Tibben and Tibben
[2013] FamCAFC 145
FAMILY COURT OF AUSTRALIA
| TIBBEN & TIBBEN | [2013] FamCAFC 145 |
| FAMILY LAW – APPEAL – Appeal against an order made by way of enforcement of an order that the husband pay the wife a fixed sum if he did not sell or otherwise dispose of a property within a specified period – The husband, who held the property as trustee of a discretionary trust, transferred the property to himself in his own right – Where the Family Law Magistrate found the husband had not sold or otherwise disposed of the property – The legal ownership of the property had not changed and prior to the transfer no one held a beneficial interest – There has not been a disposition of any interest in the property – The husband is therefore obliged to pay the fixed sum to the wife – Appeal dismissed. |
| Family Law Act 1975 (Cth) s 94AAA(3) |
| ASIC v Carey (No 6) (2006) 153 FCR 509 Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 Gartside v Inland Revenue Commissioners [1968] AC 553 Glennon v Federal Commissioner of Taxation (1972) 127 CLR 503 Kennon v Spry (2008) 238 CLR 366 |
| APPELLANT: | Mr Tibben |
| RESPONDENT: | Mrs Tibben |
| FILE NUMBER: | PTW | 3581 | of | 2007 |
| APPEAL NUMBER: | WA | 24 | of | 2012 |
| DATE DELIVERED: | 25 September 2013 |
| PLACE DELIVERED: | Perth |
| PLACE HEARD: | Perth |
| JUDGMENT OF: | Thackray J |
| HEARING DATE: | 13 May 2013 |
| LOWER COURT JURISDICTION: | Magistrates Court of Western Australia |
| LOWER COURT JUDGMENT DATE: | 21 August 2012 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Rynne |
| SOLICITOR FOR THE APPELLANT: | Leach Legal |
| COUNSEL FOR THE RESPONDENT: | Mr Jones |
| SOLICITOR FOR THE RESPONDENT: | Clairs Keeley |
Orders
The appeal be dismissed.
The appellant husband pay the respondent wife’s costs of and incidental to the appeal as agreed and in default of agreement, as assessed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Tibben & Tibben has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT PERTH |
Appeal Number: WA 24 of 2012
File Number: PTW 3581 of 2007
| Mr Tibben |
Appellant
And
| Mrs Tibben |
Respondent
REASONS FOR JUDGMENT
Introduction
I am required to determine an appeal by Mr Tibben (“the husband”) against orders made by Family Law Magistrate Walter on 21 August 2012. Mrs Tibben (“the wife”) opposes the appeal.
I have power to determine the matter by virtue of a delegation given pursuant to s 94AAA(3) of the Family Law Act1975 (Cth).
The appeal was originally against two orders; however one complaint fell away when counsel for the appellant very properly drew to my attention a legal impediment to him pursuing the sole ground of appeal against that order.
The only order now challenged is the one enforcing what was found to be the husband’s obligation pursuant to consent orders made on 23 January 2008 (“the 2008 orders”). These orders related, inter alia, to land in suburb G, registered in the name of the husband. They required the husband to make a payment of $141,075 to the wife in the event that he had not sold or otherwise disposed of the land on or before 31 December 2010.
The husband held the suburb G land in his capacity as trustee of the T Family Trust (“the trust”), which was created by a Deed of Settlement made in 1991 (“the Deed of Settlement”). The husband was both the trustee and the guardian of the trust. The children of the husband and wife were the specified beneficiaries of the trust, and the husband and the wife were additional members of the class of general beneficiaries.
On 5 September 2009, the husband, in his capacity as trustee of the trust, entered into a deed (“the Transfer Deed”) with himself in his capacity as guardian of the trust pursuant to which, in the exercise of powers conferred upon him by the Deed of Settlement, he transferred the property of the trust, including the G suburb land, to himself for his “sole benefit”. After the transaction, the husband continued to be the registered proprietor of the land.
The husband now claims that this transaction constituted a disposal of the G suburb land for the purposes of the 2008 orders. If he is correct, he will be relieved of any obligation to pay the wife $141,075. This sum was a figure the parties agreed at the time of the 2008 orders represented 60 per cent of the capital gains tax that would be payable on a sale or disposal of the property.
The 2008 orders
The Magistrate correctly identified the following paragraphs of the 2008 orders as being those relevant to the present dispute (my emphasis added):
10.If the trustee of the Trust (“the Trustee”), being at the present time the Applicant [husband], does not sell or otherwise dispose of the whole of the property being [the G suburb land] on or before 31 December 2010, the Applicant [husband] pay to the Respondent [wife] on 7 January 2011 an amount of $141,075, being 60% of the estimated capital gain in relation to [the G suburb land] as at the date of this Order.
