Rice and Rice and Ors
[2015] FamCA 85
•19 February 2015
FAMILY COURT OF AUSTRALIA
| RICE & RICE AND ORS | [2015] FamCA 85 |
| FAMILY LAW – Nuptial Settlement under s 85A – Where husband and wife transfer farm to two daughters for the purposes of receiving a pension under a Commonwealth Government Scheme 16 years ago – Where such an arrangement needs to be an absolute gift – Whether it is possible to have a settlement where the transfer is made but with residential conditions akin to a life interest – The husband and wife continued to reside on the farm on the basis of an entitlement that they be able to do so for life – Where the wife no longer wishes to live on the farm as a result of a rift with the daughters and the breakdown of the marriage with the husband – Found that the conditional nature of the transfer amounted to a nuptial settlement – Provisions of s 79 then applied as against the daughters – The husband supported the daughters in denying the existence of a nuptial settlement but having a fall-back position of seeking similar payment himself if a settlement was found – Not just and equitable to make such an order in the unusual circumstances of the case. |
| Family Law Act 1975 (Cth) Family Law Amendment Act 1983 (Cth) |
Matrimonial Causes Act 1875 (Qld)
Matrimonial Causes Act 1959 (Cth)
Settled Land Act 1958 (Vic)
| Associated Alloys Pty Ltd v. ACN 001 452 106 Pty Ltd (2000) 202 CLR 588 Underhill, A, The Law Relating to Trusts and Trustees, (Butterworth, 9th ed, 1939) |
| APPLICANT: | Ms Rice |
| RESPONDENT: | Mr Rice |
| 2ND RESPONDENT: | Ms B Rice |
| 3RD RESPONDENT: | Ms C Rice |
| FILE NUMBER: | MLC | 1275 | of | 2013 |
| DATE DELIVERED: | 19 February 2015 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 15, 16, 17, 24 AND 25 September 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Davis |
| SOLICITOR FOR THE APPLICANT: | Taussig Cherrie Fildes |
| COUNSEL FOR THE RESPONDENT: | Mr Maginn |
| SOLICITOR FOR THE RESPONDENT: | Paul Maginn |
| COUNSEL FOR THE 2ND AND 3RD RESPONDENTS | Mr Salamanca |
| SOLICITOR FOR THE 2ND AND 3RD RESPONDENTS: | Goldstone Family Lawyers |
Orders
That by 4 pm on 21 May 2015, or such other time as is agreed, Ms B Rice and Ms C Rice pay to the wife the sum of $328,750.
That in default of the payment of the sum referred to in paragraph 1 by the date there referred to, the real properties known as “D” and “E” be sold on terms and conditions to be agreed and in default of agreement, by order of the Court.
That should it be necessary to sell the real properties referred to, the wife’s entitlement shall not be $328,750 but 25 per cent of the net proceeds of sale after payment of all estate agents’ sale costs and expenses, all adjustments for rates and taxes associated with the land at the settlement of the sale and all conveyancing costs associated with the sale together with interest on the ultimate outstanding capital sum at the rate prescribed under the Family Law Rules from 21 April 2015 until payment.
Upon the receipt by the wife of the said sum, she shall vacate and give exclusive occupation of the said real properties to Ms B Rice and Ms C Rice respectively.
That the wife otherwise retain to the exclusion of all other parties, any money standing to her name in any bank account, her motor vehicle and her personal items of property in the room occupied by her at property D.
That save as to issues of costs, all extant applications (and responses) seeking final orders are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Rice & Rice and Ors 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 MELBOURNE |
FILE NUMBER: MLC 1275 of 2013
| Ms Rice |
Applicant
And
| Mr Rice |
Respondent
And
| Ms B Rice |
2nd Respondent
And
| Ms C Rice |
3rd Respondent
REASONS FOR JUDGMENT
The facts of what happened in this case are controversial but the intentions of all of the parties were very similar. The question is whether those facts as I shall find occurred, fit within and describe, a nuptial settlement as required by s 85A of the Family Law Act 1975 (Cth) (“the Act”) such as would then justify the Court making an order altering the interests of the registered proprietors of a farm, its livestock, plant and equipment? If the facts do fit within s 85A, the provision is remedial and Part VIII of the Act applies rather than any other determination according to equitable principles.
The parties
The applicant in these proceedings was Ms Rice. In 1958, she married Mr Rice and from their union, three children were born. Ms F is aged 54, Ms C is aged 52 and Ms B, 40 years of age.
Ms Rice to whom I shall refer as “the wife” is 76 years of age. Mr Rice to whom I shall refer as “the husband” is 86 years of age. Of the two, the wife enjoys much better health.
When the husband and wife married, the husband was in a partnership with his brother and mother. The husband and wife began married life in a rented rural property until a farm was purchased by them in 1968. Quaintly put by the wife, the title to the property was put in the husband’s name only because that was the way it was done in those days.
Having acquired the farm, the husband and wife raised the family, farmed the land and purchased livestock, plant and equipment. Unlike the real property in the farm itself, the livestock, plant and equipment was jointly owned.
By 1998, the financial viability of the farming operation was dire. There had been a long drought, the husband was physically incapable of continuing to do the heavy labour that he had done but most importantly, money was tight.
In 1997, the husband applied for a pension but was refused by the Commonwealth government because of his asset position. Suffice to say, the farm was largely unencumbered. In and around 1997 and 1998, the parties heard about a Commonwealth government scheme which was called a retirement assistance scheme for farmers. A government publication (which is found in annexure “A” to the affidavit of Ms B Rice filed on 21 August 2013) described its objective as follows:
[The scheme] allowed older farmers to transfer ownership of the family farm to the younger generation, retire and gain access to [a pension]. The Scheme offered a 3 year moratorium on the gifting provisions, which allowed retiring farmers to gift farm(s) valued at up to $500,000 without affecting their eligibility for [the pension].
Self-evidently, in 1998, the husband was turning 70 years of age and the wife 59 years of age.
The government publication also provided that it was recognised that the problems facing many retired farming couples was that there was a lack of succession planning for those farmers with substantial farm assets and the message to the community was that there was importance in retirement planning. The scheme then provided a limited time for:
low income, pension-age farmers to retire from farming and gift the family farm to a younger generation without affecting their eligibility for (the pension). It was targeted at those farmers and farm families who were living in hardship because their farms, which were really only capable of supporting one family, were being required to provide a living for 2 or more families.
That situation epitomised the problem for the husband, and the wife to some extent, because of who the farm was supporting.
The children’s relationship with the farm
Ms F left school in 1977 and had little to do with the farm after she worked there for about a year although she did provide assistance until about 1983. Since that time, her assistance has been limited and her relationship with the family has been strained although she now appears to have allied herself to the wife.
Ms C worked on the farm for 12 months after immediately leaving school but then moved away to commence a course in 1982. Her role on the farm has since also been limited but she is one of the registered proprietors of the farm if all the various land titles are put together and treated as one farm. That is the way the parties have dealt with it.
Ms B completed Year 12 in 1991 but also worked on and off the farm doing casual jobs. This case has been predominately about the role that Ms B has fulfilled since 1998 and she too is a registered proprietor and has been so for 16 years.
What happened to the farm in 1998?
I shall set out below more specific details about what each of the parties said but there is no controversy that the husband, the wife and the two daughters, Ms C and Ms B (“the two daughters”), attended upon a solicitor and executed a transfer of land on 12 August 1998 in respect of part of the farm. Two indentures were executed on the same day in respect of land that was not part of the Torrens system of titles but which formed part of the farm. All of those documents were executed by the husband as transferor and in each case, witnessed by the wife. On the same day, the plant, equipment and livestock were transferred by the husband and the wife although it was controversial as to whether any documents were signed. Suffice to say, from that moment onwards, the husband and wife had given all of the appearances of having divested themselves of assets and become eligible for the pension.
The controversy
This issue is whether those transfers were an absolute gift or whether they came with conditions and if so what they were, and do those terms and conditions have any impact on the outcome of these proceedings?
The application for the pension
Centrelink was the government department responsible in 1998 for the Retirement Assistance for Farmers Scheme (“RAFS”). A copy of the husband’s application to Centrelink was in evidence. The form provided that to qualify under the scheme, certain “elements” had to be met. They were (so far as is relevant to these proceedings):
·The farmer must have retired from farming by transferring as a gift, all farming assets (including the farm property), to his or her descendant or descendants;
·The net value of all the farming assets (net of debt) being given away could be up to $500,000;
·The farmer or their partner (spouse) had to be of age pension age;
·The farmer must have owned the farm for at least 15 years or have been involved in farming in Australia for at least 20 years;
·The farmer must have had average income less than the applicable pension rate (single or married) in the three years immediately preceding the transfer of the farm assets; and
·The descendant or descendants must have had an “active involvement” in the farm over the preceding three years.
There is then the following statement on the application form:
It is not necessary that the farmer move off the farm. Where the farmer keeps the right to live on the farm after it has been transferred, the value of the home will not be included in the $500,000. (My emphasis)
It will be readily seen that there is a potential for legal argument over concepts such as “gift” and the right to live on the farm. Whilst it was the husband who was of pensionable age and eligible for the benefit, the wife also had to transfer her legal interest in the plant, equipment and livestock. Similarly, she had to transfer any equitable interest she had in the land. That became evident because there was a declaration at the end of the form which required the signature of the applicant’s partner.
