TAKADA & TAKADA
[2012] FMCAfam 1419
•21 December 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TAKADA & TAKADA | [2012] FMCAfam1419 |
| FAMILY LAW – Property – long marriage – assets of the parties – whether add-backs – discretionary trust property – husband joint appointor with his sister – husband sole director of Trustee company – trust assets property of the parties to the marriage within the meaning of s.79(1) of the Family Law Act 1975 (Cth). |
| Family Law Act 1975 (Cth), ss.79(1), 79(2), 79(4) |
| Kennon v Spry [2008] HCA 56 |
| Applicant: | MS TAKADA |
| Respondent: | MR TAKADA |
| File Number: | MLC 8076 of 2011 |
| Judgment of: | Hartnett FM |
| Hearing dates: | 18, 19 and 20 June 2012 29 August 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 21 December 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr Robinson |
| Solicitors for the Applicant: | Forte Family Lawyers |
| Counsel for the Respondent: | Ms Tulloch |
| Solicitors for the Respondent: | Carew Counsel Pty Ltd |
THE COURT ORDERS THAT:
The net proceeds of sale of the property at Property C (‘the Property C property’) together with interest be forthwith distributed to the wife.
The husband forthwith do all acts and things necessary to transfer to the wife at the expense of the wife the Audi with registration number [omitted].
Subject to these orders the wife relinquish her interest in the Takada Investment Trust and Takada Nominees Pty Ltd and all assets of those entities including but not limited to Property L, Property P and Property O.
The husband cause the Trustee of the Takada Investment Trust to pay to the wife within 30 days of the date of these orders the sum of $9,539.
Pending the payment to the wife in paragraph [4] the husband and his agents be restrained:
(a)from doing any act or thing to change his entitlements in the Takada Investment Trust;
(b)from doing any act or thing to vary, dilute or otherwise affect his control of Takada Nominees Pty Ltd and the Takada Investment Trust;
(c)from resigning as an appointor of Takada Investment Trust or a director of Takada Nominees Pty Ltd;
(d)from increasing the indebtedness secured against any real estate owned by the Takada Investment Trust without the prior written consent of the wife or an order of this Court first had and received;
(e)from doing any act or thing to reduce the value of the assets of the Takada Investment Trust; and
(f)from selling any of the real estate owned by the Takada Investment Trust without the prior written consent of the wife or an order of this Court first had and received.
Pending the payment by the husband in full of the wife’s entitlements pursuant to these orders:
(a)the husband and his agents maintain the real properties owned by the Takada Investment Trust in good condition; and
(b)the husband pay or cause to be paid all payments due on the mortgages to BankWest secured on the real estate owned by the Takada Investment Trust and all other liabilities of the Trust including but not limited to tax.
The husband forthwith cause the Trustee of the Takada Investment Trust to release the wife from and indemnify her in relation to any alleged liability to the Trust or of the Trust and sign such documents as may be required to give full effect to such release.
The husband jointly and severally be liable for and pay and indemnify the wife in relation to:
(a)any and all liability, including but not limited to any taxation liability, in relation to or arising from her beneficial interest (if any) in the Takada Investment Trust;
(b)any and all liabilities of Takada Nominees Pty Ltd;
(c)any and all liabilities of any other entity in which the husband has an interest; and
(d)any and all liability of the wife (if any) to the husband’s family including but not limited to Ms S.
Unless otherwise specified in these orders and save for the purpose of enforcing any monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these orders;
(b)each party forgo any claims they may have to any superannuation benefits belonging to or earned by the other;
(c)insurance policies remain the sole property of the owner named;
(d)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(e)any joint tenancy of the parties in any real or personal estate is expressly severed.
IT IS NOTED that publication of this judgment under the pseudonym Takada & Takada is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 8076 of 2011
| MS TAKADA |
Applicant
And
| MR TAKADA |
Respondent
REASONS FOR JUDGMENT
These proceedings involve competing property applications. The wife seeks the following orders as set out in her further amended outline of case filed 30 July 2012:-
“1. The net proceeds of sale of the property at Property C (the “real property”) be applied:
(a) Firstly, to pay $2,000 to the wife’s parents.
(b) Secondly, to pay $1,000 to the wife for expenses to prepare the real property for sale.
(c) The balance then remaining be paid to the wife.
2. That the Husband forthwith do all acts and things necessary to transfer to the Wife at the expense of the Wife the Audi reg [omitted].
3. Subject to these orders the Wife relinquish her interest in the Takada Investment Trust and Takada Nominees Pty Ltd and all assets of those entities including but not limited to Property L, Property P and Property O.
4. The Husband cause the Trustee of the Takada Investment Trust to pay to the Wife within 30 days of the date of these orders the sum of $181,058.60 in order to effect a 55/45 division of the pool in her favour.
5. Pending the payment to the Wife in paragraph [4] the Husband and his agents be restrained:
(a) From doing any act or thing to change his entitlements in the Takada Investment Trust;
(b) From doing any act or thing to vary, dilute or otherwise affect his control of Takada Nominees Pty Ltd and the Takada Investment Trust;
(c)From resigning as an appointor of Takada Investment Trust or a director of Takada Nominees Pty Ltd;
(d) From increasing the indebtedness secured against any real estate owned by the Takada Investment Trust without the prior written consent of the Wife or an order of this Court first had and received;
(e) From doing any act or thing to reduce the value of the assets of the Takada Investment Trust;
(f)From selling any of the real estate owned by the Takada Investment Trust without the prior written consent of the Wife or an order of this Court first had and received.
6. Pending the payment by the Husband in full of the Wife’s entitlements pursuant to these orders:
(a) The Husband and his agents maintain the real properties owned by the Takada Investment Trust in good condition;
(b) The Husband pay or cause to be paid all payments due on the mortgages to BankWest secured on the real estate owned by the Takada Investment Trust and all other liabilities of the Trust including but not limited to tax.
