TAMARIS & TAMARIS
[2018] FCCA 3696
•14 December 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| TAMARIS & TAMARIS | [2018] FCCA 3696 |
| Catchwords: TRUSTS – Intention to create express or implied or resulting – inferred from conduct. DIVISION OF ASSETS – Substantial initial contributions by husband – need for special treatment. |
| Legislation: Family Law Act 1975, s.79 |
| Cases cited: Ashton v Pratt (2015) 88 NSWLR 281 Brown v Litton (1711) 24 ER 329 Byrnes v Kendle (2011) 243 CLR 253 Cruwys v Colman (1804) 32 ER 626 DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510 Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490 James v Holmes (1862) 45 ER 1266 JW Broomhead (Vic) Pty Ltd (in liquidation) v JW Broomhead Pty Ltd [1985] VR 891 Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62 Paxton & Paxton [2016] FCCA 1689 Pierce & Pierce (1998) FamCA 74 Re Armstrong (deceased) [1960] VR 202 Re West; George v Grose [1900] 1 Ch 84 Re Williams [1897] 2 Ch 12 Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation (1993) 178 CLR 145 Saunders v Vautier (1841) 49 ER 282 Sprange v Barnard (1789) 29 ER 320 Stanford v Stanford (2012) 247 CLR 108 Swain v The Law Society [1983] 1 AC 598 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 Weatherall v Thornburgh (1878) 8 Ch D 261 |
| Other Material: Meagher, R P and Gummow, W M C, Jacobs’ Law of Trusts in Australia (Butterworths, 6th ed, 1997) |
| Applicant: | MS TAMARIS |
| Respondent: | MR TAMARIS |
| File Number: | MLC 7592 of 2018 |
| Judgment of: | His Honour Judge Wilson |
| Hearing date: | 7 December 2018 |
| Date of Last Submission: | 7 December 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 14 December 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms J Swann |
| Solicitors for the Applicant: | Aughtersons |
| Counsel for the Respondent: | Mr G Dickson QC |
| Solicitors for the Respondent: | Barbayannis Lawyers |
DIRECTION
On or before 21 December 2018 the parties to bring in orders to give effect to these reasons and otherwise to dispose of this litigation.
IT IS NOTED that publication of this judgment under the pseudonym Tamaris & Tamaris is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 7592 of 2018
| MS TAMARIS |
Applicant
And
| MR TAMARIS |
Respondent
REASONS FOR JUDGMENT
Introduction
This proceeding, commenced in July and heard at trial in December of this year raised two issues for determination. They were –
a)whether a trust was constituted by the husband and wife in favour of their daughter in relation to the provision of funds for the daughter’s tertiary education; and
b)whether assets should be divided on a 60/40 basis in favour of the husband or on a 50/50 basis following the collapse of a 31 year marriage.
Synopsis
For the reasons that follow, in my judgment –
a)a trust was validly established as alleged; and
b)assets should be divided on a 55/45 basis in favour of the husband.
Short general factual narration
To their immense credit, the husband and wife amassed a very sizeable asset base in the course of their marriage, in excess of $6 million comprised of multiple parcels of real estate in the state of Victoria. Both husband and wife were [occupations omitted]. It was fairly said that either with the wife’s consent or in her acquiescence, the husband attended to day to day issues concerning the management of the purchase, improvement, maintenance and letting of their properties. In terms of non‑financial contributions made by each throughout their 31‑year marriage, very little dispute emerged. Ms Swann of counsel for the wife and Mr Dickson, one of her Majesty’s counsel for the husband acknowledged that the non‑financial contributions were essentially equal. That said, a significant dispute arose about the respective financial contributions each made at the commencement of their relationship. The details of that dispute are set out below. Suffice it to say at this juncture that one of the major assets was the land and improvements at an address in Property A, the current value of which exceeded $3 million. The husband contended that he contributed a greater amount at the commencement of the relationship and that such a disparity ought to be reflected in my division of assets thereby displacing the proposition advanced by the wife of an equal division.
So far as the trust argument was concerned, most briefly expressed the husband contended that he and the wife agreed to provide for the tertiary educational expenses for their daughter by the establishment of a fund, that in pursuance of that agreement he created a fund in an account in the [country omitted] in which a sizeable amount currently stands in credit and that the fund stood as a trust fund outside of the asset base that fell for division in this litigation.