Although the evidence was somewhat vague, the handwritten form seemed to have been completed by the husband. It was submitted that there was no evidence as to who prepared it but I accept on the balance of probabilities that it was the husband as the prime mover of this whole concept. He told Centrelink that he owned 100 per cent of the property immediately prior to the transfer. That could only have referred to the land itself. Interestingly, notwithstanding the supposed absolute gift requirement, the Centrelink form contained a special provision about an ongoing right to reside on the property. It enticed the applicant to tick a box alongside which the following words were printed:
Please describe the terms of tenancy (for example, a right to life tenancy acquired at the time of the transfer)
To that question, the husband wrote:
Right to life tenancy
I find the scheme was designed for people to divest themselves of farming assets so that they would satisfy Centrelink requirements of an assets test. The scheme clearly contemplated pensioner farmers not moving off the land. Nothing in the legislation which gave rise to the scheme nor the form itself, had any definition of this “life tenancy”. The enforceability of the right of tenancy and the long-term consequences if there was a breakdown of the relationship between pensioner parent and farmer child were not mentioned. Indeed, as the evidence showed, problems of ongoing occupancy had not been contemplated by any of the parties nor, it would seem, by the government.
The evidence of the parties
Sadly, although all parties remain living in the one house on the farm, there are now clearly two camps. The husband and Ms B form one alliance and the wife another. That was not always the case.
What seems to have precipitated the breakdown of the family unity was that the husband authorised Centrelink to remove the wife as his carer and substituted Ms B into that role. That precipitated the separation of pensions and a reduction in the type and amount received by the wife. She became a single aged pensioner and Ms B became the eligible carer of the husband. Ms B became entitled to government benefits in her own right as a consequence.
Just what precipitated that was a matter of controversy but I find that the relationship between all members of this household had not been good for some time. The wife said that the relationship had ended in 2004 and she was thereafter separated under the one roof but the husband’s version was that that did not occur until 2013. As it is unlikely that the relationship ended suddenly, I find the wife’s version more probable. Over the years, Ms B and the wife had been close companions including regularly travelling to hairdressers together, shopping and assisting each other with medical appointments particularly for the husband. Ms B’s version of what went wrong was that the wife had begun to mix up the husband’s medication and that, in her view, justified the events of the pension change. In my view, even if that was right, it was curious as to why there was a need to change the financial structure bearing in mind Ms B’s entitlement to the separate income, although it was minimal, from the farm. That suggests there was a relationship problem.
Part of the dilemma in this case is the way in which the matters proceeded along a litigation route to trial. To get a sense of exactly what each party was saying occurred in 1998 requires a consideration of the words each of them used in the interlocutory steps and then eventually at trial.
In the affidavit filed by the wife in March 2013 she said:
In August 1998 the house and family farm were transferred to Ms B under the “Retirement Assistance for Farmers Scheme”. I was agreeable to the farm being transferred, but not the house and the 35 acres of land around the house.
That statement suggests an absolute gift of at least all but the house and 35 acres. In her affidavit, the wife made no reference to any conditions associated with the transfer. It did not mention the transfer of part of the farm to Ms C.
In an affidavit sworn 30 April 2013, the husband disagreed with what the wife said. He said it was decided that he would apply for the pension as the income from the farm was “falling away” because of the drought as well as his deteriorating health. He “strongly” denied the suggestion that the wife did not consent to the transfer of the house and the surrounding acreage or that she wanted it transferred back to her name. He too did not raise any other terms and conditions associated with the transfer. However, that position changed later.
In April 2014, when a new solicitor began to act for the wife, an affidavit was filed in which she referred to and relied upon, the evidence that she had earlier given. Again, no reference was made to any conditional transfer.
In July 2014, the wife filed an affidavit specifically for the purposes of the final hearing. In that she said:
In August 1998, the legal ownership of [the farm] was transferred to [the two daughters]…pursuant to the Retirement Assistance for Farmers Scheme (“RAFS”). The transfer was conditional upon the husband and me having a right to live at [the farm] for the remainder of our lives. (My emphasis)
The significance of the sentence underlined and emphasised by me was that this was the first time in the proceedings that there was a suggestion of some right to live in the property. However, that was not the first time this issue had arisen between the parties.
In his first affidavit sworn in April 2013, the husband said that he did not believe that his daughter held the land and house on trust and he justified that statement on the basis of the requirement in the relevant Commonwealth and State legislation of an absolute transfer. He then added:
I believe the applicant is seeking to join [Ms B] in these proceedings as the Statute of Limitations (sic) has expired and this action seeks to get around that problem…
The reference to the joinder of Ms B occurred because the wife had added her daughter as a party to the proceedings. The husband made no reference to his other daughter Ms C to whom land had also been transferred. The reason for the reference to the statute of limitations was unclear.
The husband’s affidavit in April 2013 also said:
The [wife] is welcome to continue to reside with us for as long as she likes on the same terms and conditions as she has for the last 20+ years. (My emphasis)
Thus when these proceedings began, there were certainly arguments about whether the transfers had been absolute or whether there was some significance in what was beginning to evolve as terms and conditions of the transfer.
In his affidavit filed immediately prior to the commencement of the final hearing, the husband said:
It was a term of the arrangement when the farm was transferred to Ms B and Ms C that our daughter Ms B would allow us to occupy the property and care for us at the home.
There was thus a new description added relating to the care of the husband and wife by Ms B but the significance lies in the reference to the words “term of the arrangement”.
In her affidavit for the trial sworn in July 2014, the wife said that she “understood” the purpose of the transfer was to enable the husband to access a government pension. She said:
I ultimately acquiesced to the transfer under the belief that the homestead and approximately 35 acres surrounding it could eventually be transferred back to me.
The husband and Ms B along with Ms C (who was not called to give evidence but who had filed an affidavit which was not challenged) denied there was ever any such arrangement for a transfer back. Indeed, the solicitor who was integrally involved in the transfer arrangements also denied any such arrangement. He swore an affidavit which was filed and he was not required for cross-examination by the wife. He denied anything about the quarantining, or the transferring back, of the house and 35 acres and he denied an assertion by the wife that he had requested her to sign a blank piece of paper to transfer the partnership assets. It would be simple to just reject the wife’s evidence but I have taken into account three things. First, notwithstanding the solicitor was not required for cross-examination and his evidence was therefore unchallenged, this all occurred a long time ago. The accuracy of the evidence of both the husband and the wife was questionable. As I earlier mentioned, the versions evolved as the affidavits were filed. That may have depended upon what questions the deponents were asked. For example, in her 2013 affidavit, the wife said that she recalled the solicitor saying the house and 35 acres could be transferred back to her at a later date but in her 2014 affidavit, she made no mention of such a statement. What she did say was that she “sought” the transfer but from whom, she did not say. Secondly, my distinct impression from watching the demeanour of all of the witnesses is that discussion and communication about such important things as ownership of land would not have been high priority and the husband’s evidence was not reliable because, as he said, he was “getting on”. Thirdly, notwithstanding this discrete dispute in the evidence, the real issue is what the parties had otherwise agreed upon and when. I am satisfied that at least that evidence is clear enough to enable me to make the findings I have in these reasons. I am not ignoring the wife’s claim that the house and 35 acres was, in her view, to be transferred back to her but as she has the onus of establishing any such allegation, there is no basis upon which I could find that such an agreement was made between the wife and more particularly, the two daughters.
The focus of this hearing however and which is not affected by issues of credit, lies in a finding about whether there were, and if so what, terms, conditions or arrangements attached to the transfer of the land and also to the non-real property.
The husband referred to the wife’s affidavit just mentioned and reiterated that the transfer pursuant to “a Government scheme” was absolute. He then said in response to the wife’s assertion about the right to live on the farm that:
The transfer of the farm to [Ms B] and [Ms C] was absolute and not conditional upon anything. [Ms B] not only took over the serious work of the farm in or about 1997 but assumed the moral obligation to care for her parents at the property for their lifetimes. She has always honoured this obligation.
Because of the husband’s health and I suspect, his frailty, I agreed to hear his evidence ahead of that of the wife. He came into the Court on a walking frame on wheels and could not achieve the step up into the witness box so he sat by it. Despite his closeness to the bar table, his hearing was poor and it was difficult to know whether he fully comprehended the questions he was asked. The cross-examination bordered on counsel shouting but it was done properly.
Counsel for the wife put to the husband that he and the wife had the right to live on the farm for the rest of their lives. The husband’s response was that that was not correct because the wife had the right to live there but not him. It was then specifically put to him that the arrangement with the two daughters was that he and the wife could remain living on the farm and use it for the rest of their lives. His response was that he disagreed with the “use” of the land. He then seemed confused. He was asked whether living on the farm had been discussed and he said that he was unsure because he was “getting on” in years. Counsel went back to the subject and asked the husband whether it was an important point that he and the wife were to remain living on the farm after it was transferred. His response was:
Well, not fully.
