Vallis and Symes and [S] Trustees Ltd - [2008] FMCAfam 1050

FEDERAL MAGISTRATES COURT OF AUSTRALIA

VALLIS & SYMES & [S] TRUSTEES LTD

[2008] FMCAfam 1050

FAMILY LAW – Wife has an acquired brain injury – Trust established for her future expenses – pre-nuptial agreement not binding on the Court – Court can take it into account – lump sum to be paid by instalments – corpus of Trust not reduced – just and equitable.

Family Law Act 1975(Cth), ss.75, 79, 85

In the marriage of Clauson and Clauson (1995) FLC 92-295

Applicant:

MR VALLIS

First Respondent:

MS SYMES

Second Respondent:

[S] TRUSTEES LTD

File Number:

MLC 11430 of 2007

Judgment of:

Turner FM

Hearing dates:

25, 26 & 27 August 2008

Date of Last Submission:

4 September 2008

Delivered at:

Melbourne

Delivered on:

31 October 2008

REPRESENTATION

Counsel for the Applicant:

Mr Williams

Solicitors for the Applicant:

Cahills

Counsel for the first Respondent:

Ms Cranenburgh

Solicitors for the first Respondent:

Legal Help Lawyers

Counsel for the second Respondent:

Ms Tulloch

Solicitors for the second Respondent:

Nicholes Family Lawyers

ORDERS

That the wife, or the [K] Trust at her direction, pay to the husband the sum of $114,299.00 by quarterly instalments of $2,500.00 without interest, commencing one quarter from the date of this decision.
The wife otherwise is to retain all money and property in her possession, or in the Trust.
The husband is to retain his superannuation and motor vehicle and all other property in his possession.

IT IS NOTED that publication of this judgment under the pseudonym Vallis & Symes & [S] Trustees Ltd is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLC 11430 of 2007

MR VALLIS

Applicant

And

MS SYMES

First Respondent

[S] TRUSTEES LTD

Second Respondent

REASONS FOR JUDGMENT

Introduction

In this application the husband seeks a distribution of $350,000.00 from the pool of assets of the marriage. Interim parenting orders were made by consent on 5 November 2007 that two of the children of the marriage live with the husband and spend time with the wife. Final parenting orders were made by consent on 25 August 2008.
[S] Trustees Ltd sought the appointment of a case guardian for the wife, but withdrew that application upon it being agreed that the wife would not be cross examined.
The respondent wife was involved in a car accident when she was

six weeks old and accepted a settlement of $1,250,000.00 as damages for her injuries. That compromise was approved by the Supreme Court of South Australia on 20 June 1995. The wife was then 15 years old.

A trust was established to manage the estate and pay the wife’s expenses (the “Trust”). The Trust is administered by the second respondent, [S] Trustees Ltd in Victoria.
The husband and wife married and commenced living together in May 1999.
The husband and wife signed a pre-nuptial agreement (the “Agreement”) on 7 May 1999 [before the marriage].
There are four children of the marriage:
[W], born in 2001;
[X], born in 2003;
[Y], born in 2005; and
[Z], born in 2006.
[W] and [X] live with the applicant. [Y] and [Z] currently live with the paternal grandparents, but the applicant intends that they live with him after the Custody to the Secretary Order in relation to them is reviewed in December 2008 (Court transcript page 125 line 10).
The respondent wife brought into the relationship the balance in her Trust of $1,217,618.33 (Exhibit “ST5”) plus a car agreed to be worth $30,500 and a caravan agreed to be worth $35,000, as set out in the Agreement. The respondent wife has never had paid employment but had an income from the Trust of $300 per week which increased to $400 per week in June 2001, and $440 per week in June 2005. The applicant brought into the relationship his income of $300 per week net, his superannuation of $12,065 and his car with an agreed value of $3,000, as set out in the Agreement. His take home pay reached $450 per week, some of which he retained for his own use (Court transcript page 21 line 36).
In February 2000, [S] Trustees purchased a house at Property B for the respondent wife in her name, for $207,000. It became the matrimonial home. The applicant built a fence, did some plumbing work and performed maintenance on the home. It was sold in 2006 for $326,000. The applicant husband claims that much of the profit was due to his work on the house. The Court assesses the contributions of the parties to the assets of the relationship during the marriage to have been equal. The applicant husband brought in his income which increased over time to $450 per week gross. The respondent wife brought in her income from the Trust. The husband contributed some skill, labour and materials to improving the house; the wife was the primary carer in the family and did the majority of the cooking and cleaning (Court transcript page 23 line 26). The Court applies the finding at first instance in In the marriage of Clauson and Clauson (1995) FLC 92-295 at [81,901]:
“How much in the increase in value was due to improvement and/or general property value increase I do not know. I am left in the position that the parties efforts in and about the property may not have been responsible for the increase in value or may have been partly responsible.”
The husband produced no evidence from a valuer that the increase in value was due to his work on the house and garden. The Court finds that as the contributions of the parties during the marriage were equal, and as much of the increase in value may be attributable to the general increases in property value, and as the house was purchased solely from the wife’s funds and all outgoing expenses such as rates and insurance were paid by the Trust (Court transcript page 179 line 13), the vast bulk of the profit from its sale belongs to her. The profit from the sale is included in the balance of the Trust and is subject to the distribution decided below.
The parties separated on 13 November 2005 and were divorced on