7. The Husband forthwith cause the Trustee of the Takada Investment Trust to release the Wife from and indemnify her in relation to any alleged liability to the Trust or of the Trust and sign such documents as may be required to give full effect to such release.
8. The Husband jointly and severally be liable for and pay and indemnify the Wife in relation to:
(a) Any and all liability, including but not limited to any taxation liability, in relation to or arising from her beneficial interest (if any) in the Takada Investment Trust;
(b) Any and all liabilities of Takada Nominees Pty Ltd;
(c) Any and all liabilities of any other entity in which the Husband has an interest;
(d) Any and all liability of the Wife (if any) to the Husband’s family including but not limited to Ms S.
9. Unless otherwise specified in these orders and save for the purpose of enforcing any monies due under these or any subsequent orders:
(a) Each party be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these orders (the furniture, personal possessions and like chattels in the real property being deemed to be in the possession of the Wife);
(b) Monies standing to the credit of the parties in any joint bank account become the property of the Wife;
(c) Each public (sic) party forgo any claims they may have to any superannuation benefits belonging to or earned by the other;
(d) Insurance policies remain the sole property of the owner named:
(e) Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders;
(f) Any joint tenancy of the parties in any real or personal estate is expressly severed.”
The husband seeks orders as set out in his amended response filed 11 May 2012 as follows:-
“1) That upon settlement of the sale of the property at Property C, (“the real property”) the proceeds of the sale be applied:
a) first to pay all costs, commissions and expenses of the sale;
b) secondly to discharge the mortgage and any other encumbrance affecting the real property;
c) thirdly to discharge the Westpac MasterCard (approximately $20,000.00) and the St George Bank Visa (approximately $10,000.00).
d) fourthly the balance then remaining be divided in the proportions of:
i) 60% thereof to the husband; and
ii) 40% thereof to the wife.
2) That pending the payment on completion of the sale:
a) the wife have the sole right to occupy the real property and that during such right of occupation the wife pay all instalments pursuant to the mortgage and all rates and taxes and like apportionable outgoings of the real property as they fall due;
b) the parties hold their respective interest in the real property upon trust pursuant to these orders; and
c) neither party encumber the real property without the consent in writing of the other party.
3) That the wife be liable for and indemnify the husband against all debts incurred by her post separation.
4) That the wife relinquishes her interest (if any) in the Takada Investment Trust.
5) That unless otherwise specified in these orders and save for the purpose of enforcing any monies due under these or any subsequent orders:-
a) each party be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these orders (the furniture, personal possessions, and like chattels in the real property being deemed to be in the possession of the wife);
b) monies standing to the credit of the parties in any joint bank account are to become the property of the husband;
c) each party forego any claims they may have to any superannuation benefits belonging to or earned by the other;
d) insurance policies remain the sole property of the owner named thereon;
e) each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders;
f) any joint tenancy of the parties in any real or personal estate is hereby expressly severed.”
The wife relies upon the following:-
a)her affidavits sworn 5 September 2011 and 17 May 2012;
b)her financial statement sworn 17 May 2012; and
c)the affidavit of Mr B sworn 18 May 2012.
The husband relies upon the following:-
a)his affidavits sworn 13 October 2011 and 11 May 2012;
b)his financial statement sworn 11 May 2012;
c)the affidavit of Mr C sworn 5 October 2011;
d)the affidavit of Mr T sworn 14 October 2011;
e)the affidavits of Ms S sworn 24 April 2012 and 21 May 2012;
f)the affidavit of Mr D sworn 14 May 2012; and
g)the affidavit of Mr M sworn 18 June 2012.
Statements of fact in these reasons are findings of fact on the balance of probabilities.
History
The husband was born [in] 1968 and is now aged 44 years. The wife was born [in] 1968 and is now aged 44 years. Both are in good health. The husband is self-employed as a [omitted] earning approximately $52,000 per annum. Prior to separation his income was approximately $83,000 per annum. The question of his exercising his earning capacity as both a [omitted] is an issue in the proceedings. The husband resides with his partner, Ms L. She is in receipt of income of approximately $30,000 per annum. They commenced cohabitation in August 2011 being some seven months after the separation of the husband and wife. Ms L’s 19 year old daughter also resides with them. She is in employment but makes no contribution to the expenses of the household. The wife is employed as a [omitted] earning approximately $46,295 per annum. She works part-time. In addition, the wife has taken up a second job working in her brother’s company with an expectation that she will receive an income of $250 each week (or $13,000 per annum) when the business is up and running. The husband argues that the wife does not exercise her full earning capacity as she can and should work full-time as a [omitted], given the now ages of the children. The wife has not re-partnered.
The parties became engaged in 1990. They married [in] 1991. They separated under the one roof around December 2010 and physically (when the husband left the home) on 16 January 2011 after approximately 20 years of cohabitation. There are two children of their marriage namely [X] born [in] 1994 who is now aged 18 years and [Y] born [in] 1997 who is now aged 15 years. Since separation both of the parties’ daughters have resided with their mother, initially in the former matrimonial home and following its sale in rental accommodation. They spend some time with their father, though generally a limited time, mostly not overnight and at their own choosing. The husband pays child support in an assessed amount of $752 each month (which will now decrease given [X]’s age and completion of the Victorian Certificate of Education) and in addition he pays for the childrens’ mobile phones and provides them with other funds from time to time. The bulk of their support needs is funded by their mother.
