Ward & Ward
[2004] FMCAfam 193
•15 March 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WARD & WARD | [2004] FMCAfam 193 |
| FAMILY LAW – PROPERTY – Parties contributions to the pool of assets – whether certain assets should be added back to the pool – husband’s interest in testamentary trust – inheritance has not vested, husband says object of trust is “to put my inheritance out of the reach of my wife” – inheritance must be taken into account under s.75(2)(b) Family Law Act 1975. |
Bonnici and Bonnici (1992) FLC 92
De Angelis [1999] FamCA 1609
| Applicant: | PETER JESSUP WARD |
| Respondent: | SANDRA ROBYN WARD |
| File No: | BRM2905 OF 2002 |
| Delivered on: | 15 March 2004 |
| Delivered at: | Brisbane |
| Hearing dates: | 11 & 12 March 2004 |
| Judgment of: | Baumann FM |
REPRESENTATION
| Counsel for the Applicant: | Mr Waterman |
| Solicitors for the Applicant: | Pattison & Barry Solicitors |
| Counsel for the Respondent: | Ms Carew |
| Solicitors for the Respondent: | Nina Stratton-Funk & Associates |
ORDERS
That the former matrimonial home at 2753 Moggill Road, Pullenvale in the State of Queensland (“the home”) be sold forthwith pursuant to the following terms and conditions:
(a)That the home be forthwith placed on the market with Brisbane Real Estate and Brookfield Agencies for sale by private treaty for the sum of $570,000 with the husband and wife agreeing to accept offers of not less than $530,000 or such other sum as may be agreed in writing between the husband and wife.
(b)That in the event that the home is not sold by private treaty within a period of two months from the date the property is listed for sale in accordance with 1(a) hereof that the husband and wife shall forthwith take all necessary steps to sell the home by public auction.
(c)That the home be placed in the hands of Brisbane Real Estate for auction.
(d)That the husband and wife execute all documents as may be necessary to authorise the Auctioneer to sell the property.
(e)That in the event that the parties do not agree in writing as to the reserve price to be placed on the property at auction then the matter be re-listed before Federal Magistrate Baumann by either party upon the giving of two days written notice.
(f)That the parties shall each pay to the auctioneer one half of any sums reasonably required for advertising expenses in relation to the Auction. If one of the parties advances all of the said expenses, he or she shall be reimbursed from the proceeds of sale as a cost of sale before any division between the Husband and Wife.
(g)That the Husband and Wife attend at the auction sale and in the event that the property is not sold, shall negotiate with the highest bidder. In the event that an offer is made below the agreed reserve price and the parties do not agree as to whether or not it should be accepted, the parties shall take advice from the auctioneer as to the selling price and be bound by his advice as to the selling price of the property.
(h)That the Wife co-operate in every way with the agent in relation to the sale by private treaty or auction including being present for all inspections (or if she is unavailable for the husband to be present), allowing the inspection of the home at times reasonably requested by the Agent.
(i)That pending the settlement of the contract of sale of the home, that the wife and the husband each pay one half of the rates, insurances, and security expenses in respect of the home.
(j)That upon the settlement of the contract of sale of the home that the sale proceeds be disbursed as follows:
(i)payment of costs of sale and agents commission;
(ii)payment of mortgage to ANZ Banking Group if not paid out upon the earlier sale of the Gailey News;
(iii)subject to this order the balance then remaining to be distributed between the parties to give effect to an overall distribution of property between the husband and wife of 57.5% in favour of wife and 42.5% in favour of the husband.
That the Toyota Celica motor vehicle be forthwith listed for sale at $13,000 and in the event that a sale is not achieved at that price within a period of two months then the said car be sold at a price to be agreed and failing agreement as recommended by a Toyota dealer to be agreed between the parties and that the proceeds of sale be divided in the proportion 57.5% to the wife and 42.5% to the husband.
That the business known as Rylstone Enterprises Pty Ltd (“Rylstone Enterprises") trading as Gailey News (“Gailey News”) and having its principal place of business at Shop 7, 144 Indooroopilly Road, Taringa, Brisbane in the said State, be sold.
