York and Jones

[2012] FamCA 1075

FAMILY COURT OF AUSTRALIA

YORK & JONES [2012] FamCA 1075

FAMILY LAW – PROPERTY – BY CONSENT - Application for revocation of approval of s 87 Agreement pursuant to s 87(8) – Discretion to revoke approval

Family Law Act 1975 (Cth) s 87(8)

APPLICANT: Mr York

RESPONDENT: Ms Jones

FILE NUMBER: HBC 711 of 2011

DATE DELIVERED: 19 December 2012

PLACE DELIVERED: Hobart

PLACE HEARD: Hobart

JUDGMENT OF: Benjamin J

HEARING DATE: 5 December 2012

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Blissenden

SOLICITOR FOR THE APPLICANT: Blissenden Lawyers

COUNSEL FOR THE RESPONDENT: Mr Trezise

SOLICITOR FOR THE RESPONDENT: M +K Dobson Mitchell Allport

Orders

IT IS ORDERED

1. The approval of a s 87 deed dated 4 February 1994 be revoked pursuant to s 87(8)(b) of the Family Law Act 1975 (Cth) (“the Act”).

2. BY CONSENT the husband shall pay the wife’s costs of these proceedings.

3. This matter shall be removed from the list of cases requiring determination.

4. Exhibits 1, 2 and 3 are to remain on the Court file.

IT IS CERTIFIED

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel to attend.

IT IS NOTED that publication of this judgment by this Court under the pseudonym York & Jones has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT HOBART

FILE NUMBER: HBC 711/2011

Mr York

Applicant

And

Ms Jones

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

1. This is an application by Mr York (‘the husband’) for the revocation of approval of a s 87 agreement entered into on 4 February 1994.  The agreement was approved by an order of the Family Court made by Hannon J on that day.  The application for revocation of the approval is sought on the basis that both parties desire the revocation of the approval.

2. Section 87(8)(b) of the Family Law Act 1975 (Cth) (‘the Act’) provides:-

   SECTION 87 OPERATION OF MAINTENANCE AGREEMENTS ENTERED INTO IN SUBSTITUTION FOR RIGHTS UNDER ACT

   …

   87(8) A court may, by order, revoke the approval of a maintenance agreement under this section if, and only if, the agreement is registered or deemed to be registered in that court and the court is satisfied that:

   (a)       the approval was obtained by fraud;

   (b)       the parties to the agreement desire the revocation of the approval [emphasis added];

   (c)       the agreement is void, voidable or unenforceable; or

   (d)       in the circumstances that have arisen since the agreement was approved it is impracticable for the agreement to be carried out or impracticable for a part of the agreement to be carried out.

   …

3. An application such as this involved a discretionary determination of the facts, but there must be (under subsection (b)) the consent of the parties.

BACKGROUND

1. The evidence in this matter was obtained by way of submissions by counsel for the husband as to why the approval of the agreement ought to be revoked and then the husband gave oral evidence that those submissions were accurate.

2. Three documents were tendered into evidence:-

   1.the s 87 agreement dated 4 February 1994;[1]

   2.the taxation ruling dated 14 February 2012;[2] and

   3.a written consent signed by both parties and their solicitors.[3]

   [1] Exhibit H2.

   [2] Exhibit H1.

   [3] Exhibit H3.

3. The husband and wife were married in Tasmania in November 1974.  They separated in April 1986.

4. There was one child of their marriage, a daughter, who is now over the age of 18 years and is self supporting.

5. On 25 February 1988 the husband and wife executed a written deed (called ‘the Section 87 Deed’), in settlement of all financial matters between them.

6. The Section 87 Deed was approved by the Family Court of Australia in Hobart pursuant to the provisions of s 87 of the Act on the 29 April 1988.

7. Between 29 April 1988 and 22 March 1993 each of the parties to the Section 87 Deed took steps to, in part, put its terms into effect and to some extent informally varied the terms of it.

8. In November 1991, as part of the steps referred to in paragraph 9 herein, the husband and the Company (the B Pty Ltd) paid to the wife the sum of $40,000, the receipt of which the wife acknowledged.

9. On 22 March 1993, the wife filed an application commencing proceedings in the Family Court in Hobart, seeking, a decree for specific performance of certain provisions of the Section 87 Deed (called the “proceedings”).

10. In those proceedings, an application was also made by one of the parties to revoke the approval of the Section 87 Deed.

11. Negotiations took place between the parties relating to the settlement of the proceedings and they entered into the s 87 agreement dated 4 February 1994.

12. In these reasons any statement of fact is to be regarded as a finding of fact unless the contrary is clear from the context of the statement.

1. The facts contained in the submissions affirmed by the husband were that a significant asset of the parties was a parcel of land at Suburb C, which land was owned by a company, B Pty Ltd as Trustee for the Mr York Family Trust. This company and trust, it seems were to alter egos of one or both of the parties.  In the earlier s 87 agreement the parties agreed that a house would be built on part of the land at Suburb C, that the land would be subdivided and transferred to the wife.  The house was built but the subdivision application was rejected by the local authorities.

2. As a consequence, the parties sought and obtained the revocation of the previous s 87 agreement and entered into a new s 87 agreement, pursuant to which the wife was paid money and the husband became solely entitled to the trust as owner of the land at Suburb C.

3. Since that time the husband has become the sole beneficiary of the Mr York Family Trust.  He is now a disability pensioner.

4. The husband wishes to have the land at Suburb C transferred into his name. The land itself is not subject to capital gains tax, however the house on the land would be subject to capital gains tax. The husband sought a ruling from the Australian Taxation Office, of what the consequences would be if he transferred the land from the trust to himself under the Act and in particular whether it would be liable for capital gains tax. That ruling (Exhibit H1) shows that the Australian Taxation Office, by a private ruling, is content for that transaction to occur by way of revocation of the deed.

5. The other effect of the transfer pursuant to either a binding financial agreement or order is, according to the husband evidence, such that it may not be liable to payment of stamp duty on the transfer of title, pursuant to s 90(1) of the Act.

6. The husband has agreed to pay the wife’s costs of this application.

7. The question is whether I ought to make an order revoking approval of the agreement pursuant to s 87(8) in that the parties to the agreement desire the revocation of the approval and intend to enter into a binding financial agreement under the provisions of the Act.

8. This is not a transaction designed to evade tax, it is a transaction designed to take advantage of arrangements to assist parties to transfer properties following statutory arrangements for parties to transfer properties and adjust their financial affairs following the breakdown of a marriage or a relationship.   

9. There is no illegal purpose in the revocation and there appear to be no public policy concerns and the proposal has been considered by the Australian Taxation Office.  The consent of the parties is clear, and I exercise my discretion to make the order.

10. I am satisfied that the agreement is registered or deemed registered in the Court by virtue of its approval by Hannon J on 4 February 1994. In the 4th edition of Dickey at page 808,[4] the learned author says of s 87 maintenance agreements, ‘that the agreement is deemed to be registered in the court which approved it.

    [4] Lawbook Co 2002.

11. The husband was frank with the taxation department and the legislation seeks to impose no tax impositions on separated parties and has no limit on the times that this should apply.  This application reflects the policy of the legislation and accordingly I make an order revoking approval of the deed.

I certify that the preceding twenty six (26) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on 18 December 2012

Associate:

Date:  19 December 2012