Ogden and Ogden
[2010] FMCAfam 865
•5 November 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| OGDEN & OGDEN | [2010] FMCAfam 865 |
| FAMILY LAW – Property – long marriage – whether wife’s interest in Family Trust forms part of the property pool – analysis of Kennon v Spry and subsequent authorities – wife’s interest in Family Trust found to constitute “property” as defined under the Family Law Act 1975 – determined that an asset by asset approach be taken to enable a just and equitable distribution of the parties’ assets. |
| Family Law Act 1975, ss.4(1), 75, 79, 106B Social Security Act 1991 |
| Hayne and Hayne (1977) FLC 90-265 Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 In the Marriage of Kelly (No.2) (1981) 7 Fam LR 762 Garrett and Garrett (1984) FLC 91-539 In the Marriage of Ashton(1986) 11 Fam LR 457 Norbis v Norbis (1986) FLC 91-712 Davidson & Davidson (1990) 14 Fam LR 817 In Marriage of Goodwin (1990) 101 FLR 386 Harris & Harris (1991) 15 Fam LR 26 M v M [1998] FamCA 42 C & C [1998] FamCA 143 Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 Re NHC & RHC (2004) FLC 93-204 M and M [2006] FamCA 913 Kennon v Spry (2008) FLC93-388 Kennon v Spry [2008] HCA 56 |
| Applicant: | MS OGDEN |
| Respondent: | MR OGDEN |
| File Number: | MLC 9621 of 2009 |
| Judgment of: | Bender FM |
| Hearing date: | 11 August 2010 |
| Date of Last Submission: | 11 August 2010 |
| Delivered at: | Melbourne |
| Delivered on: | 5 November 2010 |
REPRESENTATION
| Counsel for the Applicant: | Ms Williams |
| Solicitors for the Applicant: | Wisewould Mahony Lawyers |
| Counsel for the Respondent: | Self-represented |
| Solicitors for the Respondent: | Self-represented |
ORDERS
The parties forthwith place on the market for sale the property situate at and known as Suburb B, being the land more particularly described in Certificate of Title Volume [omitted] (“the Suburb B sale”).
The Suburb B sale shall be conducted by a real estate agent agreed between the parties and failing agreement as is nominated by the President of the Real Estate Institute of Victoria and on such terms and conditions and at such reserve price as is agreed between the parties and failing agreement as determined by the selling agent.
The parties forthwith place on the market for sale the property situate at and known as Suburb A, being the land more particularly described in Certificate of Title Volume [omitted] (“the Suburb A sale”).
The Suburb A sale shall be conducted by a real estate agent agreed between the parties and failing agreement as is nominated by the President of the Real Estate Institute of Victoria and on such terms and conditions and at such reserve price as is agreed between the parties and failing agreement as determined by the selling agent.
On or before 30 November 2010, the wife shall notify the husband in writing of her intention to either appoint or not appoint a separate Trustee in respect to Class B of the P Trust pursuant to Clause 21(vi) of the P Trust Deed.
In the event the wife advises the husband of her intention to appoint a separate Trustee for Class B of the P Trust pursuant to Clause 21(vi) of the P Trust Deed:
(a)The wife shall ensure such separate Trustee as appointed is herself or a company in which she has control (“the New Trustee”);
(b)Upon the Trustee of the P Trust transferring to the New Trustee the portion of the Trust Fund to which Class B is entitled, the wife shall cause such New Trustee to distribute to the husband an amount equal to 10 per cent of the value of the portion so transferred;
(c)The wife otherwise retain all the right title and interest in the remainder of the assets of the New Trustee;
(d)Upon settlement of the Suburb B sale, the proceeds shall be distributed as follows:
(i)Payment of all costs and commissions of the sale;
(ii)Discharge of the mortgage to the Bank B;
(iii)Discharge of the Bank B overdraft;
(iv)Payment of the husband’s Mastercard to a maximum of $20,000.00; and
(v)The balance divided equally between the parties;
(e)Upon settlement of the Suburb A sale, the proceeds shall be distributed as follows:
(i)Payment of all costs and commissions of the sale;
(ii)Payment of the husband’s debt to Centrelink of $52,220.00; and
(iii)The balance divided equally between the parties.
In the event the wife advises the husband of her intention not to appoint a separate Trustee for Class B of the P Trust pursuant to Clause 21(vi) of the P Trust Deed:
(a)Upon settlement of the Suburb B sale, the proceeds shall be distributed as follows:
(i)Payment of all costs and commissions of the sale;
(ii)Discharge of the mortgage to Bank B;
(iii)Discharge of the Bank B overdraft;
(iv)Payment of the husband’s Mastercard to a maximum of $20,000.00; and
(v)The balance divided equally between the parties;
(b)Upon settlement of the Suburb A sale, the proceeds shall be distributed as follows:
(i)Payment of all costs and commissions of the sale;
(ii)The payment of the husband’s debt to Centrelink in the sum of $52,220.00
(iii)The amount of $58,314.90 to the husband; and
(iv)The balance divided equally between the parties;
(c)The wife shall retain all right, title and interest in the Class B portion of the P Trust.
The parties’ chattels shall be divided equally between them by agreement and failing agreement on the basis that each party shall take it in turn to choose an item of furniture and personalty.
The parties have liberty to apply on short notice in relation to the Suburb B sale or the Suburb A sale.
In the event either party refuses or neglects to comply with any provision of this order:
(a)a Registrar of the Federal Magistrates Court of Australia at Melbourne is hereby appointed to execute all deeds and documents in the name of the party in default and do all things and acts necessary to give validity and operation to these orders; and
(b)the defaulting party is ordered to pay all reasonable costs incurred by the other party for the purpose of enforcing this order and providing his/her damages.
For the purpose of order 10 herein, an affidavit setting out the defaulting party’s failure to comply with the orders shall be sufficient evidence of neglect and default.
IT IS NOTED that publication of this judgment under the pseudonym Ogden & Ogden is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 9621 of 2009
| MS OGDEN |
Applicant
And
| MR OGDEN |
Respondent
REASONS FOR JUDGMENT
Introduction
This is a matter relating to the adjustment of property between the parties after a very long marriage of 44 years.
The wife is seeking orders that the parties’ assets, which she submits consists of the former matrimonial home, their holiday property in Suburb A and their chattels, be divided equally between them.
The wife argues that during their long marriage each party contributed equally, she primarily in the role of homemaker and parent and the husband as the breadwinner. She further argues that there is no adjustment required in either party’s favour pursuant to s.75(2) of the Family Law Act 1975.
The husband is seeking orders that the parties’ assets be divided such that he receives 70 per cent of the proceeds of sale of the former matrimonial home, 80 per cent of the proceeds of sale of the Suburb A holiday home and an equal division of the parties’ chattels.