That in order to effect the sale of Gailey News that the husband and wife, as directors of Rylstone Enterprises, forthwith appoint Brian Fox Real Estate of 1 Sandgate Road, Breakfast Creek, Brisbane, and Newsagency Sales (Qld) Pty Ltd of 931 Nudgee Road Banyo to list Gailey News for sale at a sale price of $430,000 plus stock or such other price as may be agreed in writing between the parties and if not sold for this price within two months of being listed for sale that it be sold at such price as may be agreed between the parties and failing agreement as may be determined by Federal Magistrate Baumann.
That the husband and wife as the only directors and shareholders of Rylstone Enterprises Pty Ltd direct that the proceeds of Gailey News be divided as follows:
(a)payment of the costs and expenses of sale, including legal costs and outlays and agent’s commission;
(b)payment of any encumbrances affecting Rylstone Enterprises Pty Ltd and Gailey News if not already paid out upon the sale of the home referred to in paragraph 1 hereof;
(c)payment of agreed trade debts and other expenses of the business;
(d)payment of any tax including capital gains tax and/or goods and services tax; and
(e)subject to this order cause any credit in the joint loan account to be distributed between the parties to give effect to an overall distribution of property between the husband and wife of 57.5% in favour of the wife and 42.5% in favour of the husband.
(f)subject to this order the balance remaining to be distributed between the parties to give effect to an overall distribution of property between the husband and wife of 57.5% in favour of the wife and 42.5% in favour of the husband.
That the husband and wife do all necessary acts and things both personally and/or as directors of Rylstone Enterprises to deregister the said company, with the costs of same to be shared equally between the parties.
The husband and wife retain all right title and interest in and to the furniture and chattels in their respective possession save that the husband shall within thirty (30) days make available for collection by the wife the items listed in annexure “S (a) and (b)”of the wife’s affidavit filed on the 23rd February 2004 and the wife shall within thirty (30) days make available for collection by the husband the items listed in paragraph 3.6 of the husband’s amended outline of case document and that the items that neither party wish to retain shall be listed for sale within sixty (60) days and the proceeds (nett of sales costs which shall be borne equally by the parties) divided so as to achieve an overall distribution between the husband and the wife of 57.5% to the wife and 42.5% in favour of the husband.
That unless specified in these Orders:
(a)each party be solely entitled to the exclusion of the other to all property and chattels of whatsoever nature and kind in the possession of such party as at the date of these Orders; and
(b)each party be solely liable for and indemnify the other against any liability covering any item of property to which that party is entitled pursuant to these Orders.
That in the event that either party refuses or neglects to comply with the provisions of these Orders:
(a)The Registrar of the Federal Magistrates Court of Australia at Brisbane is hereby appointed to execute all deeds and documents in the names of the parties and do all acts and things necessary to give validity and operation to the said Orders;
(b)The party in default is ordered to pay any and all foreseeable damages to the other party caused by the default;
(c)The party in default is ordered to pay all reasonable costs incurred by the other party for the purposes of enforcing this Order and proving the damages.
That the husband reimburse the wife for expenditure relating to the rates, insurance and security expenses for the home in the sum of $5,030.34 from his share of the sale proceeds of the home or the newsagency business whichever sells first.
That the parties have liberty to apply on the giving of seven (7) days written notice to the other about the working out of these orders.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRM2905 of 2002
| PETER JESSUP WARD |
Applicant
And
| SANDRA ROBYN WARD |
Respondent
REASONS FOR JUDGMENT
Introduction
The matter before me involved competing property applications between the applicant husband Peter Jessup Ward (aged 60) and the respondent wife Sandra Robyn Ward (aged 56), with the proceedings having commenced in November 2002.
Background
The parties were married for over 30 years and the relationship bore two children, Melissa (now aged 26) and Andrew (now aged 23). The parties started with few material possessions. Both worked hard and contributed equally it was conceded, in all respects to the asset pool at the time of separation.