He explained that to mean that the wife could live on the farm but he would not be expected to live on the farm. When asked what the reasoning was behind all of that, he diverted the conversation into questions about the removal of money from a bank account that had been in joint names and that someone had told him that as he and the wife were drifting apart, friends had warned him that he had to watch his bank account.
Counsel asked:
Why do you say that you didn’t have a right to live on the property?
The husband replied:
Well I think you take that for granted anyway.
Counsel put to the husband that there was a deal between Ms C and Ms B that he would live on the property for the rest of his life and he said that he did not recall any “actual deal”.
What he then added was that anyone would take it for granted that a mother and father had the rights to live in the house. In an apparent contradiction, he said it was not taken for granted and that it was discussed. He said that a daughter would be pretty “hard up” if she would not let parents live in their house. Just whose house he was referring to was not clear but persistent questioning did not seem to make the picture any clearer. The cross-examination of the husband was sad to watch having regard to his age and obvious disability but I find that whatever he meant in his various statements, he did not dispute that he and the wife had agreed with at least Ms B that they could live on the farm for the rest of their days. Indeed, that is exactly what has happened for the last 16 years. Importantly, he got the pension.
One conclusion from the husband’s evidence was that he was referring to some moral obligation as distinct from a conditional transfer of land and no rights were created. That position became clearer when the first of the two daughters gave evidence.
Ms B Rice swore an affidavit on 13 August 2014 so at that point, she was aware of what was being asserted by her mother particularly by reference to the earlier affidavits including those of her father. She must have known that there was a challenge to the basis of the transfer. She said:
At no stage during my discussions with [M]um and [D]ad regarding the transfer of the farm did anyone say or suggest in my presence or hearing that the property or any part of it could be transferred back to either of my parents.
That was a reference to the wife’s assertion that there was an agreement about the transfer back of the house and surrounding acreage at some date after the on was received. Ms B later clarified the position in her oral evidence.
Ms B said that in 1998, her parents told her that they wanted to discuss the ownership of the farm in the context of the husband’s pension claim being rejected. She said that they proposed to transfer the farm to she and her sister so that her father would become eligible for the pension. She then added:
They indicated that they expected to remain living on the farm for as long as they wished without paying any rent to me or any outgoings on the property. As I continued to operate and live on the farm, I would remain available to look after them. I agreed with their proposal.
In cross-examination, counsel for the wife had Ms B confirm that her parents had wanted the pension so that they could stay on the farm and for the “younger generation” to retain the farm. Selling the farm had been discussed but neither of her parents had wanted that to occur. She said the reality was that they had never really considered selling. Ms B then said that she put a condition on taking over the farm which was that it was to be transferred to her and her sister, Ms C. She then confirmed that the condition of the transfer was that the parents would live on the farm and be looked after for the rest of their lives.
In her evidence in chief, Ms B reiterated what had been said in her affidavit namely that her parents could live on the farm for as long as they wished “once it was transferred” but she also reaffirmed that there was no suggestion of a transfer back to anyone of any part of the farm.. Ms B also confirmed that providing farm produce was “part of the agreement”. That was a reference in an affidavit that she had sworn in April 2013 in which she said she would look after her parents and their needs as they arose. In fulfilling that agreement, she said:
I have supplied food for the three of us including meat and produce grown on the farm, my mother and father have provided top-up items from the supermarket.
The transfer arrangement makes provision for Ms F
I have already mentioned the parties’ daughter Ms F. In 1998, she appears to have been estranged from the family. As the family contemplated the transfer arrangement with a move to the pension, an agreement was struck between the husband and wife (but unbeknown to Ms F) that $50,000 would be set aside in a bank account for Ms F. It is not clear to me where that money came from but in any event, it was banked in the joint names of the husband and the wife and sat there for a number of years until it grew to $62,000 or thereabouts. One of the causes of the cessation of the relationship between the husband, wife and Ms B concerned the wife taking that sum of money from the parties’ joint account in June 2011 into an account in her sole name for “safe-keeping”.
In the context of the transfer to Ms B and Ms C for the purposes of obtaining the pension, the allocation of the $50,000 gives a very strong appearance of estate planning. The difficulty however is that that money was never received by Ms F and although not touched until many years later, it seems to have always been treated as simply a term deposit or joint account of the husband and the wife. The creation of the account and the depositing of the $50,000 points to the fact that the husband and wife were concerned about excluding Ms F whilst giving land and a business particularly to Ms B. Unfortunately or otherwise, nothing was ever done about the deposit and it would seem that Ms F was not told of it. Indeed, when the wife wanted money, she took it. When the husband found out about it, as he said, he was told to watch his bank accounts. I am not therefore confident to make a finding that the actions of the husband and wife 16 years ago about putting that money aside means anything at all. The ownership of this farm was registered in a number of parcels both in General Law land and also Torrens Title land. The transfers show the consideration as:
The desire of the Transferor to transfer the land to the Transferee.
Those words also appear in the two indentures. No reference was made in any of the documents to a caveatable interest or anything similar.
I find that the arrangement in 1998 was that the husband, with the concurrence of the wife, approached their two daughters but particularly Ms B Rice for the purposes of enabling the farm to be transferred to them but it was a condition that the parents could live there for the rest of their lives and receive the benefits of the farm.
I further find that the evidence does not support the conclusion that there was any agreement between any of the parties that the house and 35 acres would be transferred to the wife subsequent to the acceptance by the Commonwealth government of the husband being entitled to the pension. I do not intend to make reference to the other evidence filed by the parties as it was of little assistance.
The legal issue
The wife’s application was that there should simply be an order that the two daughters pay to the wife 35 per cent of the current value of the farm and the plant and equipment.
The husband’s position was to reject that but to the extent that the Court disagreed, he wanted one half of whatever was ordered to be paid by the two daughters. The curious feature of that claim was that it was predicated upon a payment by the daughters. The position of the daughters, but specifically Ms B, seems to be that borrowing the sort of money contemplated by the wife was beyond any realistic possibility.
I have been troubled about the husband’s position because in his outline of case document, he sought that the wife’s application be dismissed. He then sought in the alternative that if any such orders of the type sought by the wife were made:
· a declaration (be made) as to what sum asset or property comprises such matrimonial property; and
· an order or orders (be made) providing for an equal division of the same as between the husband and the wife.
In final submission, the solicitor appearing for the husband said that if the Court found that some form of settlement occurred (as contemplated by the relevant legislation):
it appears that all of the s 79 considerations are imported.
I understood that to be a concession that the wife’s position was correct that if a settlement was found to have occurred, the power of the Court to do anything thereafter lay in s 79 of the Act.
If a settlement was so found (as I will), there is no basis to make the declaration sought by the husband. It would be pointless because there is no argument in this case about “matrimonial property” or what assets each party has; the titles are self-evident. In respect of the second order sought in the alternative, there was very little evidence in either of the affidavits of the husband filed 19 August 2013 or 29 August 2014 that would have justified a finding that it was just and equitable to make an order altering the two daughters’ interests in favour of the husband. Whilst there is evidence about his age and health problems and the fact that he needs assistance, the evidence supports a conclusion that he will remain either with Ms B or enter into some form of assisted care. If the latter occurred, Ms B made clear that he would have to work out a way to support himself. I have no understanding of what he would need if he needed it at all. To simply say that he wanted an equal division of the same as between the husband and the wife does little to assist me in working out what would be just and equitable for him. On the other hand, the wife has made clear why orders should be made in her favour as against the two daughters.
Ms B and Ms C’s position was encapsulated in the affidavit of Ms B filed in August 2014 in which she said that she remained agreeable to each of her parents living on the property for as long as they wished but making clear that the agreement did not give rise to any legal obligation. She said that whilst she was aware that her mother believed that there had been a separation under the one roof since 2004, she could not see any reason for why her parents could not continue to live with her amicably. She added that if that was not to be the case, she would construct an appropriate dwelling on the farm and she and her father would move there leaving the wife in the home alone. In my view, those positions were not only untenable, they were also unrealistic. There is no longer any reasonable relationship between mother and daughter and there is a poor relationship between husband and wife. There is no evidence of how the proposed building arrangement would be possible and how it would be funded. In circumstances where it was said that there was no borrowing power in the daughters to pay out the wife, it was hard to see how a building on the farm could be financed. The wife’s evidence, which I accept, was that she did not want to be isolated on the farm. She lives in a house where she is not welcome. Police have been involved even if in a peripheral way. Ms B now has the responsibility for the care of the husband and is paid an allowance. None of that gives me confidence that any offer to just continue on as if there had been no change, would be viable or proper. However, there must first be a legal basis for the wife to succeed.
The wife relied upon s 85A. If s 85A is not applicable, there is nothing in this case for the wife. The heading to that section is “Anti-Nuptial and Post-Nuptial Settlements”. Because the focus of these reasons is on the meaning of s 85A, I set it out now in detail:
(1)The court may, in proceedings under this Act, make such order as the court considers just and equitable with respect to the application, for the benefit of all or any of the parties to, and the children of, the marriage, of the whole or part of property dealt with by ante-nuptial or post-nuptial settlements made in relation to the marriage.