In debate with Mr Dickson QC and Ms Swann, both counsel informed me that their clients sought only the determination of those two issues as they were otherwise able to resolve their respective assertions in this litigation.
It is convenient to now address the two contentious matters.
The trust debate
Equitable principles governing the law of trusts have very deep roots in Anglo Australian jurisprudence. Those principles apply with equal force in the matrimonial jurisdiction of federal courts in Australia. In Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation,[1] the High Court held that a trust exists when the holder of a legal or equitable interest in certain property is bound by an obligation cognisable and enforceable in equity to hold that interest not for his own exclusive benefit but for the benefit as to the whole or part of such interest of another person or persons or of himself and such other person or for some other object or purpose permitted by law. As Lindley LJ held in Re Williams,[2] echoed by Isaacs J in Glenn v Federal Commissioner of Land Tax,[3] trusts are equitable obligations to deal with property in a particular way.
[1] (1993) 178 CLR 145
[2] [1897] 2 Ch 12
[3] (1915) 20 CLR 490
In this case the precise classification of the asserted trust was not well defined. Neither counsel referred to a single authority on point. It was relevant and to my mind important to characterise the trust alleged. Counsel for the parties chose to distance themselves from conventional terminology. While the parties devoted a small amount of time to the significance of the relevant account being styled in a particular manner, the usual indicia and terms of a trust were largely ignored. The husband gave evidence that he and his wife expressly agreed to establish a fund for their daughter’s educational needs. Conversely, the wife said she had no recollection of any such discussion. It is true that in a family arrangement legal niceties are often disregarded whereas in an arm’s length commercial setting those formalities are usually observed. The Court of Appeal of the Supreme Court of New South Wales addressed that issue in Ashton v Pratt.[4] That said, the case advanced on behalf of the husband did not descend to the detail of classifying the asserted arrangement as an express or declared trust, as a presumed or implied trust or as a constructive trust. So far as the objects of the trust were concerned, the trust was said to have been a private trust and not a charitable trust. The precise duties that bound the trustee or trustees were not the subject of detailed evidence.
[4] (2015) 88 NSWLR 281
It is well established that the fact that a trust was intended may be deduced from the conduct of the parties concerned, a point traceable to academic work of undeniable authority in Scott on Trusts, fourth edition, at paragraph 23. Yet the learned authors of R P Meagher and W M C Gummow, Jacobs’ Law of Trusts in Australia sixth edition have said that if there is any uncertainty as to the intention to create the asserted trust, there will be no trust.
In this case Mr Dickson QC relied on the circumstances that unfolded rather than on the precision of the words used. On that analysis, although he did not say so in as many words it may be that the husband was characterising the relevant trust in this case as a presumed or implied trust. Very old case law post‑dating regency England in James v Holmes[5] held that a presumed trust may arise where the intention of the creator of the trust as the transferor of the relevant property has not been expressed or cannot be inferred from the language used, but from the circumstances of the case the law presumes that a trust was intended. In this category of trusts are resulting trusts where property (including money) is conveyed to the trustee for a specified purpose and, after the purpose is fulfilled a surplus remains, in which case the surplus is held on trust for the creator of the trust or his representatives. An early illustration of such a trust was Re West; George v Grose.[6]
[5] (1862) 45 ER 1266
[6] [1900] 1 Ch 84
Mr Dickson QC submitted that the evidence may also be construed in a manner by which a constructive trust was imposed. No doubt Mr Dickson QC had in mind the line of authority commencing with Brown v Litton[7] where a constructive trust was imposed in respect of profits of sale of property sold by a stranger who took possession of the property in the absence of any express or presumed intention to create a trust. The constructive trust was imposed by the court in that case merely in order that justice might be done.