Asset Pool
At the time of trial the asset pool of the parties was as follows:-
| Assets | Owner | Value | It is noted:- | |
| 1. | Net proceeds of sale of Property C | Joint | $338,839 | |
| 2. | Property T | Husband 2/28th | $28,000 | The husband’s entitlement to this asset cannot be practically realised in the foreseeable future. |
| 3. | NAB Classic Acc [omitted] | Wife | $2,783 | These funds are held by each of the parties from monies acquired post separation and will not form part of the asset pool for division or, given their quantum and daily use, be considered as a financial resource of any significance. |
| NAB iSaver Acc [omitted] | Wife | Negligible | ||
| St.George Bank “Complete Freedom” Acc [omitted] | Joint | NIL | ||
| Westpac Choice Acc [omitted] | Husband | $109 | ||
| 4. | Credit card points on Westpac Altitude card | Husband | $724 | |
| 5. | 2006 Holden [omitted] | Husband (to be retained by him) | $15,000 | |
| 6. | 2001 Audi [omitted] (driven by wife) | Husband (to be transferred to the wife) | $7,500 | |
| 7. | Tools of trade | Husband | $2,000 | |
| 8. | Furniture in husband and wife’s possession | Value not known | Each shall retain those items in their respective possession without financial adjustment. | |
| Total assets | $392,063 |
| Liabilities | |||
| 9. | Visa card of wife at separation and agreed | Wife | $7,331 |
| 10. | St.George Bank visa card at separation and agreed | Husband | $8,600 |
| 11. | Citibank credit card (see reasons here after) | Husband | $19,000 |
| 12. | Westpac MasterCard at separation and agreed | Husband | $16,800 |
| Total liabilities | $51,731 | Note:- The parties each have borrowings to pay legal costs and outstanding legal costs personal to them at trial. | |
| Superannuation | Owner | Value | |
| 13. | [omitted] (15 May 2012 - $36,079) (20 December 2011 - $33,928) | Wife | $36,079 |
| 14. | [omitted] (10 November 2011) | Husband | $6,976 |
| Total superannuation | $43,055 |
| Add-backs | Value | |||
| 15. | Interim Order 17 October 2011 Re-draw facility used for legal costs | $26,000 advanced to wife (agreed) | ||
| 16. | AMP Whole of Life Investment closed April 2011 | $26,930.40 received by husband (agreed) | ||
| Total add-backs | $52,930.40 | |||
| In addition the wife sought the following add-backs claimed | ||||
| 17. | The increase in mortgage liability between mid-2009 and January 2011 - $379,000 to $465, 206 (excluding $15,000 for purchase of the Husband’s [Holden] and $20,000 for family holiday) | Husband | $51,200 | For the reasons given hereafter this sum is not an add-back. |
| 18. | The increase in mortgage between January 2011 and April 2012 because of the husband’s failure to pay the mortgage and cash drawings made by him. No child support was paid by the husband until April 2011. | Husband | $31,884 | For the reasons given hereafter this sum is not an add-back. |
Takada Investment Trust Assets
| Assets | Value | ||||
| 1. | Property L | $345,000 | |||
| 2. | Property P | $330,000 | |||
| 3. | Property O | $650,000 | |||
| Total trust assets | $1,325,000 | ||||
| Liabilities | |||||
| Bank | Account number | Date | Balance | ||
| 4. | Bankwest | Lite Home Loan [omitted] | 28 October 2011 | $167,796.66DR | |
| 5. | Bankwest | Business Edge Loan [omitted] | 11 April 2012 | $54,995.66DR | |
| 6. | Bankwest | FICL Monthly Interest [omitted] | 9 January 2012 | $109,051.27DR | |
| 7. | Bankwest | FICL Monthly Interest [omitted] | 9 January 2012 | $188,367.26 DR | |
| Total bank liabilities agreed by the parties for the purposes of liabilities at trial | $520,210 | ||||
| Total net trust assets | $804,790 | ||||
Note: In evidence the husband claimed, according to a beneficiary loan account, he owes the Takada Investment Trust as at 30 June 2011 the sum of $98,103.56. This sum is not immediately due and payable and in the facts of this case and exercise of my discretion it is a sum which I shall not include in the calculations for the purposes of determining an apportionment of assets between the parties. The husband draws against this account entirely at his own discretion and it exists for accounting purposes rather than actual monies owed by the husband to the Investment Trust which will be called upon in the circumstances of this case.
The Takada Investment Trust
As described in paragraph 8 herein, the husband and wife own assets in their own names and have interests in other assets through a discretionary trust called the Takada Investment Trust (‘the Investment Trust’).
A company known as Takada Nominees Pty Ltd (‘Takada Nominees’) is the trustee of the Investment Trust.
Takada Nominees was registered on 22 October 2009. The husband is the sole director and secretary. There are 20 shares. The husband owns 10 shares and Ms T (‘Ms T’), the husband’s sister, also owns 10 shares. Ms T was a director but ceased being a director on 23 January 2006. The husband’s evidence and that of his sister is that Ms T ceased being a director to better enable her to borrow money with her husband to purchase a home. She had no wish to be seen to be exposed to the liabilities of the Investment Trust and in fact has never been so exposed. The evidence of the wife is that the husband desired to distance his sister and her children from any entitlement to the two properties developed by he and the wife at Property L in the State of Victoria (‘the Property L property’) and Property P in the State of Victoria (‘the Property P property’). I accept that Ms T no longer wished to be a director of the Investment Trust for the reasons she claimed and further that the husband desired to exert complete control over its operations unfettered by her.
The Investment Trust was settled on 8 November 1999, being eight years and nine months after cohabitation commenced. The husband and Ms T are the appointors of the Investment Trust. The general beneficiaries of the Investment Trust are the husband and Ms T and their respective parents, children and grandchildren. The spouses, former spouses and widows/widowers of the husband and Ms T and other general beneficiaries are also included as general beneficiaries of the Investment Trust.