The husband also seeks orders that the wife’s “interest” in the P Trust, a Trust established by her grandmother in which she is a Class Guardian of one of five specified classes under the Trust Deed, be included in the parties’ pool of assets and that he receive a 50 per cent share of the wife’s share of that Trust.
In relation to the parties’ jointly owned real estate, the husband argues that he has made the greater contribution to the real estate. He submits that during the course of the marriage he earned wages in excess of $1,300,000.00, he maintained and improved the properties, that the Suburb A property was purchased from his parents at less than market value and that he also contributed as parent and homemaker.
In 2007 Centrelink cancelled the parties’ aged pensions and ordered the wife to repay Centrelink the sum of $53,688.00 and the husband to repay Centrelink the sum of $52,220.00. This decision was based on the finding by Centrelink that the wife had an attributable interest of 20 per cent in the P Trust under the social security legislation such that it, combined with the parties other assets, put their assets beyond the allowable level for a married aged pension. The husband pursued a review of the decision of Centrelink at the Administrative Appeals Tribunal (“AAT”). The AAT affirmed Centrelink’s decision.
The husband argues that based on the AAT decision and in light of legal advice received by the parties relating to that review, the wife has a 20 per cent interest in the capital assets of the Trust and as such it is property that should be included in the pool of assets to be divided between the parties.
The husband further argues that if the wife’s interest in the Trust is not deemed to be property of the parties, it is a resource of the wife and there should be an adjustment made pursuant to s.75(2) of the Family Law Act 1975 in his favour to reflect that resource.
Background
The wife was born in 1942 and is 68 years of age. She is engaged in home duties. She and the husband are currently separated under the one roof.
The husband was born in 1939 and is 71 years of age. He is retired.
The parties married [in] 1966 and separated under the one roof on 14 October 2009. They have two adult children, [X] aged 43 years and [Y] aged 40 years.
At the commencement of cohabitation, the wife was employed as an [omitted] at [omitted]. and the husband was employed as a professional with the [omitted]. The parties purchased the former matrimonial home at Suburb B shortly after their marriage utilising their small savings and a large mortgage with [omitted] which later became Bank B.
The wife fell pregnant soon after the parties married and ceased her paid employment. Thereafter the parties had a somewhat “traditional” marriage with the wife performing home duties and the husband in full time paid employment.
In 1970 the parties purchased a property in Suburb A from the husband’s parents for $6,000.00, being the amount the husband’s parents had paid for the property some four years earlier. They borrowed $5,000.00 from a co-operative society to finance the purchase. The Suburb A property was utilised as the holiday home for the family.
In 1972 the wife commenced part-time employment for two half days per week at [omitted]. She worked in this position for ten years earning a small wage which was utilised for the family.
In 1987 the husband had a heart attack. He was unable to work for three months. He formally retired at age 53 but continued to work on a casual basis for several years.
After his retirement from full time employment, the husband received his superannuation entitlements by way of a lump sum payment. This was used by the parties for living expenses and overseas travel. None of the husband’s superannuation payout remains.
In 2005 the parties travelled to Ireland to trace the husband’s family history. To fund their travel the parties took out a mortgage over the former matrimonial home. It was unencumbered at that time. The mortgage has not been serviced since April 2010 and the bank is threatening foreclosure.
In 1982 a private Trust, the P Trust was established. The P Trust was established from funds provided from the estate of the wife’s late grandmother. The wife is one of five appointors of the P Trust and the sole appointor and class guardian of Class B of the P Trust. She is one of the five directors of the corporate Trustee of the P Trust, Company A.
The other four appointors and directors of P Trust are the wife’s four siblings. The P Trust is divided into five separate classes for each of the five sibling families. Each of her siblings are also the appointors and Class Guardians of their respective classes.
The Trust structure and its workings will be examined in greater detail later in this judgment.
As set out earlier in this judgment, in 2007 Centrelink ruled that under the Social Security Act 1991 the wife had attributable Trust assets, being a 20 per cent interest in the P Trust assets, which at that date they valued at $583,189.00.
The wife has, since the creation of the Trust, received distributions from the P Trust as follows:
30 June 1999
$2,500.00
30 June 2000
$10,000.00
3 June 2002
$5,000.00
3 June 2003
$3,000.00
30 June 2006
$10,000.00
July 2007
$10,000.00
June 2008
$53,688.00 (used to discharge wife’s debt to Centrelink)
June 2008
$20,500.00 (used by the wife for living expenses and payment of legal expenses)
August 2009
$5,440.00 (used by the wife for living expenses and payment of legal expenses)
1 May 2010
$6,401.00 (used by the wife for living expenses and payment of legal expenses)
TOTAL
$126,529.00
After the parties separated the husband resumed receipt of the aged pension. He also reached agreement with Centrelink to repay his debt of $52,220.00 at the rate of $20.00 per fortnight.
The issues
Having heard the parties’ evidence, considered their proposals and heard submissions, I identified the issues between the parties to be as follows:
a)Has the wife made full and frank disclosure in relation to how the distributions from the P Trust received by her during the marriage were utilised?
b)What constitutes the property pool, and in particular:
i)Is the wife’s “interest” in the P Trust “property” as defined by the Family Law Act 1975 and does it therefore form part of the pool for division between the parties?
ii)Is the husband’s debt to Centrelink a joint debt to be paid from the proceeds of sale of real estate prior to division of assets?
iii)Does the balance of monies of approximately $12,000.00 received by the wife from the P Trust distributions to her, currently in her account, form part of the pool?
c)Did the husband make a greater contribution than the wife to the parties’ asset base by dint of his employment and his homemaker and parenting contributions?
d)In the event the wife’s “interest” in the P Trust is not property for the purposes of the Family Law Act 1975, should her receipt of distributions from the P Trust be treated as a resource for the purposes of s.75(2) of the Family Law Act 1975 and therefore there be a weighting in the husband’s favour?
The legislation
Section 79 of the Family Law Act 1975 defines the Court’s powers in determining applications for property settlement. Section 79(1)(a) of the Family Law Act 1975 provides that:
(1)In property settlement proceedings, the court may make such order as it considers appropriate:
(a)in the case of proceedings with respect to the property of the parties to the marriage or either of them--altering the interests of the parties to the marriage in the property.
Sub-section 79(2) of the Family Law Act 1975 provides that:
The Court shall not make an Order under this Section unless it is satisfied that, in all the circumstances, it is just and equitable to make the Order.
Section 79(4) of the Family Law Act 1975 sets out the matters the Court must take into account when considering what orders should be made for the alteration of the interest of the parties in property. Those matters are:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
f)any other order made under this Family Law Act 1975 affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The four-step approach
In Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 at [39], the Full Court of the Family Court described the preferred four-step approach in property matters as follows:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), ("the other Family Law Act 1975ors") including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case ….