(2)In considering what order (if any) should be made under subsection (1), the court shall take into account the matters referred to in subsection 79(4) so far as they are relevant.
(3)A court cannot make an order under this section in respect of matters that are included in a financial agreement.
Submissions of the parties
Mr Davis of counsel for the applicant wife acknowledged that without the benefit of s 85A, the wife could not apply for any settlement because there was no other property. He acknowledged that there was no suggestion of any duress as had previously been asserted in the wife’s supporting material. In addition, he specifically distanced himself from any suggestion this was a trust case. He disavowed any suggestion that the Court should look at questions of breaches of trust or the exercise of any power to alter the settlement itself. He submitted that if one looked at the 1998 scheme, would-be pension recipients were permitted to create a life interest in the land. He submitted that the question for determination was whether the transfer was absolute and unqualified or subject to a transfer back.
Mr Davis submitted that this was a nuptial settlement and therefore the alteration of property contained in the settlement albeit in the names of the two daughters had to be determined under the provisions of s 79 of the Act.
Mr Maginn for the husband submitted that the 1998 transactions were simply a commercial arrangement under a government scheme to accommodate the parents. He submitted that there was a disposition to the two daughters and therefore it was not a settlement as between those parties. He submitted that there was no suggestion of a disintegration of the marriage at that time and it was important to note that both husband and wife joined in the transfer. He pointed to the finality of the arrangement by virtue of the evidence about the $50,000 being also set aside for the daughter Ms F.
Mr Salamanca of counsel for the two daughters said that there was no “settlement” because this transfer was unequivocal and unconditional. He submitted that was the only conclusion because the legislation enabled the parties to take the benefit of the pension. That being so, he submitted that the application of the wife should be dismissed.
In respect of the transfer, Mr Salamanca submitted that whilst the husband made the absolute gift, it was subject to him retaining his right to non-exclusive occupation of the property for life. Thus, it was argued, there was no settlement.
Mr Salamanca conceded that the RAFS permitted the continued occupation of the farmhouse by the transferor, but he maintained that was not the means by which the husband secured a life interest in the property nor that it created a continuing provision for him. Instead, he argued that the husband had a pre-existing interest, which was not affected by the transfer. There is a superficial attraction to that submission because I accept that the husband was the registered proprietor of the legal interest and he had made an arrangement with his two daughters before the transfer occurred. However, the question is whether the combination of these transactions, discussions and agreements resulted in a settlement recognised by the law sufficient to trigger s 85A of the Act.
Mr Salamanca submitted that the key question was whether the circumstances of the transfer created some form of ongoing provision for the wife. It was argued that this would presuppose that either:
a.When transferred to the two daughters, they held the property “on trust” for the husband and wife to the extent of a beneficial “life tenancy”; or
b.the husband had negotiated a concluded and enforceable agreement with Ms B and Ms C that, in consideration for the transfer, they would permit both husband and wife (jointly and individually) to live on the property.
In response to the first point, Mr Salamanca considered whether any form of trust had been created and whether, by virtue of transferring the land back to the wife, the trust would be illegal.
Mr Salamanca first looked at whether an express trust had been created and considered whether there was certainty of intention, subject-matter and object. He submitted that there was a lack of certainty of intention and pointed first to the husband’s evidence that he did not intend to create such an arrangement and secondly to the wife’s “contradictory evidence”.
As to the criteria for certainty of subject matter (to give rise to a trust), it was submitted that there was no persuasive evidence provided by the wife as to the subject matter of the trust and what was intended by a “right to reside”. Those are all matters to which I shall turn when examining what is a settlement and what is needed to establish the existence of one.
It was argued that it was uncertain as to whether the wife was claiming a trust against, for example, the house, the whole farm, the unfarmed land and the plant and equipment which is still in existence or the new plant and equipment and livestock. The wife’s position was not based upon the formation of a trust but on a nuptial settlement but she claimed relief in respect of both the farm and the personalty.
Mr Salamanca conveniently selected the phrase “right to reside” to describe the husband and wife’s life interest in the property. He submitted that such a right conferred a personal right only and was in the nature of a bare licence as it had not been granted for valuable consideration. I reject that because the transfer was based on the consideration of the property itself.
With respect to the words “Right to Life Tenancy”, he submitted that they could not be used to prove the existence of a trust because there was no proof that the husband wrote those words. He submitted they fell short of manifesting the three required certainties and the essential terms of the trust were not in writing (as Lee J in Secretary, Department of Social Security v James (1990) 20 ALD 5 suggests they should be). However, as against that, whoever wrote it, and I accept on the balance of probabilities it was the husband, the form was signed and submitted to the government by the husband specifically for his purpose. Thus, if some other person was responsible for the language, the husband adopted it.
Mr Salamanca also submitted that no other form of trust was created. Specifically, he said there was no resulting trust as this could only be asserted by the husband (which he did not do) and in any event, the presumption of advancement would serve to rebut it. It must be said that the presumption is rebuttable where the intention is clear and I am satisfied that it was here.
It was also submitted that the creation of a constructive trust would not apply to the threshold question of whether there had been a settlement, and a constructive trust certainly could not be characterised as “nuptial” in nature. In any event, it was submitted that there was no detriment flowing to the wife where the transfer of property was a clear gift and at no stage did the wife alter her position based on the promise of the two daughters that she could reside there for life.
Mr Salamanca then looked to the question of whether the trust would be illegal if the land was transferred back to the wife. In order to validly invoke the operation of the RAFS, he submitted that it had to be a gift. In circumstances where the clear intention and representation by the husband and the wife was to gift the whole of the farming land, plant and equipment to the two daughters, counsel said it would be unconscionable, contrary to public policy and illegal for the wife to seek to prosecute a claim on the basis that what was gifted (or the portion of what was gifted) was to be transferred back to the husband or the husband and wife. There is however, no suggestion that the wife is seeking a transfer back. What she asserts is that there was a settlement and in the unusual circumstances of s 85A of the Act, the usual trust questions relating to remedies do not apply because the Court’s power comes from the Act.
The next point that counsel considered was whether the transfer was nuptial and made in relation to the marriage. It was conceded that a settlement on the children only will suffice, but that “the particular marriage must be a fact of which a settlor takes account in framing the settlement” (see Joss v Joss (1943) P 18 at p. 20 per Henn Collins J). In light of this, it was argued that there was no basis to suggest that the transfer was a settlement “in relation to” the marriage, as the purported settlement had not been entered into “because of the marriage”.
With respect to the second point, counsel argued that there were a number of factors that militate against a finding that the husband negotiated a concluded and enforceable agreement with the two daughters that, in consideration for the transfer, they would permit he and the wife to live on the property. The difficulty with that submission is that the evidence does not support a conclusion that the negotiations were done that simplistically. All of the family members seem to have been involved. Although the husband may have thought that the farm was his, I have no doubt that the wife thought otherwise. The wife was present at the offices of the solicitor and there was little dispute that she was a party to the whole arrangement.
With respect to certainty of terms, counsel submitted that the terms of the arrangement whereby the wife could be said to have an enforceable right to remain on the property should she wish, were vague and incomplete. I reject that. In my view, albeit that the words used may have been different, there was little dispute between all of the parties as to what was intended. The question remains whether that was a settlement recognised by the law.
Counsel then submitted even if there was a nuptial settlement, the factual circumstances gave rise to the application of estoppel and it would therefore not be just and equitable to make an order pursuant to s 79 of the Act. That too is a matter that cannot be considered until such time as the settlement is found to exist because absent such a finding, there is no jurisdiction of this Court to make any orders over property in which the two daughters are the proprietors. In other words, that goes to the exercise of the discretion not as to whether there was a settlement.
Finally, Mr Salamanca submitted that in the event that the two daughters were unsuccessful and the Court determined that there should be an alteration of property interests, he argued that the value of the property to be distributed should be as at the date of the transfers in August 1998 (see Mackie & Mackie (1981) FLC 91-069, In the Marriage of Healy (1977) FLC 90-295, In the Marriage of Howes (1981) FLC 91-044 and Omacini & Omacini (2005) FLC 93-218).
In Mackie (supra), a decision at first instance of Dovey J, his Honour had to contemplate what was just and equitable having regard to post-separation contributions to the building of a house started before separation. His Honour decided that the use of the separation date was the fairest way in that case. Similarly in Howes (supra), Connor J had to devise a way of evaluating the contributions made after separation. He acknowledged that normally, the value should be the date of trial but in that case, favoured the separation date. No principle arises from those authorities which are simply indications of discretionary determinations.
In Omacini (supra), the Full Court set out a principle. The value (of a business in that case) should be that as at the trial with separate consideration being given to contributions to the value between separation and trial. I am not sure that is what counsel was submitting but in my view, that is the appropriate approach and I intend to follow it here.
WHAT DOES S 85A MEAN?
The history of s 85A is not particularly helpful. It arose out of a parliamentary inquiry to which the Court made a submission and was inserted into the Act by the Family Law Amendment 1983 (Cth). It seems to have its genesis in the need for powers of the Court to alter arrangements created by one or more of the parties to the marriage particularly in relation to family trusts where the holding of assets created difficulties for alteration of legal interests. As was observed at the time, some of these structures were set up for tax related purposes.