[7] (1711) 24 ER 329
Yet four essential elements are required in any trust: the trustee, the trust property, the beneficiary and the personal obligation attaching to the trust property. The significance of the fourth element (the personal obligation being attached to the trust property) was considered by Hope JA in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties.[8]
[8] [1980] 1 NSWLR 510
On behalf of the wife, Ms Swann contended that no written document evidenced the creator’s intention to create the impugned trust. Mr Dickson QC did not assert to the contrary. The law does not require the use of formal words in writing or in a verbal exchange because any apt expression of intention to create the trust will suffice. Several authorities make good that proposition including Re Armstrong (deceased),[9] JW Broomhead (Vic) Pty Ltd (in liquidation) v JW Broomhead Pty Ltd[10] and Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation.[11]
[9] [1960] VR 202
[10] [1985] VR 891
[11] (1993) 178 CLR 145
The issue is whether in the specific circumstances of the case language or conduct showed a sufficiently clear intention to create a trust. The conclusion that the intention to create the trust existed may be drawn as an inference from the whole of the available evidence and in so doing I am entitled to look at the nature of the transaction and the circumstances, as was held in Swain v The Law Society,[12] Trident General Insurance Co Ltd v McNiece Bros Pty Ltd,[13] Byrnes v Kendle,[14] and Korda v Australian Executor Trustees (SA) Ltd.[15] In some instances it is not easy to divine an intention to create a trust in which case the distinction between an express trust as opposed to a constructive trust can be blurred.
[12] [1983] 1 AC 598
[13] (1988) 165 CLR 107
[14] (2011) 243 CLR 253
[15] (2015) 255 CLR 62
Here, the husband’s evidence about his and his wife’s intention to create the impugned trust was not detailed. The husband said he and his wife discussed their daughter’s educational needs. At the time the family was living in the [country omitted] and their daughter was undertaking her secondary schooling at an expensive private school. The husband said he discussed with his wife how tertiary education in the [country omitted] was expensive and they needed to make provision for it. The husband said he opened an account, described as a custody account, into which he progressively paid amounts from the joint income earned by the husband and the wife. At the date of the trial the balance of that account stood at $275 000,[16] an agreed position advanced by both parties.
[16] Transcript of proceeding (7 December 2018) 11 l 32
The wife denied the existence of any trust. She said she and her daughter’s relationship was strained. She said she had no recollection of the husband telling her about his proposal to establish an education fund for the daughter. In any event, she said her daughter had completed her undergraduate tertiary studies in Australia and no decision had been made whether the daughter would even study at postgraduate level, let alone where any such study would be undertaken. The husband said that he and the daughter will return to live and work in the [country omitted], that his daughter will study at postgraduate tertiary level in the [country omitted] and that she will attend University or some other similarly high ranking university. The mother said that if the father was so keen for the daughter to study at an [country omitted] university, he could pay for that study from his share of the proceeds after the division of assets has been made in this case.
The husband relied on a passage from the wife’s affidavit sworn 9 November 2018 in support of the relief she sought in this case. The relevant passage was as follows –
Mr Tamaris and I were discussing renovating the Property A property. Mr Tamaris was heavily involved in the development project, which required us to make a significant financial investment. The intention was that we would move from Property B and make the Property A property our home. [X] was undertaking her tertiary education in Australia and therefore we did not need to budget for the [country omitted] tertiary fees like we had anticipated. The project stalled on two occasions, once when Mr Tamaris was diagnosed with cancer and again when we went back to [country omitted] to live.
As one of the essential elements of a valid trust, certainty as to the object of the trust is required. The creator of the trust must set out clearly the purpose of the trust or the persons whom he intends to benefit and the extent of the benefit. If there is any uncertainty the trust fails and the person upon whom the property is given in trust holds the property on a resulting trust. That point is very long established in Sprange v Barnard[17] and in Cruwys v Colman.[18]
[17] (1789) 29 ER 320
[18] (1804) 32 ER 626
Several things must be said to this point. In no special order –
a)on the husband’s evidence the trust was constituted as an express trust after he and his wife agreed to create a fund to meet the tertiary educational needs of their daughter;
b)the wife had no recall of any such conversation;
c)in pursuance of that agreement, the husband said he opened an account at a bank in the [country omitted] into which he progressively deposited sums that aggregated $131 400;
d)funds were deposited into that account from money owned by the husband and the wife; and
e)the account so created was in the name of the husband alone, it was styled as a custody account and the wife was not recorded in any way on the account.
Unsurprisingly, the daughter although an adult gave no evidence in this case.
Mr Dickson QC extracted the wife’s admission that her inability to recall any conversation about the creation of the impugned trust did not equate to there being no such discussion. That much was true. In addition, the wife’s evidence was to the effect that for the life of her marriage she either agreed to or acquiesced in the husband dealing with financial matters. It was more likely than not, on the balance of probabilities, that if the discussion occurred in the way the husband said, the wife may not have understood its significance as she left to the husband business decisions and decisions concerning money. Whatever may be said about the wisdom or otherwise of such conduct is altogether a different issue to whether the conversation was held at all.