Assets and liabilities
Full and frank disclosure
The husband alleged the wife had failed to make full and frank disclosure in relation to the distributions paid to her by the P Trust during the marriage. The husband cross-examined the wife at length as to whether she had bank accounts in her own name prior to separation into which she deposited the monies distributed to her from the P Trust during the marriage.
It was the wife’s evidence that prior to separation she did not have any bank accounts in her own name. It was her evidence that the only bank accounts prior to separation in which she had an interest were the parties’ joint accounts. She was unable to remember how the monies distributed to her from the P Trust were received but thought it was most likely to have been by way of a cheque. She was also unable to remember if the cheques from the Trust were payable to her, or to cash, had been put into the parties’ joint accounts or otherwise dealt with.
It was the wife’s evidence that save for a trip with her sisters and mother in or around 2000 and the repayment of her Centrelink debt, all monies distributed to her from the P Trust prior to separation had been utilised for the benefit of the family.
The wife’s evidence on the details of financial matters prior to separation was vague. However, I accept her evidence that the husband was, at his insistence, responsible for the parties’ finances and that she had little involvement in or understanding of the management of the parties’ finances during the marriage.
I found the wife to be a truthful witness and that she was genuinely unable to remember how the monies received from the Trust were paid to her. I am satisfied that prior to separation, her only bank accounts were those held jointly with the husband. I am further satisfied that, other than the repayment of the Centrelink debt, she utilised all monies received by her during the marriage from the P Trust for the benefit of the family.
I am therefore satisfied the wife has made full and frank disclosure to the husband of all relevant documentation in her possession.
The P Class Family Trust
As set out earlier in this judgment, in 1982 a private Trust, the P Trust, was established at the instigation of the wife’s mother from funds provided by the estate of the wife’s late grandmother.
Whether Trust property forms part of an asset pool is very much a question of fact. In the matter of In Marriage of Goodwin (1990) 101 FLR 386 at 392 the Full Court stated that
“…the question whether the property of the Trust is, in reality the property of the parties or one of them, or a financial resource of the parties or one of them, is a matter dependant upon the facts and circumstances of each particular case including the terms of the relevant Trust Deed.”
Perusal of the Trust Deed of the P Trust provides the following information:
·the class appointors acting jointly may remove the Trustee;
·a class appointor is entitled to appoint a separate Trustee in respect to any portion appropriated to that class and upon appointment of a separate Trustee being made, the Trustee of the Trust Fund shall transfer the portion to the new Trustees;
·the Trust vests on the second anniversary of the death of Ms P (the wife’s mother) or such later date as the Trustee (with the consent of such class guardians as are alive) determine;
·the P Trust is a discretionary Trust;
·the Trustee of the P Trust is Company A;
·the wife is one of five directors of Company A, together with her four siblings. All decisions of the Trustee are decided by a majority;
·the Trustee has the absolute discretion as to the distribution of income from the Trust;
·the Trust is divided into five specified classes;
·each of the five siblings are the Class Appointor and Class Guardian for a specified class. The wife is the Class Guardian and Class Appointor of the B Class;
·each of the five specified classes has specified beneficiaries being the children of the relevant Class Appointor/Guardian as well as additional members of the class which includes their spouse and each of the other siblings, their spouses and children;
·the Trustee has discretion to distribute the capital of a class (or portion) to any beneficiary for his own use or benefit, such discretion is fettered by the Trust Deed in that where there is a Class Guardian, the Trustee cannot exercise the reserved or restricted powers in relation to that portion without the consent of the Class Guardian of the relevant class. “Restricted powers” is defined under the Trust Deed to mean the powers of the Trustee to transfer the capital of a portion to any beneficiary, lend money to any beneficiary or apply any income or capital to any beneficiary for their maintenance, education or benefit.
In 2008 the Hugh Court considered the question of whether Trust property was property as defined under section 4(1) of the Family Law Act 1975 in the matter of Kennon v Spry (2008) FLC 93-388 (High Court citation: [2008] HCA 56).
The facts of Kennon v Spry (supra) were as follows:
·In 1968 the husband settled by parole a discretionary Trust in which he was both settlor and Trustee. To avoid stamp duty, he did not execute a Trust Deed until October 1981;
·Under the Trust the eligible beneficiaries were the husband, any spouse of the husband, the husband’s issue, siblings and their spouses and issue;
·In 1978 the husband married and they had four children (now adult);
·In 1983 the husband varied the Trust to exclude himself as a beneficiary of the Trust;
·In 1998, when the marriage was in difficulty, the husband again varied the Trust Deed so as to exclude the wife as a capital beneficiary;
·In October 2001 the parties separated;
·In January 2002 the husband established four separate Trusts, one for each of the parties’ four children and distributed equally to each of the four new Trusts in equal shares, the capital and income of the Trust;
·
In May 2002 the wife instituted proceedings in the Family Court seeking orders for an equal distribution of the parties’ property, including the assets in the children’s Trust, together with an order that the 1998 and 2002 Trust variations be set aside under
s.106B(1) of the Family Law Act 1975;
·At first instance the wife was successful. The trial judge set aside the 1998 and 2002 variations finding the husband’s intention in such variations was to defeat any future property claim by putting the Trust assets beyond the reach of the Family Court. Having set aside the variations, His Honour then found the Trust assets to be “property” under the Family Law Act 1975 because of the husband’s control of those assets and divided the pool 52 per cent to the husband and 48 per cent to the wife;
·On appeal by the husband, the Full Court of the Family Court upheld the decision of the trial judge;
·By way of special leave the husband appealed to the High Court;
·A majority of the High Court upheld the orders of the trial judge.
The majority of the Court consisting of French CJ, Gummow and Hayne JJ found the Trust property to be property under the Family Law Act 1975, albeit for slightly different reasons.
Having briefly outlined the history of the matter, French CJ then considered the question of when a Trust could be considered property in the context of the Family Law Act 1975. His Honour confirmed that the word “property” as it appears in s.79 has properly been given a wide meaning by the Full Court. His Honour then considered the series of decisions of the Full Court of the Family Court which had dealt with the issue of whether the assets of a Trust fell within the definition of property.
His Honour made reference to In the Marriage of Kelly (No.2) (1981)
7 Fam LR 762 where the Full Court found that the assets of the Trust in which the husband was neither settlor, appointor nor were either of the parties beneficiaries, were not property as defined under the Family Law Act 1975, because:“The husband could not assert any legal or equitable right in respect of them.”