It would be simple to view s 85A as a vehicle to claw back assets which had been put by a party beyond the power of the Court but having regard to the wording of the section, I am convinced it is not that restrictive. In my view the fundamental question is whether or not parties other than the husband and wife are holding assets which, by virtue of that arrangement, the assets have been put beyond the reach of the Court to such an extent that the Court cannot do justice.
The section is intended to make certain property subject to the orders that could be made under s 79. I have already observed that it is not a matter in which the Court should apply equitable principles in relation to trusts but rather, the statutory provisions in Part VIII of the Act. However, the holding of the assets requires the Court to examine whether or not these assets are part of some arrangement, which typically resembles some type or form of trust (and as I consider below, this form of trust is not necessarily in the traditional sense of a trust) which gives rights to the parties to the marriage. The section itself refers to a nuptial settlement which means the Court has to examine trust principles. That does not necessarily mean that a trust must be established; the establishment of a trust is an ancillary question, which does not need to be satisfied in order to succeed pursuant to s 85A of the Act (see below discussion of Dewar v Dewar (1960) 106 CLR 170). It follows also therefore that if the assets originally held by one of the parties to the marriage have been transferred to another person by way of an absolute gift, there is no basis to suggest that there was a settlement.
In addition to the parliamentary inquiry, this provision’s genesis can be seen in the Matrimonial Causes Act 1959 (Cth) that preceded the Act. The cases arising from that legislation, as well as other matrimonial causes legislation to which I refer below, shed some light.
In Dewar (supra), Dixon CJ, Kitto and Menzies JJ dealt with an appeal from a decision arising from the Matrimonial Causes Act 1875 (Qld). Section 9 of that legislation gave power to the court to “inquire” into the existence of post-nuptial settlements made “on the parties” whose marriage was the subject of the divorce decree. The section provided that the court could make such orders with reference to the property that had been settled for the benefit of the parties to the marriage or their respective children as the court saw fit. Their Honours observed that the essential purpose of s 9 was to empower the court to make orders in what was described as the changed circumstances of the parties. That case was about property that was jointly owned by the parties. Their Honours observed that such ownership fettered the alienation of the entirety of the real property. They said unfettering could only be done by both parties and hence, there was a need for s 9 of the Act. The changed circumstances under contemplation were the inability to have the use of the land but the focus of the decision was on the word “settlement”. Their Honours considered that the transfer of the land by the parties into a situation of joint ownership was a settlement within the meaning of s 9. But pertinent for my purposes, the Court was troubled that the wife and the children had an amount fixed for their maintenance based on a supposition that they could continue to occupy the house as their home but nothing secured that occupancy. Their Honours observed that the transfer into the joint names of the husband and wife was for the purpose of giving the wife protection against the “mischances of life”. The “mischance” in that case was the “matrimonial wrong” that the husband had committed. The particular provision was seen as a remedial provision to be widely construed to achieve the objective that the parties had when they created the settlement.
The subsequent Commonwealth legislation that followed closely on Dewar (supra) created a similar provision in s 86(2) of the Matrimonial Causes Act 1959 (Cth), but like the Queensland provision, its reference to settlements was on the parties to the marriage. Section 85A of the Act refers to settlements made in relation to the marriage.
Nygh J writing extra-judicially (see ‘Section 85A: is it of much use?’ (1986) 1(1) Australian Journal of Family Law 10, 15) said the original purpose of the legislation was to allow the Court to vary existing marriage settlements. He was referring to settlements in the traditional sense especially the protective clauses usually imposed by the family of a wife that prevented a husband from obtaining control over her assets. His Honour observed that s 79 permitted the settlement of property or, in my view, the alteration of it, for the benefit of a party to the marriage or indeed the children of that marriage but he noted that there was no provision back the other way. That is, there was no provision in s 79 that permitted the alteration of the rights of children back for the benefit of the party to the marriage.
Nygh J considered the question of whether s 85A was a stand-alone power or whether it was necessary for there to be ancillary proceedings in the sense described in s 4(1)(ca) of the definition of “matrimonial cause” in the Act. His Honour was of the view that proceedings under s 85A must be ancillary to proceedings under the Act falling within paragraph (f) of the definition of matrimonial cause. This question is something that I contemplate below.
HOW DOES S 85A OPERATE?
Section 85A is enlivened only if two things are established. First, there must be a settlement and secondly, it must have a nuptial element. If those two elements are established, the provisions of s 79 are enlivened.
The nuptial settlement has to create a right, property or interest for at least the wife (if not the husband as well) if s 85A of the Act is to be applied.
As can be seen, the two daughters argued that this was an absolute gift but also that any sort of retention of interest was contrary to the legislation under which the transfer occurred. In my view, the issue of the provisions of Part 3.14A of the Social Security Act 1991(Cth) (“the Social Security Act”) requiring an absolute gift do not affect what happened. What matters is what the parties did. It was the Social Security Act that allowed the interests of the husband and the wife in the farm and the plant, livestock and equipment to be transferred to Ms B and Ms C but it was and remains, the entitlement that the husband and the wife received in return that matters. Although the Social Security Act required the transfer to be a gift, it still contemplated and permitted the transferor to retain “a life interest in the dwelling-house on the farm, and any adjacent area of land used primarily for private or domestic purposes in association with that dwelling-house” (see s 1185C(2) of the Social Security Act). Thus, the legislation recognised the possibility of a life interest in the legal sense.
Despite each party giving a differing version of what was said with respect to the entitlement, there was little difference between them as to what was meant. As the authorities have pointed out in respect of settlements, the Court has to look at what happened. I am comfortable ignoring the wife’s view that the house and surrounding land was to be subsequently transferred to her. Even if that had been said, it would not have affected what the parties were doing which was to transfer the farm but subject to the right of the husband and wife to live there. There is no doubt that all parties used the words “right to life tenancy” in respect of the ongoing entitlements of the husband and wife. I find that they all meant that the husband and wife could enjoy the use of the farm and also its benefits for life.
Ms B and Ms C submitted that the arrangement was no more than a licence to occupy. I disagree for the reasons that follow.
IS THIS JUST A RIGHT OF OCCUPATION?
The distinction between a licence and a life tenancy lies not just in the words used but also the intention of the parties (see, for example, Re Hoppe; Hoppe v McDavitt [1961] VR 381 and Re the Will of Mayer [1995] 2 Qd R 150). The critical factors that distinguish a licence to occupy from an enforceable right are fourfold. First, the language employed must point to more than just an opportunity to reside; it must be a right to use. Subtle though the difference may seem, it must be, for example, a right to treat the residence as one’s own so that the resident can change fixed appliances and fittings, alter gardens, paint and so forth. A simple right to reside like a residential tenant gives no such authority. That tenant cannot treat the house as his or her own.
Secondly, the occupied property must be precisely described as distinct from being described (as in a will) as a “home”. Thirdly, the residence cannot be a home which can simply be replaced by another because to do otherwise would mean a right to be housed or to occupy without any particular interest in that property. The right must be irrevocable by the registered proprietor so that, in the case of Ms B, it could not be terminated at her will.
Similarly in some respects to the third factor, the fourth factor must have some semblance of permanence by reference to a right for life to distinguish it from an ability of the registered proprietor to move the resident on even to some other property. Of course, life tenancies are created all of the time under which properties can and are substituted and conditions such as payment of rates and insurance are required of the tenant. However, where there are rights which have to be construed from words and conduct, the four basic factors assist in determining whether the tenant has a recognisable and enforceable right in law as distinct from somewhere to live at the will of the owner.
If the four factors are found, an equitable entitlement can be created which the holder(s) can not only protect against the registered proprietor but also against third parties. Here, if Ms B decided to sell the farm over opposition from the husband and/or the wife, could she simply evict them? Having regard to the promise of Ms B, the acceptance of that by the husband and wife even today and the fact that the Social Security Act is silent on the enforceability of such an entitlement, I accept that the husband wife have acquired a right in relation to the property.
WAS THERE A NUPTIAL SETTLEMENT?
A nuptial settlement is traditionally seen as a disposition of property that makes provision in some way, for the spouses or either of them. Thus, an unconditional transfer of property by way of an absolute gift could not satisfy that test.
Leaving aside the nuptial issue initially, the first question is whether what occurred in this case 16 years ago can be construed as a settlement.
The authorities convey the difficulty of defining a settlement. As I discuss below, the authorities have interpreted the concept broadly and provide that a settlement will have occurred where there is continuing or future provision for one or several of the parties, which originates from the disposition in question.
As I address above, the question of whether a settlement is different from a trust was one that was raised by all counsel. In many ways, the terms can be used interchangeably depending upon the circumstances of what is being discussed and explained. A trust exists where there is an obligation that one person, who has some control over property, is bound to perform or forebear some act for another (see Underhill’s Law of Trusts and Trustees (9th ed) and Jacob’s Law of Trusts in Australia (7th ed)). As the Learned Authors of Jacobs’ Law of Trusts in Australia observed, the obligation must be annexed to the property. I further canvass the interchangeable nature of the terms, but preface this discussion by pointing out that it may not always be necessary to satisfy the question of whether a trust is established in order to succeed pursuant to s 85A of the Act.
