Allan and Allan and Ors

Case •

[2014] FamCA 250

•

14 April 2014

FAMILY COURT OF AUSTRALIA

ALLAN & ALLAN AND ORS [2014] FamCA 250
FAMILY LAW – INJUNCTIONS – where orders were made in 2010 restraining the husband from doing any act in his capacity as protector of the family trust – where the husband sought that injunction be lifted for the purpose of removing the current Trustee of the family trust – where the current trustee of a family trust, Receivers of a second family trust and the wife seek consent orders consistent with a settlement deed executed by them – where consent orders are made prior to the injunction being discharged – where restraint then lifted to enable a new trustee to participate in the continued dispute in relation to the remaining funds
Family Law Act 1975 (Cth)

Ashton & Ashton (1986) FLC 91-777
Davidson (1991) FLC 92-197

Goodwin & Goodwin Alpe (1991) FLC 92-192
APPLICANT: Mrs Allan
1st RESPONDENT: Mr Allan
3rd RESPONDENT: Ms C Allan
4th RESPONDENT: Mr L Allan
5th RESPONDENT: Ms H Allan
6th RESPONDENT: Ms E Allan
12th RESPONDENT: Mr Senne as trustee for AM Trust
13th RESPONDENT: Mr Senne
INTERVENORS  : Mr D & Mr CP (Receivers)
FILE NUMBER: SYC 3842 of 2008
DATE DELIVERED: 14 April 2014
PLACE DELIVERED: Sydney
PLACE HEARD: Sydney
JUDGMENT OF: Watts J
HEARING DATE: 13 June 2013

REPRESENTATION

SOLICITOR FOR THE WIFE: Paul & Paul Lawyers
COUNSEL FOR THE 1ST RESPONDENT: Mr Green with Ms Oliak
SOLICITOR FOR THE 1ST RESPONDENT: Hudson Law
SOLICITOR FOR THE 12TH RESPONDENT: Delaney Lawyers
COUNSEL FOR INTERVENORS: Mr Roberts
SOLICITOR FOR INTERVENORS: Kelly & Co Lawyers

Orders

  1. Order 3 made 17 June 2010 is discharged.

  2. W Nominees No. 2 Pty Limited (Receivers & Managers appointed) (“the Receivers”) cause to be paid out of the account created pursuant to Order numbered 5 of the Orders made on 17 June 2010 (BankSA Investment Cash Account No. …50) (“controlled account”) the sum of $600,000.00 (inclusive of GST) into a controlled monies account (the second controlled account) under the joint control of the wife and Mr Senne as the current trustee for the AM Trust to abide the further order of the Court.

  3. The Receivers be at liberty to have access to and deal with the balance of the funds remaining in the controlled account following the payment contemplated by Order 2 above in accordance with their obligations as Receivers and Managers of W Nominees No. 2 Pty Ltd (Receivers and Managers Appointed) (in liquidation).

  4. The Receivers be relieved from the undertaking referred to in paragraph 1 of the Orders of this Court dated 4 November 2010 and that they be at liberty to sell the items identified in paragraph 9 of the affidavit of Mr Senne sworn on 2 November 2010 and filed in these proceedings and retain the proceeds of that sale or sales.

  5. Subject to orders 2 to 4 made this day, order 4 made 17 June 2010 is discharged.

  6. This matter be relisted before myself on 29 May 2014 at 10am.

  7. By 2 May 2014 any party to these proceedings who wishes to seek an order in respect of the amount of $600,000 or part of it in the second controlled account, should forward to my associate a minute setting out what orders they seek in relation to the fund together with a short explanation as to the basis upon which that order is sought and a minute of any other consequential orders that are still sought.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Allan & Allan and Ors 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 SYDNEY

FILE NUMBER: SYC 3842 of 2008

Mrs Allan

Applicant

And

Mr Allan

1st Respondent

And

Ms C Allan

3rd Respondent

And

Mr L Allan

4th Respondent

And

Ms H Allan

5th Respondent

And

Ms E Allan

6th Respondent

And

Mr Senne as trustee for AM Trust

12th Respondent

And

Mr Senne

13th Respondent

And

Mr D & Mr CP (Receivers)

Intervenors

REASONS FOR JUDGMENT

INTRODUCTION

  1. The husband applies to be relieved from the injunction against him limiting his ability to operate as protector of the AM Trust.