His Honour then considered the matter of In the Marriage of Ashton(1986) 11 Fam LR 457. In that matter the husband, who had been the Trustee of the family Trust, replaced himself as Trustee with a company but continued as the sole appointor. The husband was not a beneficiary, but received income from the Trust and it was conceded that he was in full control of the assets of the Trust. In that matter the Full Court held that:
"No person other than the husband has any real interest in the property or income of the Trust except at the will of the husband.”
The Full Court found the Trust assets to be property of the parties under the Family Law Act 1975 and ordered that the husband was to cause the Trustee of the Trust to pay or to appoint himself as Trustee to pay a lump sum payment to the wife out of the Trust assets. Leave to appeal from this decision to the High Court was refused by the High Court.
His Honour then considered In Marriage of Goodwin (1990) 101 FLR 386. The husband was not the Trustee but was the sole appointor and also a beneficiary. The Full Court of the Family Court upheld the finding that
“The Trust property was, in reality, the property of the husband”
and
“In that case the husband had the sole power of appointment of the Trustee which was a creature under his control and he was a beneficiary to whom the Trustee could make payments exclusive of other beneficiaries as the husband saw fit.”
French CJ, having considered the submissions put by both parties in Kennon v Spry (supra), held in paragraph 62:
“It is the Trust assets, coupled with the Trustee's power, prior to the 1998 Instrument, to appoint them to her and her equitable right to due consideration, that should be regarded as the relevant property. It should be accepted that, in the unusual circumstances of this case and but for the 1998 Instrument and the 18 January 2002 Dispositions, s 79 would have had effective application to the Trust assets. Dr Spry was the sole Trustee of a discretionary family Trust and the person with the only interest in those assets as well as the holder of a power, inter alia, to appoint them entirely to his wife.”
In paragraphs 65 and 66, His Honour further held as follows:
65.Where property is held under such a Trust (sic a
non-exhaustive discretionary Trust with an open class of beneficiaries) by a party to a marriage and the property has been acquired by or through the efforts of that party or his or her spouse, whether before or during the marriage, it does not, in my opinion, necessarily lose its character as "property of the parties to the marriage" because the party has declared a Trust of which he or she is Trustee and can, under the terms of that Trust, give the property away to other family or extended family members at his or her discretion.66.For so long as Dr Spry retained the legal title to the Trust fund coupled with the power to appoint the whole of the fund to his wife and her equitable right, it remained, in my opinion, property of the parties to the marriage for the purposes of the power conferred on the Family Court by
s 79. The assets would have been unarguably property of the marriage absent subjection to the Trust.His Honour, when considering the position of the other beneficiaries under the Trust Deed, held in paragraph 68:
“It has long been accepted that in some circumstances the Family Court has power to make an order which will indirectly affect the position of a third party.”
In the submissions put on behalf of Dr Spry, it had been argued that the finding of Gibbs J in Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 precluded the Family Court from making orders that impacted upon the rights of third parties. In particular Gibbs J held at paragraph 355:
"Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it."
In response to that submission French CJ held at paragraph 68 as follows:
“Giving full effect to the generality of the passage quoted from the judgment of Gibbs J, the case does not stand against the proposition that s 79 would apply in the circumstances of this case where the only property interests are those of the Trustee who is a party to the marriage, and where no other beneficiary has any legal or equitable interest apart from a right to due consideration and administration.”
His Honour then noted in paragraph 69:
“The preceding conclusion does not involve some general extension of s 79 which would require that it be hedged about with protective discretions of uncertain application to prevent its intrusion into Trust arrangements affecting assets foreign or extraneous to those acquired by the parties to the marriage in their own right. So if the husband were Trustee of a charitable Trust or executor of the will of a friend or client the mere legal title to the assets of such Trusts, because of their origins and character, could not be regarded as part of the husband's property as a party to the marriage within the meaning of the Family Law Act 1975.”
Gummow and Hayne JJ, whilst finding that the Trust was property under the Family Law Act 1975, came to that conclusion on a slightly different basis.
As with French CJ, their Honours held in paragraph 89 that:
“The phrase in par (ca) "with respect to the property of the parties to the marriage or either of them" should be read in a fashion which advances rather than constrains the subject, scope and purpose of the legislation.”
Their Honours held that the term “property” is not a term of art with one specific and precise meaning.
Their Honours held in paragraph 137 as follows:
“The jurisdiction being exercised by the Family Court was, as earlier indicated, jurisdiction over "proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them" (emphasis added). What matters in this case is that once the 1998 Instrument and the 2002 Instrument were set aside by the s 106B orders, the property of the parties to the marriage or either of them was to be identified as including the right of the wife to due administration of the Trust, accompanied by the fiduciary duty of the husband, as Trustee, to consider whether and in what way the power should be exercised. And because, during the marriage, the husband could have appointed the whole of the Trust fund to the wife, the potential enjoyment of the whole of that fund was "property of the parties to the marriage or either of them". Furthermore, because the relevant power permitted appointment of the whole of the Trust fund to the wife absolutely, the value of that property was the value of the assets of the Trust.”
The impact of Kennon v Spry
The commentary following the High Court’s decision in Kennon v Spry (supra) has been extensive. Many commentators have expressed concern that the decision undermines the independence of the Trust structure, and in particular removes the concept of discretion from Discretionary Trusts if the court can make orders that a Trustee exercise its powers in such a way that the beneficial interests of named beneficiaries in the Trust are disregarded.
Other commentators have speculated that the decision represents
“an appreciable extension of the meaning of property in the context of cases involving complicated Trust structures, especially those established to try and put Trust assets beyond reach.”[1]
[1] CCH Australian Family Law & Practice Volume 2, at 30,872
I was fortunate to have the benefit of hearing a paper presented by His Honour Justice Brereton, a judge of the Supreme Court of New South Wales entitled The High Court and Family Law – Two Recent Excursions.
In his paper and presentation His Honour considered the High Court decision of Kennon v Spry (supra). His Honour, after careful analysis of the case, the decisions of the judgments of each of their Honours, as well as the dissenting judgments, then considered the critics of that decision and in particular those which had suggested that the decision challenged previously held views as to the status of family Discretionary Trusts:
“forcing a re-think on whether a discretionary Trust is still an effective form of asset protection against the long arm of the Family Court.”[2]
[2] Michael Brown, ‘His, Hers or Theirs?’ (2009) 47 Law Society Journal 60
His Honour, in his paper, considered a long line of Full Court decisions of the Family Court in which that Court had found Trust assets to be property of the parties. In particular His Honour referred to In the Marriage of Ashton(supra) and In Marriage of Goodwin (supra) which have previously been referred to in this judgment.