Nothing arising out of the cross‑examination of either party indicated to me that the wife or the husband were anything but honest. True, the husband’s answers at times were off‑topic and in some instances he spoke over Ms Swann or me. But I regarded him as a truthful witness who made appropriate concessions where relevant. Equally, the wife was an honest witness, albeit that at times she was loquacious and keen to make a speech rather than directly answer the question put to her.
It seemed to me that her inability to recall the conversation about the creation of the trust did not amount to a denial. It was more probable than not that she abandoned any involvement in joint financial affairs as she was content for the husband to attend to them.
In those circumstances I am persuaded that a valid express trust was created. The husband and the wife agreed that joint funds were to be hived off from their joint income and those funds were to be quarantined in a separate account for the purpose of funding the tertiary education of their daughter. The undisputed evidence was that the daughter undertook her undergraduate tertiary studies in Australia in respect of which both parents paid the daughter’s higher education contribution scheme debt. The funds in the [country omitted] account are yet to be applied to further study.
If I am wrong in my construction of the existence of an express trust, then a trust was nevertheless created but it took the form of a resulting trust. The unexhausted balance of the trust corpus will be returned to the settlors pursuant to the resulting trust.
In the course of considering these reasons for judgment, I examined the application of the rule in Saunders v Vautier.[19] In essence that rule enables a sole beneficiary interested in the trust property to put an end to the trust so long as the beneficiary is sui juris and the beneficiary’s interest in the trust property is vested. Under that rule, the daughter, who is sui juris and her interest is vested so she could put an end to the trust and receive an absolute transfer of the money in the [country omitted] account for her unfettered use and benefit, whether or not she undertook further studies.
[19] (1841) 49 ER 282
The wife would undoubtedly complain about that result especially in circumstances where she denied the existence of the trust and said that the money in the [country omitted] account had to be brought to account in any calculation of the assets to be divided as between the husband and the wife in this case. But such an outcome is the effect of the rule. The rule rests on the principle that any restriction on the enjoyment by a beneficiary who is sui juris of a vested interest is inconsistent with the nature of that interest and must be disregarded as was held by Cotton LJ in Weatherall v Thornburgh.[20]
[20] (1878) 8 Ch D 261
Drawing the threads together, the propositions set out below emerged.
First, based on the husband’s direct evidence of the conversation with his wife, the details about which the wife was unable to recall, I am persuaded that the husband and wife intended to create an express trust the beneficiary of which was their daughter for the provision of funds for the daughter’s tertiary education.
Second, if I am wrong about the characterisation of the trust as an express trust, the trust took the form of an implied trust or a resulting trust.
Third, by reason of the status of the funds in the [country omitted] account as trust funds, the character of that portion of the parties’ assets changed such that the funds in that account are not assets to be divided in the division of assets in this proceeding.
Orders will be made accordingly.
Contributions
Ms Swann argued that the parties’ 31 year marriage was the subject of essentially equal financial and non‑financial contributions. She contended that the wife’s family provided the parties with a gift of real estate in Property A which was modest according to current real estate prices but which has increased so substantially as a valuable asset that its value is to be set off almost precisely against the value of the inheritance the husband derived in the latter years of both parties’ marriage. Ms Swann said that in all other respects the parties’ non‑financial contributions were equal. In the upshot, Ms Swann contended that the assets should be divided on a 50/50 basis and not in the manner urged by the husband which was a 60/40 division in his favour.
Conversely, Mr Dickson QC argued that the husband brought to the marriage assets of such a significant value that they required separate recognition with the consequence that this case fell outside of any 50/50 division. The husband contended that a 60/40 division in his favour was appropriate. Expressed arithmetically, a 10 percentage point differential in the 50/50 position urged by the wife as against the 60/40 position urged by the husband where the total base was in excess of $6 million represented an amount in the order of $600 000.
Ms Swann submitted that I should determine the division of assets on a percentage basis, convert that to a numerical amount and then ask whether the dollar amount thereby produced was just and equitable. I recognise that various styles are adopted by various judges in ascertaining the justice and the equity contemplated by s 79 of the Family Law Act. I prefer to adopt the formula set out by the High Court in Stanford v Stanford[21] in determining the appropriate manner the assets are to be divided in this case. After all, decisions of the High Court bind an intermediate trial court as well as an intermediate appellate court. Neither has licence to depart from a binding precedent pronounced on any point of law by the High Court, a point I explored in depth in Paxton & Paxton[22] and to which I presently adhere, despite observations by other judges of other courts to the contrary.
