Where
married couples choose to hold assets spread across different independent
entities such as partnerships, trusts and companies they bear the risk that one
of them could pre-empt a relationship property settlement by bringing a
separate individual claim to get immediate cash. The High Court held a Foxton farmer was
entitled to $419,000 as repayment of her current account balance due from a
family trust.
Wayne and Denise Shailer ran a
dairy farm and contracting business in Foxton prior to their separation in
November 2012. Like many farmers, the
land is owned by a family trust while a separate partnership stocks and runs
the farm. The Shailers as joint trustees
of their family trust leased the farmland to themselves as partners in the
farming partnership. The High Court was
told matters reached a head when the family trust sold some of its land,
netting about $867,500. Initially it was
intended these funds would be used to reduce debt. Rules governing the Shailers’ family trust
require trustees’ unanimous consent for trust decisions. The trustees could not agree on how the
$867,500 should be used. Evidence was
given that a stalemate followed with the money sitting in an interest-bearing lawyer’s
trust account pending some agreement.
After establishing their family
trust in 1994, the Shailers sold farmland to the trust, leaving that part of
the purchase price owing to each of them on current account as an on demand
loan. At the date of separation, Mr and
Mrs Shailer were each owed $419,000 on their separate current accounts. Mrs Shailer (as an individual) then made
formal demand from the trustees of the trust (which included herself as a
trustee) for repayment of the $419,000 owed to her with payment to come out of
the funds held in their lawyer’s trust account.
Associate Judge Smith ruled
she was entitled to payment. He said there
is nothing in relationship property legislation which affects the right of a
spouse to sue a third party for the recovery of a debt. The $419,000 current account debt was owed by
a third party – the family trust. A
family trust is an independent entity separate from the people who set it up.
Shailer
v. Shailer – High Court (24.2.15)
15.011