The Investment Trust owns three rental properties:
a)the Property L property;
b)the Property P property; and
c)Property O in the State of Victoria (‘the Property O property’).
The Investment Trust Property
The husband built several homes during the marriage and within the Investment Trust structure. Included in these were the real properties situate at Property L and Property P. The Property L property was purchased in 2002 by the husband, and in his name. In April 2005, settlement of the purchase in the sum of $167,117 occurred. In November 2005, the Investment Trust purchased the Property L property on vendor terms. The property ultimately became registered in the name of Takada Nominees in 2007. The husband claimed in his affidavit sworn 4 October 2011 the Property L property was initially purchased by the Investment Trust, but this is incorrect. The transfer of the Property L property from the husband to the Investment Trust was at less than the total purchase costs incurred by the husband and wife in 2002. The husband and wife were not reimbursed by the Investment Trust for the stamp duty paid by them of $5,260, nor rates, mortgage payments and other holding costs incurred by them in respect of the purchase of the Property L property. The Property L property had been purchased using funds borrowed against the security of the parties’ then matrimonial home at Property M. The increase in payments on the parties’ then matrimonial home mortgage (which had been extended), were met by the wife’s income at the time, with her income going directly into the Homeside line of credit secured over the parties’ matrimonial home. The Property L property was subdivided and the husband developed two home units on the site, the second being known as Property P. The wife’s evidence, which I accept, is that the husband told her he intended to subdivide the land and build the two home units, for each of their two daughters. During the time the husband worked on these two properties, being approximately a year, the wife continued to work full-time and met the mortgage repayments on the parties’ matrimonial home, which included the earlier referred to funds advanced to develop the sub-division. The wife otherwise assisted with the design of the buildings. Both properties, upon completion, were placed on the market for rental with the rental receipts being paid to the Investment Trust and applied to the borrowings obtained from Bankwest to take over the funding of the two properties from the Homeside line of credit borrowings secured over the parties’ matrimonial home, such that the security became the Property L property and the Property P property. The Investment Trust thus obtained assets using monies initially advanced by the husband and wife. Such funds, although not in their entirety, were repaid to the husband and wife in the financial years ended 30 June 2007 and 30 June 2008 by the borrowings of the Investment Trust. The Investment Trust also benefited from the work performed for it by the husband in his capacity as a [omitted]. The husband received minimal distributions from the Investment Trust being $11,901 in 2006, $10,192 in 2007 and $14,953 in 2008. No distributions were made in the 2009, 2010 or 2011 financial years. These distributions and their quantum were determined by the husband as sole director of the Trustee, Takada Nominees. His sister became aware of such distributions but had no input into the decision-making as to the fact of a distribution or its quantum as became apparent in the giving of her evidence, despite the contrary assertion of Mr D, the husband’s accountant. Of any payments received by him (in the form of the profit distribution) the evidence of the husband was that the Investment Trust:-
“paid me what it could for its work.”
Thereafter, and continuing, attending to all the repairs and maintenance of these properties, together with their management, has been the function of the husband. The husband has made drawings of capital in the financial years ended 30 June 2006 to 30 June 2011 inclusive of $256,988.27 which has included the amount of $111,821.27 paid into the parties’ Homeside mortgage account by way of repayment of funds advanced by the husband and wife.
I accept the wife’s evidence that she and the husband had many discussions about the purchase and building of the Property L property (and subsequently the Property P property) for their daughters to inherit. I reject the husband’s evidence that he developed the properties for the benefit of their children and those of his sister in circumstances where there was no financial or other assistance provided by his sister, nor was she in any way employed in the task of construction of the two properties. I also accept the wife’s evidence that the transfer of the properties to the Investment Trust was deemed by the husband to provide a tax advantage to the parties. The wife was very involved in the building of the two homes on these properties and supported and encouraged the husband in his being engaged on the construction of the two homes to the exclusion of earning otherwise a regular and satisfactory income. It was their joint endeavour with no involvement of the husband’s sister.
The real property situate at Property O is a shop and dwelling owned by Takada Nominees. The property is rented out. This property was purchased by the husband’s father in about 1963. He operated a [omitted] business from the shop until his retirement in 2003. His evidence is that in October 1999 he formed the intention that he wished for the shop and dwelling to pass to his children for their benefit and the benefit of his grandchildren. He claims it was not his intention that the shop and dwelling be for the benefit of his children’s spouses despite the Trust Deed providing for them to be beneficiaries of the Investment Trust. On 28 April 2000, the husband’s parents transferred the Property O property to the Investment Trust by way of a gift. Since approximately 2004 the Investment Trust has received rental receipts from this property.
Ms T’s resignation as a director of Takada Nominees was on 23 January 2006. There was no agreement between the husband and his sister as to any aspect of the purchase and subsequent development of the Property L property, save they would from time to time generally discuss the husband’s activities in the home of their mother, or according to Mr D, once a year in his office. Mr D’s evidence was that Ms T would not provide him with any instructions. The husband exercised sole control of the Investment Trust and intermingled the finances of he and his wife with those of the Investment Trust. I reject Ms T’s assertion that she and her children “have the equivalent rights to the Trust and the assets as Mr Takada and his children” and that further that there is an understanding between herself and the husband in these proceedings to that effect.
When making an application for finance to the St.George Bank on 9 April 2009 the husband and wife each disclosed receipt of rental in an annual sum of $25,522, being rental receipts from the properties held by the Investment Trust. There was no distinction made by the parties between assets owned by the Investment Trust and assets owned by them. They declared the information contained in the application was correct. When completing the section headed “Financial Position” they included as their assets the three real properties held by the Investment Trust together with the loans secured against them.