Section 8 of the Settled Land Act 1958 (Vic), which provides a definition of a settlement, also gives the Court some guidance as to the interpretation of the word ‘settlement’. It includes inter alia, an agreement under which or by virtue of which instrument, any land is charged, whether voluntarily or by way of family arrangement for the benefit of other persons. That legislation distinguishes between settled land and land held upon trust for sale but that is not relevant here. I point to the definition simply to indicate that it assists in defining a settlement.
In Gill v Gill (1921) 21 SR (NSW) 400, Harvey J heard a dispute about the construction of a will. The deceased had devised his farm and its homestead to his son but on condition that the son keep the homestead as “a home” and provide board and residence for the deceased’s daughters. The terms of the will were quite explicit about duration, marriage and the nature of the accommodation. The son contended that the terms of the will imposed on him were too vague and uncertain for enforcement by the Court. Harvey J distinguished between conditions which operated to divest an estate from those which were conditions for the benefit of third parties attached to the possession of the property. In respect of the latter, his Honour noted that the conditions amounted to a “quasi-contract”. His Honour then said at page 406:
[I]n other words that the person taking the property is treated as being liable in the Court of Equity to carry out the obligation in the same way as if he had contracted to do so.
Harvey J then said:
The obligation seems to me to flow from the equitable doctrine that a person cannot “approbate and reprobate” under the same instrument.
His Honour thought no higher degree of certainty was required by the Court than was required for the creation of a trust. As for the fact that this obligation was personal, it was recognised that specific performance might not be able to be secured but he saw no reason why a remedy by way of damages could not be moulded.
Thus, Harvey J saw no reason why the description of the testator, albeit of a personal nature could not attract the intervention of equity. Equity will intervene if a settlement requires that intervention.
In an English decision of Re Brace (deceased); Gurton v Clements [1954] 2 All ER 354, Vaisey J dealt with a similar factual situation in which the condition was that the recipient of the house obtained it on condition that she always provided a home for the testator’s daughter at that particular address. His Honour thought the condition, being a condition subsequent, was applicable not only to the house but to the whole estate. As such, his Honour found the condition merely precatory. That is not what I am dealing with on the basis that I have found there was an agreement that the farm would not have been transferred but for the ongoing living arrangements.
In Burke v Dawes (1938) 59 CLR 1, the High Court of Australia considered a dispute between a life tenant and an unpaid mortgagee who wanted possession after the registered proprietor borrowed money against the land the subject of the life tenancy. The outcome of the proceeding is not relevant to this case, but Dixon J (as his Honour then was) in the majority, contemplated the Victorian legislation about priorities. His Honour stated at page 17 that a “person in actual occupation of the land obtain[ed] as against any inconsistent registered dealing, protection and priority for any equitable interest to which [the] occupation was incident provided that at law [the] occupation [was] referrable to a tenancy of some sort”. In respect of tenancy, his Honour referred to a number of authorities one of which was Black v Poole (1895) 16 A.L.T. 155 in which a wife had claimed an equitable life interest under an unsigned separation agreement made with her husband. His Honour noted with apparent approval that the trial judge there had held that the words used were intended to refer to a tenancy as ordinarily understood arising out of an agreement under which the person in possession was allowed to occupy in consideration of some kind of rent. There is a distinct similarity here with the consideration being the transfer of all of the wife’s interests subject to the right of occupation for life. Such a tenancy gives rise to an equitable interest under the settlement between all of the parties.
In Re Hoppe; Hoppe v McDavitt , at first instance, Pape J heard a case in which a testator left his estate to trustees to hold on trust including a trust to permit his widow and daughter to continue to reside in a specified house and to have the use of furniture and contents. similar cases, The duration of these trusts was set by the will. Pape J held this was not a trust for sale under the Settled Land Act. His Honour looked at the nature of the interest taken by the widow and daughter under the clause in the will. He held that it created no more than a personal right to reside in the house or such other house as may have been acquired by the trustees. His Honour held that it was necessary to show that an estate had been granted. As the clause in the will did no more than give the widow a personal right to reside, there was no vesting of a life estate. His Honour examined (and I adopt) the distinction between a personal right to reside and one which creates an interest at law. The Full Court upheld his Honour’s determination. Their Honours looked at whether there was a settlement within the meaning of the Settled Land Act and questioned whether an interest in the land was given to the widow. They held that the answer depended upon the extent of the right of residence intended by the testator. Their Honours asked:
Did he intend them to have the right, if they chose, to use the premises as a residence to the exclusion of everyone else?
The Court thought the testator did. The Full Court acknowledged the right was personal in the sense that it had to be exercised by the named persons, they could not transfer it and they could not let the premises.
The Full Court then said that as the enjoyment of the residence was to the exclusion of everyone else, it was an interest in land and one that equity would enforce as against the trustees.
The exclusivity of the occupation there was referring to third parties and the trustees who had no choice but to wait to distribute the land until the occupation ceased.
In this case, despite the occupation by the wife and the husband with Ms B in the one house, the evidence supports a conclusion that there was is exclusivity of occupation by at least the wife and no-one, including specifically Ms B, considers that the right is being terminated except at the wish of the wife. I am therefore satisfied that the arrangement as between all the parties was a quasi-contract which created an interest in the land for the wife and the husband despite the transfer of the legal title. The test of that proposition might arise in another context here if Ms B chose to sell the farm. Could she do so whilst the husband and wife remained residing there? In my view, based upon the agreement, she could not because the intention of all parties was that that this right of occupation was for life.
In Scott v Comptroller of Stamps [1967] VR 122, a similar problem arose before McInerney J but where the testator’s wishes were not as precise and direct. Doubts between parties had led them to enter into a deed of arrangement. His Honour referred to Underhill’s Law of Trusts and Trustees and adopted at page 126 the rule set out by the learned author which was:
If a gift in terms absolute is accompanied by a desire, wish, recommendation, hope or expression of confidence, that the donee will use it in a certain way, no trust to that effect will attach to it, unless on the will, as a whole, the Court comes to the conclusion that a trust was intended.
That view led McInerney J to examine what constituted a settlement and he noted at page 130 that the courts, including the High Court, had been “very shy” of attempting any inclusive or exclusive definition. His Honour referred to Davidson v Armytage (1906) 4 CLR 205 where Griffith CJ delivering the judgment of the Court, rejected an argument that the term “settlement” implied “either a restriction or a succession of interest” (see page 113). Other references were made to Dixon J in Commissioner of Stamp Duties (Qld) v Hopkins (1945) 71 CLR 351 where his Honour said that an instrument was a settlement if it created trusts and contained limitations “which restrict[ed] or affect[ed] alienation and transmission, according to the course provided by law for estates in fee simple or full ownership”. The critical question was the circumstance under which the property came to be settled upon the trustee.
There are many authorities (see for example Hewett v Court (1983) 149 CLR 639, Associated Alloys Pty Ltd v. ACN 001 452 106 Pty Ltd (2000) 202 CLR 588, Re Jacobson, Deceased [1970] VR 180, Brown v Heffer (1967) 116 CLR 344 and Dunn v Carter [2004] NSWSC 862) and indeed albeit dicta in many of them, they confirm that the question is whether the registered proprietor’s powers of alienation, devising and transmission are restrained by the limitations of the settlement. The transfer by the husband of the legal interest (and the wife of any equitable interest she had in the farm) created rights for the husband and the wife.
The transfer of the plant, equipment and livestock does not and cannot fall into the same category as the farm and the homestead. There is no doubt that the transfer of the personalty as distinct from the realty was an absolute gift and no restrictions were imposed.
In Young v Young (No 1) [1962] P 27 Ormerod LJ discussed the word “settlement” and said that it was not to be used in the strict sense of what the conveyancer might consider. It had to include a transaction providing for the continuing provision for the future needs of one of the spouses after the marriage had been dissolved.
A settlement is also described as a form of trust which, in turn, gives rise to arguments about the nature of the equitable obligations which bind the trustee. Those obligations relate to the benefit of persons who may enforce the obligations. In the 9th edition of Underhill’s Law of Trusts and Trustees, the learned author analysed all of this and said that it was convenient to regard a trust as an obligation whereby one person was bound to perform or forebear some act for another. He said that the obligation implied that the trustee had some control over property. It will be seen that the question here is whether or not Ms B and Ms C as the legal owners of the farm and the other assets, have an obligation to perform some act for or in relation to their parents (or either of them) arising out of the transfer of the property in 1998. I find they do for the reasons set out above.
“Settlement” has no generally accepted definition and there is certainly none in the Act. In Re Symon, Public Trustee v Symon [1944] SASR 102, a settlement was described as arising where there was a disposition of property by which a trust was constituted for the purpose of regulating the enjoyment of the settled property amongst persons nominated by the settlor. A settlement can be described as either the documents which express the dispositions that are the settlement or alternatively, the state of affairs which the documents bring about (see Cook v Cook [1962] 2 All ER 262 at 265).