11.The amount of $141,075 shall not be subject to adjustment should the value of [the G suburb land] alter between the date of this Order and 31 December 2010.
12.If the Trustee does not sell or dispose of the whole of [the G suburb land], but develops and sells or disposes of only a part of [the G suburb land] prior to 31 December 2010, the amount of $141,075 shall be reduced in the proportion which the value of that part of [the G suburb land] which is not sold or otherwise disposed of bears to the value of [the G suburb land] as a whole as at the date on which the subdivided part is sold or is otherwise disposed of.
13.If the Trustee sells or disposes of the whole of [the G suburb land] prior to 31 December 2010, the obligation to make payment to the Respondent [wife] under paragraph 10 will cease.
It is common ground that paragraph 10 contained an error, in that “the estimated capital gain” should be read as “the estimated capital gains tax”.
Although the motivations of the parties in consenting to these orders is not relevant, the rationale of paragraph 10 was that the capital gains tax potentially payable on a disposal of the G suburb land had been taken into account in assessing the value of the assets available for division. If the husband did not in fact dispose of the land within the agreed time, and hence did not incur a capital gains tax liability, the wife wanted to receive the amount she would otherwise have received in the settlement.
Neither party takes issue with the learned Magistrate’s findings in the following paragraph of her reasons:
21.It would appear that as a result of the transfer of the trust property to the husband, no capital gains tax has been paid or is payable. At least, the husband has not produced any documentation to suggest any capital gains tax was payable and it was open to him to do so …
The Transfer Deed
The Transfer Deed was styled as a “Deed of Transfer of Beneficial Interest in Trust Property”. It was in the following terms (original emphasis):
INTRODUCTION
ABy a Deed of trust described in the schedule hereto as the Trust Deed (the “Trust Deed”), a discretionary trust was created known by the name of the trust specified in the schedule (the “Trust”).
BThe Trustee was appointed Trustee of the trust by the Trust Deed and has continuously held such office up to and including the date of this Deed.
CThe Trust Deed vests the power of transferring all or any part of the trust fund for the benefit of any beneficiary in the Trustee provided the Trustee has the consent of the Guardian to do so.
DThe Guardian has not retired from the position of Guardian or done anything to preclude the Guardian from exercising its powers contained in the Trust Deed.
EThe Trustee wishes to vest the trust and the Guardian consents to the transferring of the Trust Property to the Nominated Beneficiary as specified in the Schedule.
IT IS AGREED
1.Pursuant to clause 7(a) of the Trust Deed, the Trustee in exercise of the powers conferred upon the Trustee by the Trust Deed transfers the Trust Property to the Nominated Beneficiary for the sole benefit of that beneficiary from the date of this Deed.
2.The Guardian declares and confirms its consent to the transfer of the Trust Property to the Nominated Beneficiary.
3.This Deed is for all purposes deemed to have been executed by the parties on the date which it bears.
The “Nominated Beneficiary” specified in the schedule was the husband himself.
The reasons of the Magistrate
The Magistrate rejected the claim that the arrangement recorded in the Transfer Deed constituted a disposal of the G suburb land for the purposes of the 2008 orders. Her primary basis for doing so appears in this extract:
38.Whilst the legal ownership of the trust property was held in the name of the Trustee of the Trust (who was the husband), the Trustee does not hold the property for his benefit but rather for the benefit of the Trust, that is for the beneficiaries of the trust. That is, whilst the Trustee may hold the legal ownership of the assets of the trust, the beneficial ownership of the assets of the trust remains with the potential beneficiaries, or such of them as the Trustee ultimately determines will receive the income and/or capital of the Trust. No authority was referred to by the husband to suggest this is not the case.
39.In those circumstances and as evidenced by the terms of the Deed of Transfer of Beneficial Interest in the trust property, whilst the property was transferred to the husband, I am satisfied that does not constitute a sale or disposal of the property. The Deed of Transfer refers to the Trust vesting, no consideration was paid. Only nominal stamp duty was paid on the Deed. There is no evidence from the husband that either the husband or the Trust declared the transfer of the property in their relevant tax returns. No transfer was lodged at Landgate. The beneficial ownership of the property remained the same.
The ground of appeal
There was only one ground of appeal, namely that the Magistrate had erred in law and fact when determining that the G suburb property had not been sold or otherwise disposed of on or before 31 December 2010.