Separation occurred in March 2001 and regrettably a high level of conflict and vitriol still exists. Somewhat surprisingly the parties have continued, post separation, to manage and operate the Gailey News newsagency purchased by them through their corporate entity, Rylestone Pty Ltd in February 2000, substantially with the benefit of the redundancy payment received by the husband together with borrowed funds. The business is listed for sale and both parties agree that it be sold. The asking price is $493,000 inclusive of stock.
Through a few property transactions the parties became the joint owners of a house at Pinjarra Hills, which has been occupied by the wife since separation.
Again, the parties agree this property should be sold and its value is around $530,000. A seminal issue, and the main issue which has been an obstacle to a resolution of this dispute, is the interest the husband has in a discretionary testamentary trust established by the will of the husband's late mother Barbara Ward, who died on 19 August 2003. I deal with this issue later in these reasons.
Principals
It is well established by a long line of authority that the approach to be adopted in a property matter is firstly to determine the relative pool of assets and liabilities at the time of trial. Secondly to determine the contributions the parties have made pursuant to s 79(4) and by reference to s 79(4)(d) to consider any relevant factors under s 75(2). Finally and as a form of overarching principle the Court is required to consider whether the order it proposes to make is just and equitable to the parties.
Issues
Counsel for the husband Mr Waterman, and Counsel for the wife Ms Carew, could not have said more to advance their client's interest in this case. They were of great assistance to me in the legal issues which arose.
There were some appropriate concessions made including, that to the date of separation, all contributions of both a financial and non-financial direct and indirect nature were equal after such a long marriage. There were the following remaining issues which I am required to determine:-
a)Pool of assets including:
i)Should the proceeds of the sale of shares in Fosters sold by the husband post separation be added back.
ii)Should the wife's current bank account of $13,000 be added to the pool.
iii)Should the furniture be added into the pool and if so, how.
iv)Should the payment by the wife of $21,522 in legal expenses be added back.
b)Post separation contributions, particularly the adjustment (if any) for payments made by the wife in respect of the home.
c)How to treat the husband's contingent interest in the testamentary trust, and
d)The form of orders.
Pool of Assets
The number of assets were agreed as to the value. The pool is determined by dealing with the disputed issues as follows.
Fosters Shares
At paragraph 42 of his affidavit, the husband says that he sold his 3,166 Fosters shares. He gives no explanation as to why he did so. The shares, although acquired by him as a staff bonus, were clearly property available to the parties at separation. He gave evidence in his supplementary affidavit that he used the proceeds:
“For living expenses, car expenses, and outgoings on Toowong house.”
The parties had, post separation, a common and equal source of income, that being drawings from the business. Additionally it seems, the husband was supported by loans to him from his mother. I am not satisfied on the evidence that he had a need to access the Fosters shares for his support as he claims. The proceeds of $13,341 shall be notionally added back to the pool.
Wife's bank account
I am satisfied the wife maintained a separate account post separation in which she deposited her drawings from the business. She used these funds to pay living expenses, legal expenses, some maintenance on the home and maintenance and expenses on the cars in her possession, the Corolla and the Celica.
Any income from this same source (drawings from the business) received by the husband post separation appears to have been entirely dissipated by him. I can see no reason why the wife should be disadvantaged by perhaps living more frugally than the husband. Both parties were entitled to use their income as they saw fit, including payment of their legal expenses.
If, as the husband alleges, the wife derived a financial advantage from the use of the home, then as a matter of principle that is a consideration within the matrix of the post separation contributions. For these reasons, I would not include the wife's current bank account balance.
It follows from the same reasoning that I do not regard it as proper for the legal expenses of $21,522 paid by the wife from her post separation earnings to be included in the pool of assets. The wife properly concedes that the balance of two Suncorp accounts which were in existence at separation, should be included.
Furniture
Reflective of the antipathy between the parties, (even though a gross pool of assets exceeding $1 million exists in this case), the parties strongly contested throughout the value and possession of a number of items of furniture. The Court appointed the Court expert Mr W Carlton to value furniture.
The husband sought the return to him of certain items of furniture, mostly of sentimental value identified at paragraph 3.6 of the husband's amended case outline. In cross-examination the wife said the husband could have those items, somewhat reluctantly I suspect.