The next concept that the court must be satisfied is that the settlement has a nuptial element. In Brooks v Brooks [1996] AC 375 the House of Lords looked at the issue of a marriage settlement. Lord Nicholls of Birkenhead said that the word “settlement” was not a term of art with one specific and precise meaning. His Lordship said that its meaning depended upon the context in which it was being used. In the context of the English Matrimonial Causes Act, the Matrimonial Causes Act 1973 (UK) (“the English Act”), his Lordship said that the section provided “clues”. Section 24(1)(c) of the English Act empowered the court to make an order varying the terms of a marriage settlement in the following terms:
[A]n order varying for the benefit of the parties to the marriage and of the children of the marriage…any ante-nuptial or post-nuptial settlement (including such a settlement made by will or codicil) made on the parties to the marriage.
Lord Nicholls said that the statutory provision was concerned with an order varying the terms of a settlement. That provision is different to s 85A in that it empowers a court to alter the terms of the settlement in a different way to that which is the focus of s 79 of the Act. The English provision is directed to ensuring the purpose of the settlement is carried out but in a way that is different to that which had been happening prior to separation. The Australian provision is not about rectifying a marriage settlement. There is therefore guidance from the decision in Brooks (supra). That decision was also considered by the English Court of Appeal in Charalambous v Charalambous [2004] All ER (D) 582 (Jul) but that related more to the definition of a nuptial settlement.
In Kennon v Spry (2008) 238 CLR 366, s 85A of the Act was considered by Heydon J but his Honour restricted his judgment to the fact that the words “made in relation to marriage” in that case could not apply to a trust in 1968 where the marriage occurred in 1978. Kiefel J took a different path. Her Honour said at 437 that although it was difficult to define “settlement”, it should be given a broad meaning and may involve:
A disposition of property for the purposes of regulating the enjoyment of the settled property…[but] it is necessary that it provide for the financial benefit of one or other of the spouses. It may imply some kind of continuing provision for them.
Kiefel J there found that the necessary nuptial element was present because the trust was used to hold property for the benefit of the parties to the marriage.
In Re Public Trustee (SA) and Keays (1985) FLC 91-651, the Full Court said that the provision only required that the settlement be in some manner “consequential upon or incidental to, the marriage”. To be post-nuptial, there must be a marriage and an arrangement giving rise to the settlement must contemplate the continuation of that marriage (see Young (supra)). A nuptial settlement must be designed in some way to benefit the parties to the marriage (or indeed the children) and be for the purposes of protecting the financial benefits for the parties to the marriage. In this case, the purpose of the settlement was to enable the protection of the parties through their eligibility for the pension but also, and quite separately, for their security of residence and indeed, assistance.
To be a settlement therefore, there must be a disposition of property on certain terms. Those terms must have some continuing provision for the parties who enjoy the property the subject of the settlement. Nothing in s 85A indicates that that enjoyment or those terms and conditions have to give rise to equitable interests or even rights enforceable in equity but one must conclude that they do. What must be apparent is an obligation upon the legal title holder. If that obligation is not met and the Court then finds that the settlement is a nuptial settlement, the provisions of s 85A may be enlivened. Having regard to my finding about what occurred in 1998 (see paragraph 49), I am satisfied that the transfer of the property but not the non-real property, was a settlement because obligations fell on Ms B and Ms C but particularly Ms B.
I agree with the solicitor for the husband that in 1998, the breakdown of the marriage was not contemplated. In my view, there is no jurisdictional requirement for there to be a breakdown of the marriage or even for one to be contemplated. The whole arrangement in this case was incidental to the marriage because of the need of the husband and wife for security. They could have achieved that by a sale of the farm but all agreed that no-one wanted that to occur. Thus, this was about their future security as a couple and was organised for their benefit. At that time, the wife was ineligible for the pension so this was a form of security and support for ongoing years. I find therefore it was an arrangement incidental to the marriage. It is therefore a nuptial settlement.
SECTION 79
I find there is a basis to say that the provisions of s 79 of the Act are enlivened by virtue of the finding that this arrangement in 1998 was a nuptial settlement and the determination of this case is therefore governed by the provisions of Part VIII of the Act.
Section 79(2) prescribes that a Court should not make an order unless it is satisfied that, in all the circumstances, it is just and equitable to make that order.
The approach to s 79 was examined by the High Court of Australia in Stanford v Stanford (2012) 247 CLR 108 which decision has been considered by the Full Court of this Court in Bevan & Bevan [2013] FamCAFC 116 and other cases.
In Stanford (supra), the High Court noted the requirement to identify existing property interests (as determined by common law and equity). That exercise sheds light then on whether it is just and equitable to alter those arrangements. All of the evidence needs to be considered as to why the state of the titles should be altered.
Here, Ms B and Ms C are the legal owners, in varying arrangements, of the farm and its plant, equipment and livestock. Save for what I have found was the interest of at least the wife, if not she and the husband, in the farm by virtue of the nuptial settlement, the wife would have nothing. The right to reside on the farm is not something that the wife wishes to retain. She wants the freedom to do as she wishes with her life and having regard to the circumstances under which she is currently living and I suspect would have to continue to live, the existing arrangements are no longer appropriate because of her age, the isolation of the farm, the nature of the relationship with Ms B, the loss of the relationship with the husband and otherwise, the absence of any property. It is just and equitable to alter the extant titles because she can no longer enjoy the benefits of her interest.
In addition to the husband and wife’s interest that I have described as a result of the nuptial settlement, there was also the money set aside for Ms F. That was in a term deposit but the wife took it and placed it in her own account. Two observations need to be made about the term deposit money. First, I am satisfied that some of the money has been spent by the wife on her legal expenses.
Secondly, on the evidence of the husband and the wife, this money was set aside for Ms F. Although it was not a subject of argument, if I was asked (but have not been) to find that it was either a part of this nuptial settlement or indeed, part of a trust under which the husband and wife were trustees and the beneficiary was Ms F, I would have considered there is merit in all of those matters. However, being satisfied that the money has largely been spent, it is not necessary for me to make any such finding. There is little point in some notional sum being “added back” because, in my view, neither party has satisfied me that the money belongs to them. To the extent that the money is under the control of the wife or that the wife has spent Ms F’s money on legal fees, Ms F can sort that out with the wife.
Bearing in mind also that the source of whatever cash the parties have has largely come from their Commonwealth pensions and they have lived separate financial existences since the determination of the husband to have Ms B have responsibility for his pension, I find that it would not be just and equitable to alter those interests. In their respective financial statements, neither party showed any outstanding legal expenses so I intend to presume that whatever the wife is to retain, it will be hers.
As at July 2014, there was about $43,000 and a modest number of shares. By September, the savings were down to about $11,000. In his financial statement, the husband said he had nominal savings and not much else.
The only property therefore which the husband and wife otherwise have is the interest to which I have referred in the farm. As I have also indicated, I find that the non-farm realty (which seems to have been valued at about $140,000) is not part of the nuptial settlement but rather, was part of an absolute gift. As such, the property I am dealing with is the farm which I am satisfied has a total value of $1,315,000 being “D”, $1,025,000 and “E”, $290,000. There are no significant liabilities attached to those interests.
I am satisfied that the Court is then required to deal with and take into account only the matters in s 79(4).
In Mallet v Mallet (1984) 156 CLR 605 at 647 Dawson J described the just and equitable determination as the “overriding requirement”. A Court should not be drawn into a clinical examination of what the parties have done over many years. It must be a holistic approach rather than various mathematical gymnastics. The Court must look at, assess and give weight to all of the contributions of the parties both before and after the agreement in 1998. The husband and wife operated the farm as a partnership for taxation purposes. There was evidence about the wife’s inheritance and how she contributed it but on any view, it was modest albeit important at the time with the poor returns on the farm. As it was so long ago, I consider it has no relevance. The reasoning behind the husband being the registered proprietor of the land no longer matters because the farm was used by both husband and wife in conjunction with the plant and equipment as well as the livestock in a partnership. They conducted their affairs as if everything was owned equally even if the husband might not have said so. In respect of the pension, he knew that the Social Security authorities wanted both he and the wife to transfer all of the farming assets to the two daughters. In any event, nothing in the material of either the husband or the wife suggested that they had not worked other than hard and together. When Ms B agreed to take the farm over, I find that she had not made any major contribution to it. To the extent that she had worked there for nothing or nominal wages, she was receiving the benefits of it which must be seen as offsetting any modest contribution she may have made. The situation for the last 16 years must be seen to be different.
Since the transfer and what I have found to be the nuptial settlement, Ms B has worked the farm. Whilst there was evidence of the wife helping and the husband directing, I am satisfied that Ms B made her own decisions and improved the property. I have evidence of some alterations but no evidence of how that might impact on value. In my view, it matters little because on any view, the husband and wife have had the benefit of the pension for 16 years which could not have occurred had Ms B and Ms C not agreed. Ms B and Ms C have also had the ongoing benefits of the farm but so too have the husband and wife by their occupation, companionship and financial support even if limited to produce of the farm.