  2. W Nominees No. 2 Pty Limited (Receivers & Managers appointed) (“the Receivers”) apply for orders in similar terms to that in a Settlement Deed executed, inter alia, between the Receivers, the current trustee of the AM Trust (Mr Senne) and the wife in February 2012.

  3. Although the Receivers in their written submissions say that their application should be dealt with first (and if successful would render the husband’s application academic), it was agreed at the start of the hearing that the husband would become the moving party and that his application to be relieved from the injunction against him exercising his powers as protector of the AM Trust would be the matter that would be argued first, although all parties acknowledged the connection between the two applications.

HUSBAND’S APPLICATION TO LIFT INJUNCTION

  1. On 17 June 2010, I made orders (inter alia) in the following terms:

    3.    Until further order, [Mr Senne], in his capacity as trustee of the [AM] Trust, is hereby restrained from selling, assigning, transferring, encumbering or in any way dealing with any asset of the trust whatsoever including but not limited to any artworks, furniture, object d’art and valuables of any kind whatever or from distributing any capital or income of the trust to any beneficiary thereof.

    4.    Until further order, the respondent husband be restrained from doing any act or thing whatsoever in his capacity as protector of the [AM] Trust including but not limited to causing the trustee of the [AM] Trust to be removed as trustee and to appoint any substitute or alternate trustee.

  2. The injunctive orders were made as a result of an application by the wife. In my Reasons for Judgment dated 17 June 2010, I said:

    8.  The husband did not oppose the injunctive orders that the wife sought against the trustee of the [AM] Trust or against himself restraining them both from disposing of items that might be owned by the [AM] Trust.

  3. The primary purpose of the injunctive orders was to restrain the current trustee of the AM Trust and the husband from disposing of assets which they asserted belonged to the AM Trust. Order 5 made 17 June 2010 required the Receivers to place the proceeds of the sale of 23 disputed items in a controlled monies account. It is that account, at the date of hearing in the approximate sum of $1,570,000, which is the primary focus of this application.

  4. It is the husband’s proposal that if he is successful in obtaining relief from the restraint to act as protector of the AM Trust that he will exercise that power to appoint a new Trustee who he proposes will be Mr CC. It is common ground that the husband as protector of the AM Trust has no power to direct Mr CC to act in any particular manner. However, the husband contemplates that Mr CC as new trustee would review the efficacy of the settlement that Mr Senne has now entered into. The husband would confidently predict that Mr CC would not be happy with the settlement.

  5. At paragraph 22 of the husband’s affidavit of 26 November 2012, he says:

    Mr [CC] has advised that he would then immediately file an application for the proceeds of the sale of the 23 items to be paid to the Trustee of the [AM] Trust and for an order that the purported settlement deed of 14 February 2012 not be approved by this Court.

  6. The Receivers submit that unless and until Mr CC has taken proper advice, any suggestion that he would seek to go behind the Settlement Deed would have little weight. The Court has not heard from Mr CC. Counsel for the husband submitted that it is irrelevant that we have no evidence from Mr CC given that the husband would be at liberty to appoint whomsoever he saw fit to be the trustee. The husband seems to be in no doubt about what Mr CC will do. I agree with the submission that there is a question as to whether or not he would be acting in good faith if he did so without having full knowledge of the material which is before me.

  7. Counsel for the husband in final oral submissions, indicated that what the husband sought, after an order was made to discharge order 4 made 17 June 2010, was an adjournment for an appropriate period of time to allow Mr CC to review all the material and make some determination about whether or not he would continue to agree to the compromise reached by the current trustees.

  8. I am comfortably satisfied an order made as sought in the husband’s application, would have the practical effect of ensuring that the Trustee of the AM Trust would no longer be prepared to support an application for the consent orders consistent with the Settlement Deed entered into in February 2012 between the current trustee, the Receivers and the wife.

THE WIFE’S STANDING

  1. Counsel for the husband submitted that the wife had no standing in relation to the applications before the court given that she had no ability to be the protector, trustee or a beneficiary of the AM Trust. That submission overlooks the wife’s assertion that the disputed assets are owned by W Nominees and her application under s 85A Family Law Act in relation to the AM Trust.