Annexure S to the wife's affidavit sets out items the wife seeks from the Toowong home and from storage in Rocklea. The husband says the wife can retain all those items save for:
“Item 38 Ladrow lady dancing, 30cms as Sandra has retained the balance of the ornaments in the matrimonial home.”
This comment is a classic example of the “tit for tat” which tainted the evidence. I will order that the wife shall be entitled to retain this ornament which appears to be a part of a collection.
There are a number of items, it seems, that nobody wishes to retain. The husband says that the wife would therefore be entitled to retain certain chattels. The wife says she should not be required to retain goods she does not want, with a consequent diminution in cash as a result. The parties agree that the Celica should he sold.
I believe the most appropriate way in which to deal with this highly contested issue is:
a)The husband shall retain goods in his possession that he seeks including two items "purchased" from his mother's estate and shall be entitled to the return of the goods set out in his case outline as earlier referred to.
b)The wife shall be entitled to retain items at Pinjarra Hills that she seeks to retain; a return of the goods requested including the Ladrow figure mentioned above and the Toyota Corolla.
c)The Celica and the other items of commercial value either party does not wish to retain shall be sold and the net proceeds after commission divided as set out hereafter.
There may be, as a result of these orders, a variance in what might be the value of items retained by the parties. The difference will be small, around $5,000 and in a pool of this size, insignificant in my view. For these reasons I will not include the furniture retained.
Summary of the pool of assets
On this basis I would estimate the pool at hearing as follows:-
POOL OF ASSETS
House 530,000 Newsagency plus stock 493,000 Husband’s Assets AXA Shares 629 AMP Shares 2,142 Telstra Shares 1,896 Proceeds of Fosters Shares 13,341 AMP Life policy 5,317 AXA Life Policy 2,582 Husband’s Superannuation 42,596 68,503 Wife’s Assets Suncorp Shares 4,445 Coles Myer Shares 5,067 Woolworths Shares 5,197 Telstra Shares 1,896 Wife’s Superannuation 24,000 Toyota Corolla 2,400 Suncorp Account 081 464 621 18,748 Suncorp Account 081 464 622 4,539 66,292 Proceeds of sale of Celica and “unwanted” furniture NK 1,157,795 LESS ANZ Mortgage 226,000 Estimated Realisation of costs of sales 30,000
256,000
901,795
Contributions
As earlier noted, the parties conceded through their Counsel that contributions of a financial and non-financial character were equal to separation. In the period from separation in March 2001 to trial, a period of some three years, the evidence reveals:
a)The parties contributed equally to the operation of and maintenance of the business, preserving it for sale.
b)The wife, as a result of the husband leaving the Pinjarra Hills property, has occupied the property essentially "rent free" since separation. Whilst it is unlikely that the wife would need to occupy a home of this size (with the clearly significant maintenance issues arising from acreage), nonetheless I do regard it as a small contribution by the husband to allow her to remain living in the home.
c)What must be offset against that contribution is the fact that the wife continued to preserve the property and, with assistance maintaining and repairing the property, including the damage from recent storms.
In Annexure G of the wife's affidavit she sets out her claim for reimbursement of $7,977.31. The husband as a result of what he says was his perception of an agreement reached with the wife, contributed 50 per cent of the rates and insurances, security calls and electricity until December 2003. I see no reason why his position after December 2003 should be substantially different although I would exclude electricity utilised by the wife whilst occupying the home.
The wife has had the use of the cars, and should I believe therefore meet the expenses of those vehicles. I take the view that the husband should contribute equally to any required repairs of the home. The husband agrees to pay half of the documented repairs of $4,902, a sum of $2,451.
I acknowledge the submission of Ms Carew that the husband post separation has had the benefit of the use of the Toowong home of his mother, both during her life and since her death. This does not, on proper principles, in my view diminish the contribution made by the husband by allowing the wife to continue to reside in the home. Any additional expenses paid by the wife and any which she incurs of a similar character until sale shall be her responsibility and I would make no other adjustment for contributions.