In addition His Honour made reference to the matter of Davidson & Davidson (1990) 14 Fam LR 817 in which the Full Court of the Family Court held that as was the case in In the Marriage of Ashton(supra), the Trustee of the Family Trust was a company that was described by the trial judge as a “creature of the husband” and that such a view was open to the trial judge. The Full Court also held that it was appropriate that the trial judge, having found that the Trust assets form part of the property pool, then ordered that the Trustee of the Trust to transfer certain assets to the wife by way of property settlement.
His Honour, at page 16 of his paper, stated:
“It is worth noting that, in dismissing an application for special leave to appeal in Davidson, the High Court said:
We are not persuaded that there was an error or principle on the part of the Full Court of the Family Court in concluding that the applicant [husband] could cause the Trustee company to apply the capital of the Trust fund for the benefit of the respondent [wife] or for the benefit of a company in which he was a shareholder, so long as a beneficiary is a shareholder.
The primary judge found as a fact that the Trustee company was a creature of the applicant and the provisions of the Trust Deed are well open to an interpretation which supports the conclusion reached by the Full Court.”
His Honour also made reference to the Full Court decision of Harris & Harris (1991) 15 Fam LR 26 in which their Honours, having considered the specific terms of the Trust Deed, summarised it as follows:
“The very object of the Trust, as appearing from the instrument, was to put the husband, his appointor and guardian into the position of complete and unfettered control just as if he were the owner of the property. This arrangement was not a sham. It was a genuine transaction intended to bring about the legitimate income tax advantage and may have had other commercial motives.
In our opinion, the husband’s interest as a beneficiary under the Trust in combination with his rights and powers as appointor and guardian place him, for the purposes of s 79 of the Family Law Act 1975, into the position of an owner of property which property is constituted by his interest and his rights and powers under the Trust. This property is properly evaluated as equivalent to the value of the assets of the Trust.
Under s 79 the court may make orders altering the interests of the parties in this property. If necessary, the court may require the husband to exercise his rights and powers under the Trust Deed so as to bring about a settlement of property out of the corpus or income of the Trust for the benefit of the wife.”
Justice Brereton in his paper then concluded that Kennon v Spry (supra) is entirely consistent with the line of cases to which he had made reference.
Justice Brereton then set out why he believes Kennon v Spry (supra) is consistent with the long line of cases and argued that the common theme that runs through all of the cases, including Kennon v Spry (supra) is as follows:
“What emerges from these cases, although not always clearly articulated in them, is that the critical criterion that enabled assets of a discretionary Trust to be treated as property of the parties is the capacity of one spouse to exercise powers which can cause the Trust assets to become property of one or other of the spouses, and thus amenable to s 79. That is more clearly so where the “controller” is also an eligible beneficiary, but Ashton and Davidson show it to be so also where only the other spouse is an eligible beneficiary. Where those criteria are satisfied, the controller has power – as Trustee directly, or as appointor indirectly – to augment the pool of ‘property of the parties to the marriage or either of them’, to the extent of the Trust assets, if he or she so chooses. In distinction from the ordinary case, the Trustee’s interest is valuable, because it is in his or (sic her) power to procure a distribution of the whole of the Trust assets, if not to himself or herself, then to the other spouse, and thus to make it property of one or other of the spouses available for division between them.”
The question therefore in this matter is, in light of the decisions set out here before and in particular Kennon v Spry (supra), does Class B of the P Trust fall under the definition of property of the parties in the context of s 79 of the Family Law Act 1975.
The legal interest in the property of the Trust vests in the Trustee, which is Company A. The wife is one of five shareholders and directors of that company. As such, she does not have a controlling interest in the Trustee and thus no legal interest in the Trust property in her own right.
The Trustee company is not and cannot be seen as the wife’s “creature” as was the case in In the Marriage of Ashton (supra) and Davidson & Davidson (supra).
The assets of the P Trust consist entirely of shares. Those shares have their origin in the estate of the wife’s late grandmother. It is common ground that neither the wife nor the husband (or any of the wife’s siblings and their partners) contributed in any way to the Trust assets. Thus they do not fall under the form of asset referred to by French CJ in Kennon v Spry (supra) as:
“property held under Trust by a party to a marriage and the property has been acquired by or through the efforts of that party or his or her spouse whether before or during the marriage.”
It is common ground, again not refuted by the husband, that the Trust was established at the behest of the wife’s mother with the clear direction from her that the capital of the Trust was to be held for the benefit of her grandchildren, being the children of each of the wife and her siblings.
The Trust is managed by the wife’s brother, Mr P, who filed affidavits in these proceedings and also gave viva voce evidence at the final hearing. It was Mr P’s evidence that he has the management of the Trust and its affairs, including the completion of all books and accounts, notices and minutes and chairing of meetings.
He confirmed that the Trust was established from the estate of his late grandmother and consists of shares that were initially owned by her. It was his evidence that when the Trust was first established, all income of the Trust was retained and no distributions were made to any of the beneficiaries named under the Trust Deed. With the passage of time, distributions were made to the various siblings, dependent upon need, including a sister who had a health crisis and funds were needed to put her children in boarding school, a holiday was taken by his two sisters and his mother which was funded by the Trust and various small distributions up until the time that the wife in these proceedings lost her pension and was required to make a capital repayment to Centrelink as a result of her interest in the Trust.
A decision was then made by the siblings in their capacity as shareholders of the Trustee to make a distribution to the wife to enable her to discharge her debt to Centrelink. At the same time, and in the interests of equality the “Trustee” determined that there would be a distribution up to and including the end of the financial year 2009 so that each of the five siblings received an equal distribution of the Trust income.
Mr P confirmed that each of the siblings felt bound by the wishes of their mother that the capital of the Trust be preserved for the benefit of each of their children. Mr P conceded however that such restraints were not contained in the Trust Deed and that under the terms of the Trust Deed their mother had no power to direct or control the disposition of the Trust assets.
If the P Trust was a “simple” discretionary Trust whereby Company A as Trustee had the effective control of the Trust assets it would, in my opinion, be difficult to argue that the Trust assets were property or any part thereof was property of the wife pursuant to s.79 of the Family Law Act 1975.
However, this is not the case with the P Trust. Reference must be had to clause 21(vi) of the P Trust Trust Deed. That clause provides as follows:
21(vi)The Class Appointor of a class shall be entitled to appoint separate Trustees in respect of the Portion appropriated to that class and upon any such appointment of separate Trustee being made:
(a) the Trustee of the Trust Fund shall transfer the Portion to the new Trustees and for that purpose shall be entitled to exercise all the powers of apportionment hereinbefore contained;
(b) the new Trustees shall hold the Portion for the relevant class upon the Trusts as to income and capital and with the powers of investment advancement and application herein contained so far as applicable;
(c) the provisions of clause 22 hereof shall apply to the Portion of the Trust Fund transferred to the new Trustees;
(d) the provisions of the proviso to clause 1(n) hereof shall cease to apply.