Appellant’s submissions
Counsel for the appellant provided a written outline of argument identifying the relevant legal principles. No issue was taken with his analysis of the law. The main propositions were these:
·A trust is not a juristic person with legal personality distinct from that of the trustee and beneficiaries;
·Where a trustee is the owner of the legal fee simple in land, the right of the beneficiary, although annexed to the land, is a right to compel the legal owner to hold and use the rights which the law gives the legal owner in accordance with the obligation which equity has imposed upon the legal owner by virtue of the legal owner’s position as a trustee. Equity does not say that the beneficiary is the owner of the land. The trustee is the owner but is bound to hold the land for the benefit of the beneficiary;
·It follows that a trust cannot own property – e.g. by being the registered proprietor of Torrens land;
·If one person has both the legal estate and the entire beneficial interest in land then the person holds an entire and unqualified legal interest and not two separate interests, one legal and the other equitable;
·In the case of discretionary trusts, unless and until there is a specific application of trust income or capital to an object of the trust, no person holds an equitable interest in any part of the trust property.
Counsel for the appellant further submitted that:
·While the words “disposed of” do not possess a technical legal meaning, they have a very wide meaning and generally cover all forms of alienation;
·The Deed of Settlement conferred on the husband, as trustee, power to transfer the G suburb land to himself;
·This power was in the nature of a power of appointment or a “vesting power”, but however the power is characterised, the exercise of the power constituted a “disposition”;
·Prior to the transfer occurring, the husband had no equitable interest in the G suburb land and therefore the nature of his interest in the land changed upon the execution of the Transfer Deed;
·If contrary to the previous proposition, the Deed of Settlement was such that the husband always had an equitable proprietary interest in the land, then that interest changed upon execution of the Transfer Deed;
·After the execution of the Transfer Deed, the husband acquired “the largest estate in land known to the law”, such result having been achieved by a “disposition”.
Respondent’s submissions
Counsel for the respondent did not seek to support all the observations made by the learned Magistrate, conceding they were “perhaps in excess to the decision she needed to make”. He nevertheless submitted that her Honour had reached the right result because the husband at all times was the registered proprietor of the land and thus had not disposed of the whole of the property within the meaning of the 2008 orders.
Resolution of the appeal
I have concluded that the learned Magistrate was correct in determining that the husband had not “disposed” of the land within the meaning of the 2008 orders. My reasons, although not entirely corresponding with those of her Honour, can be shortly stated.
Prior to the execution of the Deed of Transfer, the husband, in his capacity as trustee of the trust, had at law all of the rights of an absolute owner of the land, albeit he was not free to use those rights for his own benefit save to the extent provided for in the Deed of Settlement: Glennon v Federal Commissioner of Taxation (1972) 127 CLR 503. After the execution of the Deed of Transfer, the husband continued to have all of the rights of an absolute owner of the land, but now held those rights free of obligations pursuant to the Deed of Settlement. The fact that following the execution of the Deed of Transfer the husband holds an entire and unqualified interest in the land does not mean there has been a disposal to him of an interest in the property he did not already possess.
Until the husband executed the Deed of Transfer, no-one held an equitable interest in the land because there had been no specific application of the capital of the trust to anyone. As French CJ pointed out in Kennon v Spry (2008) 238 CLR 366 at [49], citing the decision of the Privy Council in Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 22, “the law does not require for all purposes and at every moment in time, the separate existence of two different kinds of estate or interest in property, the legal and the equitable”. The only “entitlement” of the beneficiaries under the Deed of Settlement was a right to consideration and due administration of the trust: Gartside v Inland Revenue Commissioners [1968] AC 553 at 607; ASIC v Carey (No 6) (2006) 153 FCR 509 at [30]. Indeed, as was pointed out by Gummow and Hayne JJ in Kennon v Spry (supra at [125]) the use of the term “beneficiaries” in the context of a discretionary trust, is inapt insofar as it suggests the existence of a beneficial interest, since those referred to as “beneficiaries” are no more than eligible objects of the trust.
The terms of the 2008 orders imposed an obligation on the husband to pay the agreed sum to the wife unless he had disposed of “the whole of the property”. Given there has been no change in the ownership of the legal interest in the land, the husband could not have been said to have disposed of the whole of the property. Furthermore, given that no-one held an equitable interest in the land, the Deed of Transfer did not constitute a disposal of such an interest.
There being no disposal of any interest in the property, the husband is obliged to pay the agreed sum to the wife. The appeal will therefore be dismissed.
Costs
It was effectively acknowledged that the husband should pay the wife’s costs if the appeal was dismissed. The only issue is whether costs should be assessed on an indemnity basis. Nothing put to me by the respondent indicated that there was any valid reason for costs to be assessed on an indemnity basis.
I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 25 September 2013.
Associate:
Date: 25 September 2013
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