In Mallet (supra), s 79 was seen by the High Court as conferring a very wide discretion to make such order as the Court thinks fit. The discretion is difficult to explain because the assessment of contributions and then any further adjustment because of s 79(4)(e), is done on a qualitative basis. In Steinbrenner v Steinbrenner [2008] FamCAFC 193, Coleman J remarked that this qualitative assessment had to be reflected in a quantitative outcome. The parties have to see that the Court has given weight to all that they have presented and come up with a just and equitable outcome.
The interests of the husband and wife as well as Ms B and Ms C lie in the farm whereas the plant, equipment and livestock belong to Ms B. In my view, there is no basis to alter the interests of Ms B in the plant, equipment and livestock. That was the subject of the specific gift and not part of the nuptial settlement.
In my view, it is just and equitable to make an order but not of the type and extent sought by the wife.
An assessment of the various contributions also requires a consideration of the provisions of s 79 of the Act. That statutory requirement sets out that the Court must consider:
·the parties’ financial contributions to the acquisition, conservation or improvement of any of the property of either of them;
·the parties’ other contributions to the acquisition, conservation or improvement of any of the property of either of them;
·the parties’ contribution made to the welfare of the family;
·the effect of any proposed order upon the earning capacity of either party;
·the matters referred to in subsection 75(2) so far as they are relevant;
·any other order made under the Act affecting a party to the marriage or a child of the marriage; and
·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.
Section 79(4) requires the Court to consider the above factors as they apply to all parties. This is not just about the husband and wife. Based on the matters set out above, I make the findings set out in the paragraphs that follow.
The financial contributions of the husband and wife were equal insofar as those contributions relate to what they did until the transfer. The role of Ms B since that time has been to continue the farm and there have been some improvements of a modest nature but on the basis of Ms B’s “profit”, I conclude that little has changed over 16 years. She appears to be eking out a living. It was for that reason that counsel for the two daughters submitted that the Court should take the transfer date as the relevant valuation date. Leaving aside the fact that the evidence presented by Ms B and Ms C related to documents of the Social Security Department including an “Asset Value Assessment” in 1997, I do not consider those statements to have probative value. To take that as evidence and rely upon it ignores two important factors. First, all parties have had years of occupation and use and thereby benefit of the property. Secondly, even if the then valuation was used, Ms B and Ms C made no significant contribution to the farm until that point in time. The fairer way is to look at what is there now, how it was achieved and then evaluate the contributions by the husband and wife until the transfer and the contributions of Ms B and Ms C since that time taking into account that all have had the benefit of the property in various ways since the transfer. Apart from natural increase in value, not much has changed if the profitability is any indication.
The non-financial contributions of the husband and wife were indistinguishable even if in very recent years, the wife has had a significant caring role for the husband. But so too, Ms B has ensured that provisions were made available for the husband and wife. She laboured on the farm subsequent to its transfer (and I have ignored her efforts prior to that time on the basis of her being an employee of some sort in the partnership). In earlier years, the husband did the heavier labouring work on the farm but the wife assisted and undertook the domestic chores. The wife’s role since the transfer has been limited but I accept she has assisted Ms B even if each saw their respective contributions very differently. There can be no doubt that Ms B managed and worked the farm and the wife did not. That needs to be recognised.
The wife’s contribution made to the welfare of the family was greater than that of the husband in the earlier years but that was decades ago and to the extent that such a role could be defined as nurturing, I consider the growth of the children and the many years since they became adults has meant that the welfare of the family role has become much less prominent now.
There can be no doubt that any order in favour of the husband will likely end the prospect of Ms B operating that farm or at least put her in a position where she has to alter her work life. She gave evidence that the reduction of the size of the farm would make it not viable and she had no capacity to borrow.
Save for s 79(4)(e), the other matters in s 79 are not relevant.
Section 79(4)(e) requires the Court to consider the factors in s 75(2) so far as they are relevant. I turn to those matters now.
SECTION 75(2) FACTORS
In the paragraphs that follow, I deal with ss 75(2)(e), (f), (g), (k), (m) and (n).
It goes without saying that the husband and wife are not young and their states of health differ. The husband has both age and poor health to his disadvantage. He needs ongoing care. Neither is going to be able to obtain gainful employment. Ms B and Ms C are obviously much younger. Ms B has been involved in farming all of her adult life but that does not mean that she cannot find an alternative; it was clearly her preference that she should not do so. The husband’s choices are limited and there was no evidence about how he would be affected by a sale. Ms B had proposed that a house be built for the two of them so change must have been contemplated.
Neither the husband nor the wife, having regard to their respective ages, has any earning capacity and each will continue to be reliant upon the pension. Any property settlement in terms of cash will (in the case of the wife) have to be channelled into accommodation so there is little prospect of the wife’s financial position in life improving much. The husband’s financial position will be much the same and it seems on the evidence that he will require care on a full time basis in the foreseeable future. The position of Ms B is more curious. Her evidence presented in a hearsay way but without objection is that she has earned virtually nothing over the years and now has a small profit of about $10,000. The sale of the farm can hardly be said to have had much of an impact on her earning capacity. Ms C’s position is unknown but she described herself as a tradesperson.
Looking at the commitments necessary to support themselves, it may be concluded that none of the parties in this case lives an extravagant lifestyle. The wife’s ambition is to live in a town and have her own home. Ms B wishes to continue to farm but has lived on an income which is meagre by Australian living standards. She is now receiving a carer’s pension for the husband. I find the changes to the income and financial circumstances of all parties unlikely. To the extent that they have property, it is in excess of $1 million in value. They are collectively asset rich but income poor but that too will radically change if the farm has to be sold and at least Ms B, has to start again.
It is very difficult to ignore that this was a deliberate plan to obtain the pension but at the same time, retain a certain rural lifestyle. Had all gone well between the husband and wife and thereafter between the wife and Ms B, things would have continued on forever. Ms B was not earning any significant income but over the many years of this farming family’s life, not much had changed. It is a sad pity that these types of problems were not contemplated at the time of the desperate need of the husband and wife for a pension. Perhaps the then government might have been a bit more paternalistic and required the sale of the asset on the basis that the financial situation was unlikely to change. Ms B could very well then have moved onto a different way of life. In my view, that requires a very significant recognition and the Court has the power to take that into account in s 75(2)(o) of the Act. I intend to give that weight.
I do not find that some form of restructuring could occur here. The husband is not capable of looking after himself even if he remained on the farm so to that extent, there is no basis for me to try and somehow equalise any entitlement with the wife. The real issue here is what should the wife have and what should the two daughters receive. I am conscious that there is no suggestion that Ms B and Ms C could not work out an ongoing relationship with their father.
I find that Ms B’s 16 year contribution along with the fact that the husband and wife have had the benefit of the farm, justifies a conclusion that Ms B (and in that sense, I include Ms C as well) has contributed 50 per cent of the farm. The husband and the wife have contributed the other half and for the reasons just set out, I would not distinguish between their respective entitlements. Taking into account s 75(2) save for s 75(2)(o), I would not find there is any basis for me to make any further adjustment because the economic circumstances of all parties are modest. The needs of the wife to get away from the farm and have her own property as against those of Ms B to earn an income very much balance themselves out. It is not appropriate that I simply give the wife enough money to buy a house because that would not reflect what has occurred nor Ms B’s entitlements. If the wife cannot acquire a house on what she has available, she may have to use the capital in some other way to accommodate herself.
I therefore propose to alter the interests of the Ms B and Ms C in the farming property so that the wife receives 25 per cent of the total real property. Although the husband’s position was that if the Court was going to make any order in favour of the wife, he too would want much the same, I do find that was never seriously his case and there is no suggestion that he will be abandoned by his two daughters. In my view, it would not be just and equitable to make any order in his favour out of the legal interests of Ms B and Ms C but should he desire to have such an opportunity, he could make an application. Because I am not intending to make orders about his share in his favour, I do not consider that any power in the Act is exhausted.
It is probable that the farm will have to be sold. However, because the farm is in various titles and Ms B and Ms C each has a separate legal interest, I consider the only appropriate course is for me to give the parties an opportunity to work out the most efficacious way of coming up with the money.
In her outline of case and proposed orders, the wife sought discrete sums of money from the two daughters failing the payment of which, their respective interests in the land be sold. I do not consider it is just and equitable to make such an order. In my view, the daughters should be required to jointly and severally pay the sum to the wife and failing agreement, a default regime can be implemented in which all properties can be sold. The nuptial settlement involved Ms C as much as it did Ms B. It would not be just for the greater burden to fall upon Ms B.
Notwithstanding the pessimism of Ms B that the farm has to be sold, she in particular, should have an opportunity to consider an alternative. If she does not have the capacity to meet the fixed sum of $328,750 within a reasonably acceptable time frame, the entire farm should be sold and the wife be paid 25 per cent of the net after payment of costs of sale and expenses. I reiterate for the avoidance of doubt that I find 25 per cent of the nett value of the farm property otherwise described as “D” and “E” in these reasons but excluding plant, equipment and livestock is a just and equitable award for the wife.
In my view, that is a just and equitable outcome and I accordingly make the orders at the commencement of these reasons.
I certify that the preceding One Hundred and Sixty (160) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 19 February 2015.
Associate:
Date: 19 February 2015
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