Clause 1(n) provides as follows:
1(n)“Portion” shall mean in relation to each class of General Beneficiaries the number of equal parts of the Trust Fund appropriated to that class of General Beneficiaries as set out in the Schedule respectively;
PROVIDED that the Trustees may subject to clause 10 hereof by instrument in writing revocably or irrevocably declare the number of equal parts of the Trust Fund appropriated to each class of General Beneficiaries to be varied from the numbers respectively set out in the Schedule and upon the making of such declaration the Portions shall be varied accordingly but so that this power shall not be capable of being exercised so as to derogate from any interest to which any beneficiary has previously become indefeasibly entitled whether in possession or in reversion or otherwise.
The Schedule to the Trust Deed provides that the number of parts into which the Trust Fund is to be divided is 20 and that the number of parts appropriated to each class is four parts to each of the five classes, including four parts to Class B.
Mr P in his evidence confirmed that there had been no variation to the Trust Deed or its’ Schedule since its creation.
As Class Guardian and Class Appointor of Class B, the wife under the Trust Deed has the power to direct the Trustee of the P Trust to transfer to a Trustee which could be either herself or a company in which she has control, a one-fifth portion of the capital assets of the P Trust. Thereafter the wife or a company in her control as that “New Trustee” could distribute that one-fifth share or a portion thereof to herself or to the husband as they are in the class of General Beneficiaries named under the Trust Deed.
In these circumstances, it is arguable, using the analysis of Justice Brereton, that the wife has the power to direct that a one-fifth interest in the capital assets of the P Trust become property of either herself or the husband.
It was submitted on behalf of the wife that in light of the decision of French CJ in Kennon v Spry (supra) and in particular paragraph 65 of His Honour’s judgment to which I’ve previously made reference, that for a Trust asset to be considered property under the Family Law Act 1975, its origin and character must be determined and in particular a finding must be made that the Trust assets came about through the single or joint efforts of the parties. It was therefore argued on behalf of the wife that if the Trust assets were derived from an independent third party then they can not be held to be property of the marriage as defined under the Family Law Act 1975.
I do not accept those submissions as being a correct interpretation of French CJ’s findings. Nor is it an accurate reflection of the law in relation to property in this jurisdiction. It has long been accepted that the property of the parties to a marriage or either of them can come into being through no direct input of either or one of them. The most obvious example of such circumstance is where there is inherited property that is inherited by one of the parties during or prior to a marriage. Often these assets are such that neither party has made a contribution other than by bloodline or association. The manner in which such property is treated may vary depending upon the circumstances of the case, but there is no doubt that for the purposes of the legislation it is property as defined under s.4(1) of the Family Law Act 1975.
It was further submitted on behalf of the wife that unless ordered to do so by the court the wife will not exercise her powers under the Trust Deed to require the transfer of the Class B portion of the Trust to a Trustee established by herself and thereafter distribute that portion to either of herself or her husband as she, as do her siblings, believes she is bound by her mother’s wishes that those funds should go to her children.
It was therefore submitted that in this circumstance that portion of the Trust which could be transferred by the wife was not property as by way of a finding of fact, the transfer and distribution will not happen.
When the Trust was established at the behest of the wife’s mother, the Trust Deed could have been drawn in such a way as to require the Trustee to distribute the capital to her grandchildren only, and to otherwise enable the income to be distributed to her children or such other named beneficiaries during the life of the Trust. A Trust Deed in these terms is not uncommon. However, that was not done. The Trust Deed was drawn in the terms as set out in this judgment which enables each of the siblings, if they so desire, to have a one-fifth share of the Trust capital assets transferred to a Trustee of their choice and to have the funds thereafter distributed to the named General Beneficiaries which includes themselves, their spouses, their siblings, sibling spouses, children, nephews and nieces.
Whilst the wife may not seek or wish an order to be made in such terms, this court has the power under s.79 of the Family Law Act 1975 to order the wife to create a Trust vehicle over which she has control, and to then order she do all things necessary to request that the Trustee of the P Trust transfer the Class B portion of the Trust to that Trustee and thereafter order her or her Trustee company to distribute the assets of the “New Trust” in such proportions as determined by the court.
In these circumstances I am satisfied that the one-fifth portion of the Trust estate to which Class B is entitled is property as defined under the Family Law Act 1975 and is to be included in the pool of assets for distribution between the parties.
The court was not provided with a current valuation of the capital assets of the P Trust. In July 2007, when Centrelink determined that the parties’ assets exceeded that allowable for the aged pension because of the wife’s interest in the P Trust, they determined that the assets of the Trust were $2,915,745.00 and therefore the wife’s 20 per cent share was $583,189.00. It was Mr P’s evidence that there has been no realisation or sale of the capital Trust assets since the creation of the Trust.
Accepting that the assets of the Trust consist of shares, its’ capital value will vary from day to day depending on share prices. Whilst the value of shares has gone up and down since 2007, especially in light of the Global Financial Crisis, I am satisfied that, absent any further evidence, the capital value of the P Trust for the purposes of this matter will not have markedly altered since 2007 and is set at $2,915,745.00.
The husband’s debt to Centrelink
It has been well documented in this judgment that as a result of the decision of Centrelink that the wife’s interest in the P Trust formed part of the parties’ asset pool such that they went above the allowed assets for an old age pension, the parties were required to repay Centrelink pension payments received by them. The wife’s indebtedness of some $53,688.00 was repaid from funds that she received by way of distribution of income from the Trust. The husband’s debt of some $52,220.00 remains outstanding.
It was argued by the husband that his indebtedness to Centrelink is a liability incurred in the course of the marriage and as such should be treated as a joint liability and paid from the parties’ assets before any distribution of assets take place.
It was argued on behalf of the wife that the husband has been able to come to a very reasonable arrangement with Centrelink whereby he is only required to repay that debt at the rate of $20.00 per fortnight from his reinstated pension. It was further argued that he may pursue further appeals against that decision. The husband did not dispute he was considering appealing the AAT decision to the Federal Court. It was therefore argued that in those circumstances, it would be unfair for the debt to Centrelink of the husband to be treated as a joint liability.
To counter this, the husband argued that upon settlement of the sale of the matrimonial home, it was unknown whether Centrelink would require immediate repayment of the amount owing to them as he would have cash assets available to him to immediately repay that amount.
Having considered the parties’ submissions, I am satisfied in all the circumstances that the husband’s debt to Centrelink is a matrimonial debt in that it was incurred during the course of the marriage. That the wife was able to discharge her Centrelink debt by way of a distribution of the Trust leaving her in a situation where she was free of that liability does not change or alter the nature of the husband’s remaining liability.
In those circumstances I am satisfied that the husband’s debt to Centrelink is a joint liability which should be repaid from the parties’ assets prior to distribution of property between the parties.