14 January 2007
.
The husband married Ms V on 2 March 2008. Ms V has three children from a previous relationship; [J] aged 18, [R] aged 16 and [B] aged 8. [J] and [B] live with Ms V and the applicant husband. [R] lives with his friends. Ms V and the applicant have a child together, [E], who was born in June 2008. He lives with them.
The wife married Mr S in April 2007. The wife formed a relationship with Mr H and had a child with him, [O], born in September 2007.

[O] is in foster care in [S].
The applicant husband rents a house at Property C for $200 per week. Living in that house with him are his wife Ms V, her children [J] and [B] and the applicant’s children, [W] and [X], plus his child with Ms V, [E], who was two months old at the time of hearing. [J] is 18 years old (Court transcript page 25 line 43). The applicant therefore needs a house that will accommodate seven people; and if his other two children [Y] and [Z] come to live with him, nine people. The wife opposes the last two children going to live with the husband. It is not possible to determine whether those children will live with the husband. The Court must consider the established facts at this time.
The respondent wife pays the applicant $205 per week in child support. The applicant’s household has a weekly income of:
The applicant’s take home pay of $429 per week
Child support of $205 per week (Court transcript page 74 line 8)
Ms V’s payments from Centrelink of $450 per week
Child support for [B] of $28 per week (Court transcript page 102 line 39)
Total: $1,112 per week
The applicant husband claims that he cannot afford suitable rental accommodation, and that he cannot obtain a loan to purchase a house. He seeks a distribution of $350,000 from the pool of assets which he says will enable him to purchase a suitable house. That amount is sought “by way of property settlement and capitalisation of spousal maintenance” (Third Amended Application dated 17 July 2008, Court transcript page 17 line 25). Effectively, the $350,000 would come out of the funds held in the Trust.

The pre-nuptial agreement

The Agreement records the financial position of the parties on 7 May 1999 as follows:
The Respondent Wife:
·Holden Astra, $30,500
·Caravan, $35,000
·Trust monies, $1,205,979.90
·Personal items
·Income from the trust of $300 per week.
The Applicant Husband:
·Ford Station Wagon, $3,000
·Superannuation ($12,065 as at 17 October 2007)
·Net salary of $300 per week
·Personal items
The asset pool excluding weekly incomes was therefore $1,286,544.90 (including superannuation as at 17 October 2007). Of this, the applicant husband contributed $15,065.00 or 1.17%.
The contributions of the parties during the marriage were equal.

The wife’s income was $300 per week and increased to $440 per week. The husband’s income was $300 per week and increased to $450 per week. The wife’s care of the family and home offset the husband’s input of skill, labour and materials.