Evidence of Mr B
Mr B is a Chartered Accountant called to give evidence on behalf of the wife. Amongst other documents, he was provided by the parties with the individual taxation returns for the husband for the financial years ended 30 June 2006 to 30 June 2011 inclusive together with the Trust Deed of the Takada Investment Trust dated 22 October 1999, and the Trust’s relevant taxation returns and financial statements. He prepared a report dated 17 May 2012 which is attached to his affidavit. In respect of the first task requested of him by the wife’s solicitors, that of ascertaining the accuracy of the Investment Trust documents, he was unable to undertake such exercise because he was given insufficient information to undertake the exercise. In respect of the second requested of him, he noted:-
a)the transfer of assets to the Investment Trust at less than market value and with no compensation of the holding costs of the husband and wife by the Investment Trust (which involved the sale of the Property L property for the purchase price to the husband less the stamp duty paid by him, and less interest expenses paid by the parties prior to the transfer and throughout the period of the vendor terms contract);
b)the underpayment by the Investment Trust for work done by the husband in his providing full-time services to the Investment Trust as a [omitted]. However, the husband was not so engaged (that is in a full-time capacity), as is evident from his taxation returns; and
c)the intermingling of the husband’s personal monies and those of the Investment Trust which evidence coincided, to that extent only, with the observations of Mr D, the accountant engaged by the husband. Mr D confirmed the evidence of the husband himself, that the husband paid some expenses of the Investment Trust and that likewise the Investment Trust met expenses of the husband. They were in fact significantly intermingled.
Contribution
At the commencement of the marriage neither the husband nor wife had assets of any significance. Each had a motor vehicle and the wife’s parents had given them $3,000 to purchase some furniture. The evidence of the husband’s father, Mr T, was that he gifted to his son the parties’ first matrimonial home at Property W in the State of Victoria (‘the Property W property’), and that he advanced such gift six months after the marriage. However, he did not transfer the property into his son’s name, but rather gave him the net proceeds of sale of $161,955.40 on its sale some nine years later, when the parties moved from that residence to their new home at Property M in the State of Victoria (‘the Property M property’). The evidence of the husband is also that he was gifted the Property W property but before the marriage and some two or three years before. He agrees that the title of the property was never altered. The wife’s evidence is that the husband had a verbal agreement with his parents to purchase the Property W property and that to that end he paid them monies both before and after the marriage. The husband and his father deny that any payments were made and I accept their evidence as to this. In the seven years the parties resided in the Property W property they treated it as their own and improved it. They applied wedding gifts totalling approximately $7,000 to it, and the husband performed various works himself in its improvement. Whilst he did so the wife assisted, cared for the parties’ first child and ran the household. I accept the expert evidence given to the Court by Mr M that the historic municipal valuation as at 30 June 1990 was $131,500 which was, he said, a valuation provided at the height of the property boom some two years earlier, which on the husband’s father’s evidence predated the giving of the gift. I also accept that in 1988 the value was in the sum of $92,900 based on its 1986 valuation. Both these valuations go to assisting in establishing the contribution of the husband’s parents at that time.
The net proceeds of sale of the Property W property were applied by the parties to the construction of a home on land purchased at Property M. They also applied their savings, sold shares and obtained a mortgage advance. The cost of building the home was approximately $250,000. The parties registered as owner-builders and the husband performed that work which he could do. He supervised the building and as deposed to by the wife in her affidavit sworn 17 May 2012 at paragraph 51:-
“He worked most weekends and after work, and during the Easter and Christmas holidays. When he could get time away from work and during the day he visited the site and ensured the work was being done to his satisfaction.”
The wife assisted as she could in the design of the home and visiting showrooms to select items for the home and otherwise cared primarily for the parties’ daughters. They both worked hard and made an equal contribution to the acquisition and improvement of this asset and to the welfare of their family. The husband was at earlier times in the marriage the primary financial provider. Between 2003 and 2009, the wife earnt the greater income. The wife was constantly the primary care giver to the parties’ two children.
The wife worked in various part-time jobs until she completed a [qualification omitted] in approximately 2003. She then commenced full-time work as a [occupation omitted]. In 2007, she reduced her employment to part-time to enable her to better run the household and care for the children. She was then required to work full-time in 2008 before obtaining a permanent part-time position in 2009. At the commencement of cohabitation the husband worked as a [omitted]. He then became employed and then self-employed as a [omitted] for a ten year period from 1993 to 2003. His father gave him the sum of $25,000 to fund this business but ultimately the business was not successful. In 2003, the husband commenced to be self-employed in the building industry and during these years he constructed amongst others the properties now held by the Investment Trust at Property L and Property P. In 2009, he commenced to work for [omitted] for 18 months on a salary of approximately $83,000 per annum. This workload became oppressive to him and the travel required too onerous. Accordingly, he left this job around the time of the parties’ separation and was under-employed for a time whilst regaining employment in the building industry.
The parties sold the Property M property in 2008 for $635,000 with the net proceeds being approximately $380,000. These funds were applied to their purchase of Property C in the State of Victoria (‘the Property C property’) for the sum of $729,000. The wife’s parents gifted the parties the sum of $30,000 and otherwise they obtained borrowings from the St.George Bank. The parties initially borrowed $560,000 but immediately repaid $180,000 thereby reducing the mortgage – as at March 2009 - to $379,000. The parties lived in this property until separation. At separation the mortgage was in the sum of $446,049. The mortgage amount owing was then further increased in quantum by the parties non payment and partial payment of monies owing pursuant to, it together with some cash withdrawals made by the husband, such that at settlement of the sale of the property an amount of $530,000 was required to be paid out pursuant to the mortgage. The parties again had improved this property with the husband doing various of the improvements himself. His evidence was that the parties saved $10,000 in labour costs by his work. The wife also contributed in her interior decoration of the property and ultimately the property’s presentation for sale. The wife’s evidence as to that was (as contained in her affidavit sworn 17 May 2012 at paragraph 60):-
“I presented, decorated and prepared Property C for sale on my own. It sold well above the reserve. I have not endeavoured to cost the number of hours I spent but it was very time consuming. The feedback given by prospective buyers to me by the real estate agent was very positive about the presentation and that the decor and colours were appealing. I spent about $1,000 on linen, flowers, a print and furniture to prepare the property for sale. The agent was surprised that we were offered $895,000. He recommended a reserve of about $810,000. Mr Takada agreed. Mr Takada and I had a sworn valuation from ValueIt of $810,000 as at 3 January 2012. I wanted the reserve to be higher as I expected a higher sale price which more accurately reflected my work in presenting the property for sale.”