Wife’s remaining Trust distributions
It was argued on behalf of the husband that the balance of monies held by the wife in her bank account from distributions by her from the family Trust should be considered part of the property pool. In the wife’s Form 13 financial statement sworn on 23 July 2010, the wife deposed to having some $12,000.00 in her bank account which represented the balance of the monies received by her from the distributions from the Trust. She has been in receipt of no income, other than those distributions, since July 2008 and has to support herself solely from these distributions.
I also accept the evidence of Mr P that there are no anticipated distributions from the Trust to any of the siblings likely to take place for the financial year 2010/2011.
The wife’s savings will have considerably diminished since the filing of the wife’s financial statement as they represent her only means of support at this time.
On the evidence it would appear the savings consist of monies distributed to the wife shortly prior to and after separation. As such, it is open to argument that such funds are not joint assets.
Further, the authorities are quite clear that monies that existed at separation which are used by the parties to fund their reasonable living expenses will not be notionally added back into the property pool (see M v M [1998] FamCA 42, C & C [1998] FamCA 143, Re NHC & RHC (2004) FLC 93-204 and M and M [2006] FamCA 913).
In all these circumstances, whatever savings the wife has spent since separation and whatever small amount of those savings remain shall not be added back into the pool.
The matrimonial asset pool
For the purposes of the hearing, sworn valuations were filed by the wife in relation to the former matrimonial home and the Suburb A property. The husband took no issue with those valuations and they will be used for the purposes of determining the property pool. Having said that however it is noted that the real estate is to be sold and for the parties’ sake it is hoped that the valuations prove to be conservative.
The parties argued that the former matrimonial home is currently encumbered by way of a mortgage to Bank B (which at the time of the hearing had $98,743.14 owing) and a Bank B overdraft (which at the time of the hearing had an amount of $3,564.52 owing). The parties also agree there was a joint debt to Bank A of $20,000.00 in relation to a credit card in the husband’s name which had been utilised by the parties to meet their living expenses when they lost their pensions.
In all these circumstances I therefore find the matrimonial assets to be divided between the parties to be as follows:
Suburb B
Less mortgage to Bank B
Less Bank B overdraft
Less husband’s Mastercard
Net$1,025,000.00
<$98,743.14>
<$3,564.52>
<$20,000.00>
$902,692.34
Suburb A $300,000.00 Class B portion of the P Trust E$583,149.00 Total $1,785,841.34 Liabilities:
Husband’s debt to Centrelink $52,220.00
NET ASSET POOL $1,733,621.34
Contributions
Neither party had any assets of significance at the commencement of cohabitation.
Over the course of a very long marriage both parties contributed to the best of their ability to the acquisition, improvement and maintenance of their jointly held assets, both as income earners and as homemakers and parents.
As noted previously in this judgment, the marriage was along “traditional” lines, with the husband performing the role of income earner and the wife predominantly performing the role of homemaker and parent.
I accept the wife’s evidence that she performed the majority of the household duties as well as the day to day practical responsibilities for bringing up the parties’ two sons. Having said that, the wife quite openly conceded that the husband had been very involved with their sons and referred to him as:
“a terrific father.”
The husband, a professional in finance, had calculated that during the course of his working life he earned $1,300,000.00. He argued that in these circumstances his must be seen as the greater contribution, especially compared with the minimal amount of money and small trust distributions received by the wife.
The terms of s 79(4)(a) and (b) of the Family Law Act 1975 have been set out previously in this judgment and I won’t repeat them here. Having said that however, and for the benefit of the husband, I will bring his attention to s.79(4)(b) in which the legislature has made it quite clear that the court, particularly in a long marriage, will give considerable weight to the contributions of the principal homemaker as well as the contributions of the income earner.
In the matter of Hayne and Hayne (1977) FLC 90-265, the Full Court held that when determining contribution under the auspices of the Family Law Act 1975 it was:
“not a meticulous mathematical exercise.”
In Garrett and Garrett (1984) FLC 91-539, the Full Court held as follows:
“Where parties were married and cohabitated for 22 years, brought up two children and devoted their resources and incomes to the benefit of the family as a unit, it is impossible to have a detailed accounting concerning the amounts of their respective financial contributions.
Under s 79(4)(b) (sic as it then was) non-financial contribution is to be taken into account. This must of necessity be a matter of judgment not of computation.”
In these circumstances, the husband’s argument of a greater contribution because of his role as the principal income earner in the marriage will be given no greater weight than that of the wife as the primary homemaker.
The husband also argued that because the Suburb A property was purchased by the parties from his parents for slightly less than market value in 1970, he made a greater contribution in respect to that property.
The husband did not provide any evidence that confirmed his contention that the parties paid less than market value for the Suburb A property to his parents. However, as the parties bought the property from his parents relatively shortly after his parents had purchased the property, I find that any capital increase would have been minimal. Further, the purchase took place 40 years ago and any minor initial contribution that arose from the generosity of the husband’s parents has well and truly been eroded by the subsequent contribution of both of the parties since that time.
In these circumstances I am more than satisfied that in relation to the parties’ real estate assets, their contributions to those assets are equal.
The situation in relation to the Class B portion of the P Trust is however different.
As noted previously in this judgment the P Trust was established in 1982 from assets provided by the wife’s mother from the estate of the wife’s late grandmother. Whilst the wife is a director and shareholder in the Trustee company, it is common ground that the day to day management and administration of the Trust has been performed by the wife’s brother Mr P and that the wife’s only involvement has been to counter-sign cheques and any other documentation as prepared and directed by Mr P.
It was Mr P’s evidence, which I accept, that at the time of the creation of the Trust, the value of the shares which comprise the trust assets was approximately $100,000.00. The share asset base of the Trust which Centrelink found to be in the vicinity of $2,900,000.00 in 2007 is a reflection of the increase in value of those shares over time and is in no way attributable to any contribution or efforts by either of the wife or the husband.
It was the husband’s evidence that he had no knowledge of the workings of or the assets of the Trust and he accepted that the wife’s knowledge of the Trust was similarly very limited.
The parties’ position in relation to the Trust has always been and continues to be that the capital assets of the Trust will ultimately vest in their children and that they believe they have no moral entitlement to those monies at all.
The parties innocently and genuinely failed to disclose to Centrelink any details of the Trust at the time they qualified for the aged pension because of their genuine belief that they had no entitlement in the Trust other than the distribution of income from time to time to the wife. In his evidence the husband indicated that he may pursue further review of that decision to the Federal Court and that this belief would form the basis of his argument before that Court.