Section 75(2) factors

Consideration of factors in s.75(2):
a)The applicant is 31 years of age and in good health. The respondent wife is 29 years of age and has an acquired brain injury.
b)The applicant earns a net income of $429 per week and has the capacity to retain gainful employment. The respondent wife has a Trust income of $440 per week and is unlikely to be able to obtain gainful employment.
c)The husband has the care and control of two children of the marriage and may in the future have the care and control of the four children of the marriage, all of whom are now under the age of 18.
d)The respondent wife pays the applicant $205 per week by way of child support. She owns her house at Property S. The applicant has a commitment to house his family (presently seven persons). He currently rents a house for $200 per week.
e)The respondent wife pays child support of $205 per week. The applicant needs to support a family of seven (that may become nine).
f)There is no evidence as to the eligibility of the applicant husband or respondent wife to receive an allowance or benefit as described.
g)Both parties have divorced and remarried. It was stated during the hearing that the respondent’s husband (Mr S) has left her in recent weeks. Neither party has enjoyed a luxurious standard of living.
h)The applicant seeks $350,000 “by way of property settlement and capitalisation of spousal maintenance”. One of the wife’s proposals is the periodic payment of maintenance. The division of the pool will be made in such a way that the applicant’s share will be paid to him in instalments.
ha)    Not relevant.
j)The applicant has made a minor contribution to the assets and income of the relationship.
k)The marriage of eight years has not affected the earning capacity of either party.
l)
The applicant wants to continue his role as a parent.

The distribution decided on will assist him to do that.
m)The respondent wife is not cohabitating with anyone. The applicant has married Ms V. Between them they have a household income of $1,112 per week and pay rent of $200 per week.
n)Not relevant.
o)The Court takes into account the fact that the Trust has been established to enable the wife to take care of herself for the rest of her life, presumably without working.
p)The parents signed a pre-nuptial agreement on 7 May 1999 which includes provisions:
“B) There are no children of the relationship but it is possible that there may be.
C)     Both Ms Symes and Mr Vallis are entering into their marriage with the view that it shall be a long and lasting relationship. Both Ms Symes and Mr Vallis own some assets. In particular, Ms Symes has a substantial sum of money held on her behalf by [S] Trustees Ltd. In the hope of leading to and assisting with marital tranquillity in their life together and to avoid disputes between them in the future about the entitlement to property and the financial obligations towards each other and to ensure that those monies held on Ms Symes’s behalf by the
[S] Trustees are maintained for her benefit, Ms Symes and

Mr Vallis propose to set down in this Agreement how their financial relationship will be regulated should their marriage relationship be unsuccessful.
6.     Mr Vallis and Ms Symes agree that no recognition shall be given for contributions of a non-financial nature in any form and no claim shall be made by either against the other accordingly in respect of such non-financial contribution.” (Court’s emphasis)
12. Ms Symes and Mr Vallis intend this Agreement to be binding upon them subsequent to their marriage. They have been advised and understand that this intention will not bind a court exercising jurisdiction under the provisions of Part VIII of the Family Law Act 1975, but acknowledge that this intention is a factor which may be taken into account in the exercise of any judicial determination under the Family Law Act or any legislation which replaces or amends that Act. The parties agree that this Agreement may be used in such proceedings under the Family Law Act as evidence of this intention and neither of them will raise any objection to this Agreement being introduced into evidence for this purpose.
13.    Mr Vallis and Ms Symes intend this Agreement to binding even if a child (or children) is born to the parties…”
The applicant husband proposes that the respondent wife pay him $350,000. The respondent wife proposes first that the financial agreement be enforced, or alternatively that she make periodic payments to the applicant, or alternatively that a trust be established for the benefit of the children (Court transcript page 51 line 1).
Although the Court is not bound by the terms of the financial agreement (s.85A of the Act) it may have regard to it (ss.75(2)(o)). The parties signed the agreement thereby indicating to the other party that they intended to be bound by it. The applicant says that he knew at the time of signing that they would not be bound by it and that there would be a way around it (Court transcript page 108 line 12 and page 112 line 24). To not have regard to the agreement would allow the applicant to benefit from that conduct. Although the Court is not bound by the agreement, the Court has regard to it in reaching its assessment of what is fair and equitable between the applicant and the respondent.
In considering what (if any) orders to make under ss.85A(1) the Court is required to take into account the matters referred to in ss.79(4) as far as they are relevant.
Sub-section 79(4)(a): the Court takes into account the financial contributions of the parties.
Sub-section 79(4)(b): the Court takes into account their non-financial contributions.
Sub-section 79(4)(c): the Court takes into account the contributions of parties to the welfare of the family, and as homemaker and parent.
Sub-section 79(4)(d): the proposed orders of a payment of $350,000 to the husband will greatly reduce the corpus of the Trust and thereby the earning capacity (income potential) of the wife.
Sub-section 79(4)(e); s.75(2): factors are discussed below.
Sub-section 79(4)(f): factors are not relevant.
Sub-section 79(4)(g): the wife pays chid support to the husband of $205 per week.
The Court’s assessment of the s.75(2) factors is as follows:
a)The husband is 31 and in good health. The wife is 29 and has an acquired brain injury.
b)
The wife has substantial assets but is unlikely to ever find paid employment.