The Mortgage
There is dispute between the parties as to the quantum of the mortgage at the time of settlement of the sale of the Property C property and its application. The wife argued the husband unilaterally withdrew funds for his own purposes. The husband denied that claim and said, in paragraphs 58 and 59 of his affidavit sworn 11 May 2012, the following:-
“58. During the marriage I applied my income to the support of the family and the acquisition of the assets which currently form the matrimonial asset pool. We have drawn down on the mortgage during the marriage and post separation the result of which is that the mortgage has increased by approximately $100,000.00 since the Property C Property was purchased. The drawdowns include:
(a) $40,000.00 was spent on an overseas trip to Macedonia, Turkey and France with the children for 8 weeks in 2010.
(b) I purchased a Ute costing me $15,000.00 in December 2010 which I use for my employment. [The wife in her evidence agreed with this].
(c) I drew down $10,000.00 for the costs of enclosing the carport and … [converting it] into a garage at the former matrimonial home. [The wife in her evidence agreed with this].
(d) In January 2011 I paid $1,000.00 for school books for the children. [The wife in her evidence agreed with this].
(e) I had terminated my employment in December 2010 and the mortgage repayment of $3,700.00 was paid from the offset account in January 2011.
(f) In January 2011 I withdrew $600.00 to take the girls camping at Portarlington. [The wife in her evidence agreed with this].
(g) There was a service fee for the wife’s vehicle of $445.00. [The wife in her evidence agreed with this].
(h) I moved $5,000.00 to the mortgage account on or about 21 March 2011 to pay the outstanding mortgage repayment of $3,700.00 and the wife’s Centrelink debt of $825.00. [The wife in her evidence agreed with this].
(i) The sum of $26,000.00 was advanced to the wife pursuant to a court order in these proceedings.
(j) The balance of monies was taken from the account for the benefit of the family and meeting our financial obligations.
59. The mortgage has been met from income and since my income has decreased and I have run out of available cash it has been met from the redraw facility.”
The wife concedes that approximately $20,000 was applied by the parties to an overseas holiday in May/ June 2010 and that such funds were an advance on the mortgage. The husband however claims the sum expended was $40,000 approximately which covered a trip of seven to eight weeks to Macedonia, Turkey and France and the pre-payment of credit card debt of $3,000 together with provision for repayment of the mortgage of $7,000 and other debt in the parties’ absence. The wife in her evidence agreed that the cost of the trip may well have come to $40,000 and otherwise as to the manner of its funding and payment of expenses during it, both here and overseas, she was vague in her evidence. I prefer the evidence of the husband who controlled the finances at the time and note it was a time when separation was not envisaged by either of the parties.
Otherwise I accept the evidence of the husband as set out in paragraph 25 herein. He was able under cross-examination to substantiate his expenditure and where he could not be precise, there was no obvious counter evidence suggestive of him intentionally depleting the family finances to the detriment of the wife, as really conceded by the wife when she gave evidence that “we all benefited from the draw-downs made against the mortgage for joint family expenses,” in the 17 months prior to separation. The wife however did not concede the joint family expenses application of the funds obtained by the husband on the cashing in of his AMP policy which monies are added-back to the asset pool - a concession made by the husband very late in the evidence.
The monies received by the husband from AMP were part paid in the sum of $20,000 into the Investment Trust account after the husband moved the monies from his personal account across to the Investment Trust. The husband then withdrew the funds for the payment of personal expenses including furniture and legal fees. The husband’s evidence was that he withdraws monies from the Investment Trust account in payment of his personal expenses where necessary.
Post-separation
The wife’s evidence was that following separation the husband made no direct contribution to the mortgage of the Property C property or its maintenance (prior to the sale). This was, she claimed, despite him not commencing to pay a child support amount to her until April 2011, and him living with his parents until August 2011 and thereby incurring minimal expenses. The mortgage repayments until sale were paid by the wife in part being as to 50 per cent ($1,700 per month) with a borrowing from her parents of $2,000, and by the parties using their redraw facility. The monies advanced by the wife’s parents are a contribution made on the wife’s behalf as was the cost to the wife of the preparation of the property for sale. Thereafter the wife had the benefit of occupation of the home and was in receipt of income. The husband’s income had declined in circumstances where it was reasonable for him to change his employment. Nevertheless this was an extra financial burden placed upon the wife and represents a post-separation contribution made by her which was not made by the husband. It is that, rather than an add-back of capital to the asset pool. In addition, the husband withdrew some amounts of cash for either his own personal use or for the use of the Investment Trust, but not in any significant sum (for personal use) as claimed by the wife such that a sum of nearly $32,000 should be added back to the asset pool.
The Law
In Kennon v Spry [2008] HCA 56 French CJ said at paragraphs 56 and 57:-
“[56] In Ashton [In the Marriage of Ashton (1986) 11 Fam LR 457] a husband who had been the trustee of a family trust replaced himself as trustee with a company but continued as sole appointor. He was not a beneficiary but received income from the trust. It was conceded that he was "in full control of the assets of the trust" The evidence made clear that he applied the assets and income from them as he wished and for his own benefit. The Full Court held that "[n]o person other than the husband has any real interest in the property or income of the trust except at the will of the husband". Special leave to appeal from that decision was refused by the High Court on 5 December 1986 (Gibbs CJ, Wilson and Brennan JJ).