The basis upon which I have determined that a 20 per cent interest in the Trust forms part of the property pool is set out clearly in this judgment. However, it is apparent that that interest arises purely because of the wife’s blood ties to her grandmother and that other than that, neither of the parties, and in particular the husband, has made any contribution whatsoever to that asset.
The Trust and its’ assets have never been treated by the parties as a matrimonial asset or as a resource which they could access.
Its management and control have not been in the parties domain.
In these circumstances I find that the husband has made no contribution to the parties’ interest in the Class B portion of the P Trust.
Section 75(2) factors
The wife is aged 68 and the husband is aged 71. They are both retired.
The husband is in receipt of the aged pension and because of the Centrelink determination which has dominated this judgment, the wife has no regular income stream, save and except any distributions that might be made to her from the P Trust from time to time and the monies that she will receive from this property settlement.
The wife’s entitlement to income from the P Trust is clearly a resource in her hands, albeit the distributions are relatively meagre when averaged over the life of the Trust and are at the discretion of the Trustee.
Further, in the event the Class B portion of the Trust is transferred to a Trustee at the wife’s discretion, such entitlement to income from the P Trust would cease and therefore the wife would no longer have that resource.
Asset by asset or global approach
When determining how property should be divided between parties, the Court can adopt either a global approach whereby the totality of the pool is calculated and a division of that total pool determined, or an asset by asset approach can be adopted which involves the parties’ interests in each separate asset being determined individually and orders made that deal with each such asset accordingly.
That either of these approaches is legitimate and an appropriate exercise of discretion under s.79 of the Family Law Act 1975 has been confirmed by the High Court in Norbis v Norbis (1986) FLC 91-712.
Whilst the global approach is the more usual approach of this Court, the asset by asset approach has been used in circumstances where the parties have strictly separated their assets.
The parties have always treated the P Trust as a completely independent “asset” to those assets that have been acquired by them during their marriage. I am therefore of the view that an asset by asset approach is the appropriate method to be applied in order to determine a just and equitable distribution of the parties’ property, in that the parties’ entitlement to the Class B portion of the P Trust will be dealt with separately to the parties’ real estate assets and chattels.
Just and equitable
The respective orders that both parties seek in this matter have been set out earlier in this judgment and it is quite apparent from the findings I have made that neither of the parties’ proposals accord with those findings.
Absent my finding in relation to the P Trust, this matter was a very straight forward one which would have involved orders being made that the parties’ real estate assets and furniture and chattels be divided equally between them.
Having determined that I will adopt an asset by asset approach in determining the orders to be made for the division of the parties’ assets I will firstly consider the Class B portion of the P Trust.
I have found that the husband has made no contribution to the Class B portion of the P Trust, both as to its’ assets, to its’ ongoing management or its increase in value since its’ creation.
I have found that this asset has never been considered to be an asset to which either party believes they have an entitlement and that the entitlement to that asset ultimately rests with their sons.
I have found that the wife’s entitlement to income from the P Trust is a resource in her hands, albeit a rather meagre one and one which would cease in the event the wife exercised her power under Clause 21 (vi) of the Trust Deed.
I accept the wife’s evidence that she will never exercise her power under Clause 21(vi) of the Trust Deed to have the Class B portion of the Trust assets transferred to a Trustee in her control and would thereafter distribute the asset to herself or the husband unless ordered to do so by the Court.
In all these circumstances I am satisfied that the husband’s entitlement to the Class B portion of the P Trust is 10 per cent. I value such interest to be $58,314.90.
In relation to the parties’ real estate assets and chattels, I am satisfied that there has been an equal contribution to those assets by both parties and that such assets should be divided equally between them.
In these circumstances I am satisfied that I should make orders in the following terms:
a)The parties’ real estate assets be forthwith placed on the market for sale. In relation to the former matrimonial home, that sale is to be by an agent agreed between the parties and failing agreement, to be nominated by the President of the Real Estate Institute of Victoria;
b)The Suburb A property will be placed on the market for sale by an agent agreed between the parties and failing agreement, to be nominated by the President of the Real Estate Institute of Victoria. Whether that property is to be sold by auction or by way of contract shall be agreed between the parties and failing agreement as nominated and recommended by the selling agent;
c)The properties will be placed on the market at a reserve price agreed to between the parties and failing agreement as nominated by the selling agents;
d)Within 21 days of the date of making these orders the wife shall notify the husband in writing of her intention to either appoint or not appoint a separate Trustee in respect to Class B of the P Trust pursuant to Clause 21(vi) of the P Trust Trust Deed;
e)In the event the wife advises the husband of her intention to appoint a separate Trustee for Class B of the P Trust pursuant to Clause 21(vi) of the P Trust Deed:
i)The wife shall ensure such separate Trustee as appointed is herself or a company in which she has control (“the New Trustee”);
ii)Upon the Trustee of the P Trust transferring to the New Trustee the portion of the Trust Fund to which Class B is entitled, the wife shall cause such New Trustee to distribute to the husband an amount equal to 10 per cent of the value of the portion so transferred;
iii)The wife otherwise retain all the right title and interest in the remainder of the assets of the New Trustee;
iv)Upon settlement of the Suburb B sale, the proceeds shall be distributed as follows:
1. Payment of all costs and commissions of the sale;
2. Discharge of the mortgage to Bank B;
3. Discharge of the Bank B overdraft;
4. Payment of the husband’s Mastercard to a maximum of $20,000.00; and
5. The balance divided equally between the parties;
v)Upon settlement of the Suburb A sale, the proceeds shall be distributed as follows:
1. Payment of all costs and commissions of the sale;
2. Payment of the husband’s debt to Centrelink of $52,220.00; and
3. The balance divided equally between the parties;
f)In the event the wife advises the husband of her intention not to appoint a separate Trustee for Class B of the P Trust pursuant to Clause 21(vi) of the P Trust Deed:
i)Upon settlement of the Suburb B sale, the proceeds shall be distributed as follows:
1. Payment of all costs and commissions of the sale;
2. Discharge of the mortgage to Bank B;
3. Discharge of the Bank B overdraft;
4. Payment of the husband’s Mastercard to a maximum of $20,000.00; and
5. The balance divided equally between the parties;
ii)Upon settlement of the Suburb A sale, the proceeds shall be distributed as follows:
1. Payment of all costs and commissions of the sale;
2. The payment of the husband’s debt to Centrelink in the sum of $52,220.00
3. The amount of $58,314.90 to the husband; and
4. The balance divided equally between the parties;
iii)The wife shall retain all right, title and interest in the Class B portion of the P Trust; and
g)The parties’ chattels shall be divided equally between them by agreement and failing agreement on the basis that each party shall take it in turn to choose an item of furniture and personalty.
I certify that the preceding one-hundred and forty-six (146) paragraphs are a true copy of the reasons for judgment of Bender FM
Date: 5 November 2010
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