I will order that the husband contribute equally to rates, insurance and security until sale. Any repairs or mowing shall, if required for presentation of the property, also be shared equally. By way of summary, considering the contributions under s 79(4) I regard them as equal to trial.
Section 75(2) factors
Both Counsel addressed me at some length about the husband's interests in the testamentary trust. The matrix of facts which shape this consideration are I find on the evidence as follows:
a)Barbara Ward, who I will call “the deceased”, had three children. The husband is her only son.
b)The husband enjoyed a good relationship with his mother and assisted her with the management of her financial affairs, particularly so after the death of his father. His letter in 1997 to John Shand, the deceased's solicitor, about changes in the deceased's will reflects his involvement and the preciseness of his considerations. The letter was written at a time when his sister Jennifer was on the verge of bankruptcy if not already bankrupt. Protecting the estate from a claim by creditors of Jennifer, was it seems, a motivation for the letter.
c)A will made (before separation) in September 1999 simply provided that the husband in this case and his two sisters would share equally in their mother's estate.
d)Two days prior to separation the deceased made what proved to be her last will and testament dated 15 March 2001. The significant differences between the two wills are:
i)The husband was no longer an executor and trustee.
ii)One third of the estate was to be held by the trustees (sister Janice and solicitor John Shand) in a discretionary testamentary trust. The beneficiaries of the trust (which has a vesting date of 2083) are the husband and his two children, Melissa and Andrew. The trust allows the trustees at their discretion:
“To advance and apply the whole or any part of the income or capital of the share of my estate to which any beneficiary may be contingently expected to be or presumptively entitled under the trust hereof.”
This power contained in clause 5.11 of the will is incorporated in the powers under the testamentary trust by clause 4.3.7 of the will. The husband under cross-examination admitted that the purpose of the change was:
“To put my inheritance out of the reach of my wife.”
The husband even it seems, sought to achieve this result with the car which he says he bought with loan funds from his mother, but somewhat curiously he says is registered in the deceased's name. There is no evidence so suggest the executors regard the car as an assets of the estate.
e)The husband acknowledges that from separation until the death of his mother he had access (with his mother's consent) to her funds and used those funds to meet a variety of his living expenses and including the purchase of a motor vehicle, credit card liabilities and his legal expenses of this litigation. After the death of his mother the debt due to the estate by him of $81,659 was reduced by $9,750 being an agreed adjustment for 130 weeks assistance at $75 per week. It is hard for me to accept the husband's evidence that he has incurred expenses of approximately $185 per week for nearly all expenses were "borrowed" from his mother. The husband says and I accept, he would be very surprised if he was called upon to make any repayment to his mother's estate.
f)A one third share of the estate (before allowance for furniture et cetera) and including repayment of the debt of $71,909 is estimated to be at least $295,453. This figure adopts a value of Toowong of $680,000 at October 2003. If the increase in value of Pinjarra Hills property since August 2003 is an indication (increase from $420,000 to $530,000) then it is reasonable to infer that the interest in the estate of his mother is represented by:
i)Th sum of $71,909 which he is not required to repay. I reject the husband's evidence that he has some arrangement with the executors to repay these funds on the sale of marital property. No evidence from the executors or the trustees was called and could have been called it seems to me, and
ii)A contingent interest in the testamentary trust which has a gross entitlement of at least $223,544.
g)It is supportive of the wife's Counsel submissions that the solicitors for the estate (of which one is an executor and trustee) described in the beneficiaries distribution "Peter's one third share".
h)There is no evidence from the trustees or the other contingent beneficiaries of their expectations. Certainly there is no evidence, for example, of any distributions under the testamentary trust to any of the other beneficiaries.
Counsel in final submissions referred me to cases such as Bonnici and Bonnici (1992) FLC 92 and De Angelis [1999] FamCA 1609. Mr Waterman submitted that the trust created by the will "is unimpeachable" and the oft quoted remarks of the Full Court in Bonnici at 79-020 referred to me namely:
“Property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question.”