[57] Where the husband was not entitled to be a trustee but was sole appointor and also a beneficiary, the Full Court of the Family Court in Goodwin [In Marriage of Goodwin (1990) 101 FLR 386 ] upheld a finding that "the trust property was, in reality, the property of the husband” and in so doing applied as a statement of principle the perhaps unremarkable proposition that:
[T]he question whether the property of the trust is, in reality, the property of the parties or one of them ... is a matter dependent upon the facts and circumstances of each particular case including the terms of the relevant trust deed.
In that case the husband had the sole power of appointment of the trustee which was a creature under his control and he was a beneficiary to whom the trustee could make payments exclusive of other beneficiaries as the husband saw fit.”
And later at paragraphs 65 and 66:-
“[65] Where property is held under such a trust by a party to a marriage and the property has been acquired by or through the efforts of that party or his or her spouse, whether before or during the marriage, it does not, in my opinion, necessarily lose its character as "property of the parties to the marriage" because the party has declared a trust of which he or she is trustee and can, under the terms of that trust, give the property away to other family or extended family members at his or her discretion.
[66] For so long as Dr Spry retained the legal title to the Trust fund coupled with the power to appoint the whole of the fund to his wife and her equitable right, it remained, in my opinion, property of the parties to the marriage for the purposes of the power conferred on the Family Court by s 79. The assets would have been unarguably property of the marriage absent subjection to the Trust.”
Consideration
The husband and his sister are the appointors of the Investment Trust. As appointors they can seek to remove or change the trustee company, of which the husband is the sole director. No discussion has occurred between the husband and the husband’s sister to the effect that the husband’s sister would seek to exercise her power in that way, nor is her evidence that she currently would do so. In April 2005, the sum of $167,117 was withdrawn from the husband and wife’s Homeside mortgage account for the purchase by the husband of the Property L property. On 5 September 2006, the sum of $168,000 was transferred from the Investment Trust account to the husband and wife’s Homeside account. At the same time, the parties had advanced a further $100,000 to the Investment Trust by borrowing against their residential property and increasing their home loan to $376,000 (from its initial $167,117). On 19 September 2006, a further sum of $60,000 was repaid from the Investment Trust to the parties by way of further reduction on their home loan. At this time the Investment Trust then obtained borrowings from Bankwest such that the Investment Trust had its own borrowings secured over its own assets.
The husband operated a business cheque account on behalf of the Investment Trust. Despite the husband’s evidence being that following the refinancing by the Investment Trust of its borrowings into its own name no further monies were advanced to the Investment Trust by the parties, the business cheque account has deposited into it $30,000 on 12 December 2006 (from the Homeside mortgage) $20,000 on 5 February 2007, $10,000 on 20 February 2007, $10,000 on 6 March 2007, $10,000 on 3 April 2007 and $12,000 on 16 April 2007 making a total of $62,000 between 5 February 2007 and 16 April 2007. The husband’s evidence as to his taking these further funds was that he “had a family to support” (on 21 February 2008 a further $11,000 was withdrawn making a total of $73,000 from the parties’ mortgage account). No funds were ever provided by Ms T, nor was there any work done by her, nor did she take on any of the liabilities of the Investment Trust. On 29 February 2008, the Investment Trust paid into (via Bankwest) the husband and wife’s Homeside mortgage account the sum of $97,000. Thereafter further monies were advanced to the Investment Trust by the husband and wife by way of further borrowings on their home mortgage totalling $40,000 which were then repaid by the Investment Trust on 30 May 2008. Some of the monies were applied to another property developed by the husband in Property S which was purchased in the name of the Investment Trust in May 2008 and subsequently sold. The pattern throughout 2005 to 2008 was one of using the parties’ matrimonial home funds, in terms of further borrowings against that property which the husband and wife repaid, and then a subsequent repayment by the Investment Trust of the borrowed funds without any interest component.
It is implausible that, as suggested by the husband, the wife would have consented to the husband working for little remuneration and well below what was commercially reasonable, whilst she earnt a full-time wage to meet the mortgage repayments on their home, when often those repayments had added to them the mortgage amounts advanced to the Investment Trust by herself and her husband, in circumstances where this was all done to build up the assets in the Investment Trust to benefit the parties’ children and Ms S’s children with no provision to be made for the husband and wife in these proceedings.
The husband sought in the proceedings to establish that the Investment Trust’s assets were for the beneficiaries of the Investment Trust which included himself, his sister Ms S and their children to the exclusion of his spouse. The terms of the Investment Trust in fact include his spouse and former spouse as a beneficiary. The only distributions made from the Investment Trust to date have been to the husband. I find on all the facts of the matter as set out in these reasons that the Investment Trust assets are property of the parties to the marriage within the meaning of s.79(1) of the Family Law Act 1975 (Cth) (‘the Act’).
Citibank Credit Card
The husband obtained a Citibank credit card which he only discovered at trial. His reasoning was curious. He was not seeking to include its liability as he had determined it was a card associated with the Investment Trust and thus considered, like the assets of the Investment Trust, it did not form part of the assets and liabilities as between the parties to be taken into account and given consideration with respect to. His evidence was that the credit card debt was a debt of both the Investment Trust and himself personally. He obtained it to transfer the Investment Trust debt from his MasterCard to a credit card in his name but to which he could personally assign its debt to the Investment Trust. The Investment Trust could not refinance at the time and so he made the decision to obtain a further credit card for use by him for the Investment Trust expenses. Under cross-examination a number of costs attributable to the credit card were however for personal expenditure of the husband and wife whilst they were together. The husband transferred the debit of $19,000 from his Westpac MasterCard to his Citibank credit card in March 2010, some nine months before separation. All of this debt was incurred by both parties and the Investment Trust intermingled during the course of the marriage.