The husband has little capital but is in paid employment.
c)The husband has care and control of two children of the marriage and intends presently to seek the care and control of the other two. All four are under 18.
d)The husband needs to provide housing currently for 7 people.
e)The wife relies on her income from the Trust to maintain herself and pay child support to the husband and to his parents. The husband has a duty to maintain his wife and currently 5 children.
f)Neither party receives an allowance as described.
g)Both parties appear to be living in circumstances that are reasonable.
h)The application is for property settlement and maintenance (Third Amended Application and Court Transcript page 51 line 41).
ha)Not relevant.
j)The husband has not made a major contribution to the income, property and financial resources of the wife.
k)
The marriage was of relatively short duration being from May 1999 to their separation on 13 November 2005 and divorce on

14 January 2007
.
l)The husband wishes to continue his role as parent to the children of the marriage.
m)The husband is cohabiting with Ms V who receives a payment from Centrelink of $450 per week.
n)The Court makes an order under s.79 as set out later in this decision. It considers that order to be just and equitable.
na) The wife pays child support to the husband of $205 per week.
o)The Court takes into account the fact that a pre-nuptial agreement was entered into.
p)The pre-nuptial agreement is an agreement as to finances. The husband alleges that he thought that there would be a way around it. If that is so, he never intended to create a legal relationship when he signed it, and it is arguably therefore not binding on him. That argument was not put for the husband. The Court decides that the justice of the case requires it to be taken into account.
Section 79(4) and s.75(2) factors lead to an adjustment in favour of the husband of 10%. This is within the normal range of 10-20% referred to in Clauson at [81, 911] (post). In that case, an adjustment of 25% was made for s.75(2) factors where there was an enormous disparity in the income and earning capacity of the parties, coupled with the fact that the wife was not the custodian of the four children [81, 910]. Here there is not an enormous disparity in the income and earning capacity of the husband and wife – they are similar. Although at some stage the applicant may have four children of the marriage living with him, he is receiving $205 per week in child support from the wife for the two children now living with him. It is the intention of the Court that the Orders below are a final resolution of the proceedings between the parties.
The Court therefore decides that a distribution of 11.17% in favour of the husband is just and equitable (s.79(2)). This takes account of the husband’s contribution to the asset pool of 1.17% plus 10% for the s.75(2) factors and s.79(4) matters. The Court notes the evidence of Mr N in his affidavit sworn on 22 August 2008 that “any reduction in capital held by the Trust would be likely to cause a significant adjustment in the ability of the Trust to remain intact and be able to provide for (the respondent’s) needs.” The distribution of capital by instalments should keep the corpus in tact.
The Court orders that the respondent wife pay to the applicant an amount equivalent to 11.17% of the asset pool to be in instalments without interest.
The wife’s house and motor vehicle holdings are included in the Trust. The husband is to retain his car and superannuation. They have not been added to the pool. Without the assets to be retained by the parties, the divisible asset pool comprises:
The balance of the Trust at 30 June 2008 (Exhibit “ST5”) of $1,063,266.96.
The Court deducts from that the estimated legal costs of the wife and the Trust of conducting these proceedings of $40,000.00 (Court transcript page 177 line 30). That leaves a balance of $1,023,266.96. 11.17% of that is $114,299.00.
That sum is to be paid without interest in quarterly instalments of $2,500 commencing one quarter after the date of this decision.

The full sum will have been paid in approximately 11.43 years.

The children of the relationship now living with the applicant will then be 19 and 17 years old respectively. The respondent is to retain all other money and property in her possession and in the Trust. The applicant is to retain his superannuation and motor vehicle and all other property in his possession.

Payment of $2,500 per quarter will assist the applicant to rent suitable accommodation or to obtain a loan to purchase a home.
The Court is satisfied that in all the circumstances, the above orders are just and equitable.
As far as is practicable the above orders should finally determine the financial relationship between the parties and avoid further proceedings between them.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Turner FM

Associate: Danielle Keogh

Date: 22 October 2008