[21] (2012) 247 CLR 108
[22] [2016] FCCA 1689
It is true that the husband brought to the marriage assets of greater value than did the wife. Yet it is also true that through the wife the Property A property was introduced to the marriage. Over the life of the 31 year marriage, the disparity of contributions became a matter of increasingly diminishing significance. It is not possible to prepare a balance sheet of each party’s contribution to the marriage at various intervals because intangible non-financial contributions often assume a degree of importance and over many years of any given marriage (here, one in excess of three decades) the importance of any original disparity abates with the effluxion of time.
That said, and while neither party referred me to the case, the decision of the Full Court of the Family Court of Australia in Pierce & Pierce[23] held that the trial judge erred in assessing initial contributions when arriving at a percentage split of 45% to the wife and 55% to the husband. That case involved a 10 year period of cohabitation where the husband made a significant initial contribution to the acquisition of the matrimonial home using funds he had at the time of the marriage. In that case the husband also contributed by caring and supporting the children after the date of separation. The Full Court held that the trial judge’s assessment was wrong and ordered the assets to be divided on a 70/30 basis in favour of the husband.
[23] (1998) FamCA 74
That amount was 10 percentage points more than the husband in this case sought. The Full Court’s decision is significant because in that case the marriage was shorter yet the percentage was greater than was sought in this case. The Full Court was critical of the trial judge’s failure to identify the initial contributions and to assess them. The Full Court said the trial judge failed to properly weigh the greater initial contributions of the husband. The Full Court also held that the trial judge failed to consider the use made by the parties of the husband’s greater initial contribution.
Here, the initial contributions were said by the husband to have been as described hereunder –
a)first, the husband owned 50% of the apartment, being [country omitted property] prior to the marriage;
b)second, the husband owned Property C at the time of the marriage on an unencumbered basis at the time of the marriage;
c)third, the husband owned Property D debt-free on an unencumbered basis valued at $40 500 at the time of the marriage;
d)fourth, the husband had $36 000 in savings from the sale of a property in Suburb P at the time of the marriage;
e)fifth, the husband owned property at Property E, debt-free, valued at $6 000; and
f)sixth, prior to the marriage the husband spent $28 525.95 renovating Property A.
There is force in the submission that the husband’s initial contributions were greater than were the wife’s. To that extent this case is similar to the factual scenario in Pierce & Pierce. However, unlike in Pierce, this case involved a long marriage. In weighing that initially disproportionate contribution by the husband in this case, I am required also to weigh the use made by the parties of that contribution. I am also required to weigh that initial contribution against later contributions from the wife.
In my view the percentage urged by the husband in this case of a 60% division in his favour was excessive. Whatever the initial disparity in contributions the asset base increased very considerably over 31 years, both parties contributing essentially equally. While the initial contribution must be recognised as unequal, its disparity did not amount to a 10% differential. In my view the inequality of initial contributions could equitably and justly support a division on a percentage split of 55% in favour of the husband and 45% in favour of the wife. I do not agree that a 60% division is just and equitable. Equally, the 70% division of assets ordered in Pierce & Pierce was based on a vastly shorter marriage. Here, over the 31 years of the parties’ marriage financial and non-financial contributions by both parties have been considerable to say nothing of the mutual benefit the parties have enjoyed from the substantial increases in real property values over 31 years. In my view 55% in favour of the husband is supportable and is just and equitable.
Conclusion
I direct the parties to bring in orders within seven days to give effect to these reasons and otherwise to dispose of this litigation.
Final note
This case represents something of an exemplar of the efficiency of the Federal Circuit Court where the parties’ legal representatives cooperate in the amassment of complicated facts, in their presentation in proper legal form and in a cooperative method of presenting the case in court. This case was commenced and heard at trial in six months. The propositions of fact and law were far from straightforward. However, with the assistance of the parties’ legal representatives and some accommodation from the court this case has been commenced and brought to a conclusion in six months, a commendable statistic in any court’s records.
I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of his Honour Judge Wilson
Date: 14 December 2018
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