Orders
To the total assets of the husband and wife of $392,063 there is added back an amount of $52,930 making a total of $444,993 less liabilities of $51,731 leaving a net amount of $393,262. Of this asset pool there is a significant contribution of the husband in the sum of $28,000 which should not reduce in any way, it being a sum not readily available to him. Any proposed realization of the asset will be subject to obtaining the agreement of a large number of other registered proprietors or result in costly litigation. It will be however a sum of money available to the husband in the years to come in like way to the superannuation entitlements of the husband and wife. The wife’s entitlements exceed those of the husband by approximately $29,000 being a not dissimilar amount. Neither party sought a splitting order in the proceedings and the superannuation entitlements of the parties shall remain where they are. Thus each party has a similar amount available to them to be realised in the years ahead and I do not propose to make any further adjustment as a result of the husband retaining his 2/28 interest in the real property at Property T in the State of Victoria nor as a result of the wife having currently greater superannuation interests than the husband. Once the $28,000 sum is allocated to the husband in its entirety the net asset pool becomes $365,262. With respect to this amount there is a further contribution made by the husband in the form of his parents’ gift to him of the parties’ first matrimonial home. This was a significant contribution at the time, as I find it on the husband’s father’s evidence, being some short time after the marriage. Its value would have been less then the $131,500 ascribed to it in 1990 on the basis of the 1988 peak boom time valuation but more then the $92,900 valuation obtained earlier. This contribution was at the commencement of a long marriage and what followed were contributions by each of the parties being of both direct and indirect financial nature and of a non-financial nature. In addition, there was the $30,000 contribution of the wife’s parents to a subsequent matrimonial property of the parties, and the $25,000 contribution of the husband’s father to the husband’s business which was effectively lost. Finally, there are the contributions of the wife post-separation. Despite the assistance of their respective families, the husband and wife were not able to create a large asset pool because they often spent more than they earnt and because the husband’s income in the 2003 to 2008 years was very low.
Some adjustment is warranted in favour of the husband in respect of his parents original contribution but that should not be great, given all the other contributions made as described above. An adjustment of 5 per cent is warranted. The s.79(2) of the Act matters then alter this adjustment in that the wife has had and will continue to have the support of the parties’ daughters in far greater measure than the husband. Each of the parties have an earning capacity, the husband’s slightly more than the wife, and each currently earn similar incomes. The husband has re-partnered and his partner is in receipt of income. An adjustment of 5 per cent to the wife is warranted. Thus the asset pool of the parties should be equally divided providing for each a sum of $182,631. To that conclusion, must now be added a consideration of the assets of the Investment Trust which I find to be property of the parties and available for distribution between them.
The Investment Trust net assets are $804,790. The husband’s parents gifted the husband and his sister, although the gift was to the Investment Trust and thus to the named beneficiaries or any one of them, an asset which has now a value of $650,000 and in relation to which no expenditure of the parties has been required given its rental receipts. It has produced income and equity for borrowings of the Investment Trust. The husband has the power to control the Investment Trust but he must do so having regard to Ms T’s interest in the Investment Trust. Her interest is as a joint appointor, defined beneficiary and person consulted annually about the Investment Trust by Mr D, the family accountant, but being a person who provided no instruction to him. It is just and equitable to consider only one half of the value of the Property O property when considering a division of the Investment Trust property of the parties to the marriage. This acknowledges Ms T’s equitable right to the administration of the Investment Trust. This allocation reduces the net trust assets to $1,000,000 less $520,210 in liabilities leaving a sum of $479,790 to be divided between the parties. The original gift of the husband’s father should result in an adjustment of 10 per cent of this amount in the husband’s favour, such that the wife should receive 40 per cent of this sum being $191,916. The total funds to be received by the wife are therefore $374,547. This figure represents an apportionment to the wife of 44.3 per cent on a global approach when looking to the joinder of the asset pools of $365,262 (after deduction of the husband’s $28,000 interest) and $479,790 (after deduction of the sum of $325,000 to acknowledge an interest of Ms T) being a total of $845,052. This gives due consideration to the matters of contribution and s.75(2) of the Act.
The wife has received, or pursuant to these orders will receive, the following:-
a)the Audi motor vehicle $7,500; and
b)the sum of $26,000 already advanced to her, total $33,500;
c)the wife has debt of $7,331;
d)thus the wife’s present net position is that she has already the benefit of $26,169. A further sum of $348,378 is required to be paid to her.
This total sum required to be paid to the wife of $348,378 together with interest on the invested sum should be accompanied by a transfer from the husband of the Audi motor vehicle to her. How should the payment be made? I consider that it would be just and equitable to make orders whereby the entirety of the net proceeds of sale of the Property C property should be paid out to the wife, together with a further sum of $9,539 from the Investment Trust. This leaves the husband with his motor vehicle, credit card liabilities and control of the Investment Trust assets with a minimal sum to be paid out therefrom to the wife. The wife will be able to rehouse herself and the children. The husband will be able to further develop the Investment Trust assets or sell them as determined by him with input, if he seeks it, from his sister. His evidence is that the Investment Trust has currently available to it a line of credit from the Bank of Adelaide of approximately $162,000 to effect repairs and improvements to the Property O property of $50,000 approximately. Both the husband and wife have many years ahead to earn an income and provide further for their future. The wife’s needs are more pressing now with the support of the parties’ daughters (they require appropriate housing) and a lesser earning capacity. The making of orders in these terms satisfy the justice and equity requirements as set out in s.79(4) of the Act.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Hartnett FM
Associate:
Date: 21 December 2012
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