many millions of dollars in property have been alienated by the parties by agreement to the husband’s son and grandson and daughter-in-law.  The recitals reveal that neither the husband nor the wife seeks to set aside, vary or otherwise resile from those transfers.

2. As to the property owned by the parties and referred to in the Application, they have significant assets in superannuation and they own a property in a retirement development near Wollongong.  They jointly own Unit 1, in the development and attribute to it a value of about $1 million.  On 3 July 2014, the husband moved into the high care facility which is part of the development but the wife continues to live in Unit 1.

3. I am not quite sure about the arithmetic in this, but their document says that each of the parties has $846,400 in the Commonwealth Bank, so that is nearly $1.7 million.  They have investments in a business called B with each of them holding shares worth $91,187. They have no liabilities that they identify.  They have a bit over $3 million in superannuation.

4. The parties assert that they have no income.  And although it is not set out very clearly anywhere, it appears that the husband’s son, whether as a formal or informal part of the agreement that had all of those assets transferred to him, provides financial support to the parties. That support is in addition to physical support, which the husband acknowledges.

5. As to the arithmetic the Application is a bit confusing because as I say, it records that the parties have $3 million in superannuation and later asserts that as a result of the settlement, the husband will receive $2.711 million in superannuation and the wife, $1.5 million, which makes more than $4 million in superannuation.  I do not think it is necessary for me to work all of that out. 

6. A potential concern in property settlement orders that all of the assets are transferred to one party and the other party retains debts.  It would be difficult to find that such an arrangement was just and equitable.  Here, the parties’ declared intention is to separate their finances on virtually an equal basis.  They propose a slight imbalance in favour of the wife.  The parties have assessed it at 51.65 per cent to the wife, 48.35 per cent to the husband.

7. In a long marriage, there would need to be some explanation why the property settlement was not somewhere near equal.  This is somewhere near equal. 

8. As to the alienation of millions of dollars of assets - if there were contested property settlement proceedings and there was an application to do set aside or revisit those transactions, they could be called into question. Section 79 provides to settlement in favour of children but there is usually no evidence, for example, that either the beneficiary, in this case the husband’s son or grandson contributed in any way to the property pool. The background facts suggest that in addition to making property developments, the husband had another business. The evidence is that his son and grandson now operate and work in that business. Perhaps that accounts for part of the reason why things have been done in this way.

9. The parties say, in effect, that they did not want to go to the trouble, uncertainty and expense of making a binding financial agreement.  That is the obvious course they could have taken to try and resolve things.  The recitals and the proposed orders suggest that the parties are trying to achieve the benefits of a binding financial agreement.  They are trying to bring to an end their parties rights under the legislation.  For example they seek an order that they be restrained from bringing proceedings.  An order that a court could never make.

10. But that is not the end of the enquiry.  I have indicated to the parties’ representatives that provided those offending provisions were taken out of the orders, or I simply noted it seems to me that it is proper to make the orders.

11. Although it was not expressed in the documents put to the registrar, there is now a situation where the wife is beholden under an informal agreement to her stepson for her income.  One could understand that she might be disturbed by that arrangement.  Then there is the potential for the husband to predecease the wife.  That would turn attention to his estate.  There is the issue about how, under New South Wales real property law, the ownership of the parties’ unit would be treated.  Would she take under a right of survivorship or is there a risk that her accommodation could potentially be the subject of litigation elsewhere.  What the parties have described as a situation whereby although their marriage is still intact, orders would be made now that would put the unit in the wife’s name and the quid pro quo would be that more of the parties’ superannuation would go to the husband.

12. That accords with their needs now.  The husband’s accommodation is taken care of in the high care part of the facility.  His need is for income.  He has made an arrangement with his son.  He has arranged for the income from the parties’ superannuation to be reinvested, rather than generating an income directly to the parties.  There is no doubt that the parties’ superannuation would be in the payment phase.  In any event, theirs is a self-managed superannuation fund, so they would not be bound by all of the formalities of the superannuation laws, I would have thought.  But on any view, the superannuation must be in the payment phase in any event.

13. And unlike the situations that are presented to Court in other cases of intact marriages.  It is difficult to see a major change of circumstances that might give rise to a need to bring the matter back.  Sadly, Parkinson’s disease is a progressive, degenerative condition.  I doubt that the husband would have an expectation that he would be able to return to the parties’ unit. I do not mean to be cruel about it.  One can appreciate that there is a reason, now, for making orders that is not just to do with obviating a stamp duty obligation.  The reason is to give the wife security in respect of her own affairs and circumstances.

14. There is a suggestion in the documents that there has been a falling out within the family.  The husband says that the wife has met somebody, an accountant, I think, at the facility and that has caused this problem.  She says that is not true. In any event it is entirely irrelevant.  There is reference in the documents to the wife having concerns about disposing of her own estate and being able to deal with her will without having to worry about the fact that her affairs are legally linked still with the husband.

15. We know there has been very fulsome distribution from the parties’ assets to the husband’s son and grandson and one could understand that the wife might have an aspiration make secure provision for members of her family.  Unique to this situation is the fact that the husband’s son is not the son of the wife.  There may be problems under the Family Provisions Act 1982 (NSW) or the potential for litigation which the parties would like to avoid, or at least the wife would like to avoid.

16. It is clear on the documents the proposed orders were not originally thought of by the husband.  He says “My wife wants this done and I agree to it”.

17. Part of the reason for the proposed orders is that the parties have put in place a very confusing arrangement.  Whereas the parties’ assets would have provided adequate support for them, they have chosen not to live on the income of their superannuation, but to reinvest it, and they have chosen – or they are, in fact, supported on a day to day basis by the husband’s son.  The husband says that he turns to his son and daughter-in-law on a daily basis for assistance, as well as medical issues.  He says “Although we,” meaning he and his wife, “remain on amicable and affectionate terms, our relationship is different to what was previously in that we can no longer cohabit, we no longer make joint financial decisions, we now seek financial counsel from other people whereas we would have resolved such matters when they arose together.”  There is evidence that the husband’s son held a power of attorney under which he had some control over the parties’ assets.  For her part, the wife has revoked that power of attorney.

18. So a picture emerges of a background involving dispositions to family on the husband’s side, and of a complicated arrangement whereby the parties are not the masters of their own destiny notwithstanding that their assets would provide them with support.  The arrangement makes the wife vulnerable or she believes that it makes her vulnerable, including in relation to her accommodation.  There has been something of a falling out with the person who had some financial responsibility and provided day to day financial support to each of the parties.  It seems to me that provided what I might call the falsely aspirational aspects of the terms of the orders, provided those things are expunged, in my view it would be just and equitable in those circumstances that there be an order for settlement of property.  It seems to me distributions within a percentage or two of an equal distribution make sense of a long marriage given that the parties do not want to resile from or take into further account the fact that they have given away what must be six or seven or more million dollars over the recent years. 

19. In my view that is sufficient.  If I can indicate to the parties that I will make orders in terms of a document amended as indicated, provided that a minute in those terms is sent to my chambers and I can be informed that the parties continue to agree to the making of those orders. 

I certify that the preceding thirty two (32) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 23 October 2015.

Associate:

Date:  5 November 2015