In Bonnici, the inheritance had vested. This is not the case here. I am satisfied that the creation of the testamentary trust was for the purposes, acknowledged by the husband, to put it out of the reach of the wife. Certainly he has achieved that in a control sense. The wife cannot assert any right to alter the husband's contingent interest in the trust.
I am satisfied that it is likely on the balance of probabilities that the husband will receive the whole of the entitlement of the testamentary trust personally. Once final orders are made then any vesting of an interest in the trust will be "beyond the reach of the wife". I expect it will vest for the husband's full benefit.
The contingent interest represents at this time a financial resource. He has already had the use of $81,000. He will in my view have a further entitlement of at least $232,000. This financial resource, to which the wife has made no contribution and which even if it had vested, arises post separation, is a windfall for the husband.
Nonetheless it is a matter which I am entitled to and must take in my view into account under s 75(2)(b) of the Family Law Act. An adjustment should, I believe, be made in the wife's favour of 7.5 per cent of the pool. This computes to a figure of approximately $67,500, a not insignificant adjustment for this windfall.
The remaining s 75(2) factors do not in my view require a further adjustment. The parties are of similar age and health issues to date have not impaired significantly their capacity to work long hours in their newsagency. They present as quite efficient money managers, the wife in particular. Neither has a commitment to support any other persons. The results of the property division will give each party the capacity to accommodate themselves but possibly not at the level they have previously enjoyed.
Just and equitable
If the net proceeds of sale of the house and business are in fact $767,000 then a division of the pool of $901,795 in the proportions of 57.5 per cent to the wife and 42.5 per cent to the husband would mean the wife would receive assets in her possession of $66,292 together with a share of net proceeds of $452,240, totalling $518,532.
And the husband's 42.5 per cent share of the pool would be assets in his possession of $68,503 together with a share of net proceeds of $314,760, totalling $383,263.
When I take into account the benefit which I have found the husband has received and will receive from his mother's estate via the discretionary testamentary trust of approximately $300,000 I regard such division as just and equitable.
Form of orders
I raised with Counsel at the commencement of the trial that once I had made a finding about the asset pool and an appropriate division then I would ask them to discuss with each other the form of order. This is necessary as no financial statements for the corporate entity, Rylstone Enterprises Pty Ltd were produced to the Court and I do not know, for example, how the net proceeds of sale are capable of being returned to the parties in an effective way.
Capital gains tax implications may need to be considered, as might repayment of any outstanding loan accounts on the books of the company so as to avoid any unintended consequences from declaring a dividend before deregistration of the company if that is to occur.
To assist the parties in forming those orders, however, and considering the draft orders proposed by the wife, I would require to be incorporated in the order:
a)A period of two months for the parties to arrange for any necessary repairs on the Pinjarra Hills property to be completed and the property then presented for auction. I regard the wife's request for four months on the limited evidence of the case before me, as too long in the current market.
b)The parties have agreed to market the house through Brisbane Real Estate.
c)I have no concerns about either party being present during inspections if they wish to be there. It would not seem likely that it would be a particularly useful exercise if they were both there. The wife has some security concerns if she is not present. I regard those as reasonable. The husband is concerned that the wife may use such a requirement for inspection as an impediment to a timely inspection and therefore sale. The wife has a vested interest in achieving the best price for the property and I expect she will do so.
d)It seems the parties agree to list the newsagency for sale with two specified agents. The wife proposes if they cannot agree on a sale price then Paul Coleman should be able to make a binding recommendation. The husband is not prepared to agree to this role for Mr Coleman. If the parties could not agree, again remembering both have a vested interest in achieving the best sale price, then they will have to come back to me for a decision based on the evidence offered at the time.
e)The movement of chattels should take place within 30 days.
f)The sale of the Celica and the chattels no one wishes to keep should be effected within 60 days and the funds divided as to 57.5 per cent to the wife and 42.5 per cent to the husband after allowance for any sale expenses.
g)There is no basis upon which I would order the husband to indemnify the wife for director's liabilities from a business they have been maintaining jointly.
Orders, after consultation with the parties shall be as appear at the beginning of these reasons.
I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate:
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