  2. A matter which may be relevant in the terms of the wife’s s 85A application is that there was no attempt to make the children beneficiaries of the AM Trust until the 1982/83 tax year. On 5 July 1982 the husband purported to sign a document appointing the four children as beneficiaries. At that time, the majority of the assets were already in the AM Trust. As at 5 July 1982, when the husband signed that appointment document, the husband was protector of the AM Trust and had no standing to appoint beneficiaries and consequently had no power under the AM Trust Deed to appoint the children beneficiaries of the trust. What he did in July 1982 was not a valid appointment. It was not until 13 June 2002 that the children were appointed as beneficiaries of the AM Trust, when the current trustee executed a valid nomination of memberships of the appointed class naming the children.

  3. I find the wife does have standing to be heard in the present applications.

THE APPLICATION BY THE RECEIVERS, CURRENT TRUSTEE AND WIFE TO MAKE CONSENT ORDERS

  1. On 14 February 2012 the Receivers, Mr Senne in his capacity as trustee of the AM Trust and in his personal capacity, the wife and A Finance entered into a Settlement Deed. A Finance lent money to W Nominees No. 2 Pty Limited (“W Nominees”); held a mortgage debenture and had the Receivers appointed to W Nominees on 27 March 2009. A Finance is not a party to these proceedings.

  2. Some relevant recitals to the Settlement Deed recorded the following things:

    D.  By orders made on 17 June 2010, inter alia, it was ordered that:

    5.... the Receivers forthwith do all acts and things and execute all documents so as to sieze, take into their possession and to cause and [sic] to be offered for sale and sell for the best price reasonably available:

    5.1 all the assets of the [AM] Trust; and

    5.2 all property being antiques, artworks, furniture and furnishings and other items (“the collectables”) being the items referred to and listed in an affidavit .... including the alleged missing items, and/or the items particularised in the [Z Auction House] catalogue “The [W Nominees] Collection”

    and upon the sale of the collectables the proceeds of sale be applied in payment of the liabilities of [W Nominees] as secured by the mortgage debenture PROVIDED THAT the proceeds of the sale of the 23 items referred to in the schedule to the orders, be placed in a controlled monies account, controlled by the lawyers for the Receivers, pending the finalisation of these proceedings.

    E.  The Receivers’ solicitors presently hold the sum of approximately $1,569,985.35 in the Bank Account which they control for the purposes of the Court’s orders set out in Recital D.

  3. The operative clauses of the Settlement Deed record an agreement between the parties in the following terms:

    2.1 The parties agree that, subject to order of the court, the monies held in the Account are to be distributed as follows:

    (a) The sum of $600,000 (inclusive of GST) is to be paid into an account nominated by [Mr Senne] and [Mrs Allan], or as ordered by the Court, and upon such payment the Receivers will (by this deed) forthwith disclaim any right, title and interest or claim to, such fund;

    (b) The balance is to be paid to the Receivers, and [Mr Senne] and [Mrs Allan], will (by this Deed) forthwith disclaim any right, title and interest or claim to, such sum.

    2.2 Consent Orders

    Each of the Receivers, [Mr Senne] and [Mrs Allan], will consent to such orders of the Court as are necessary or desirable to give effect to the matters in clause 2.1 above

  4. As was pointed out by counsel for the husband, the Settlement Deed also contains a release by the trustee of the AM Trust “irrevocably and unconditionally effective as at 14 February 2012”. That release discharges any liability the Receivers and A Finance have arising out of the AM Trust or relating to or in connection with the ownership or sale of Type DD goods and the trustee of the AM Trust indemnified the Receivers and AG Securities in respect of any such claims. Mr Senne also gave similar releases to the Receivers and A Finance in his personal capacity. Counsel for the husband submitted that what Mr Senne had done by giving those releases effective as at the date of the signing of the Settlement Deed, was a breach of order 3 made 17 June 2010. That would of course only be so were it established that Mr Senne in his capacity as trustee of the AM Trust had in fact given away something that actually existed as an asset of the trust. This submission is not a matter of weight in the exercise of the discretion in the matters I am required to decide. There may also be an argument that the release given by the trustee is ineffective for want of consideration (notwithstanding the agreement is in a Deed) until a court order is made, in circumstances where the consideration provided by the Receivers is contingent upon an order being made by the court.

  5. What I am actually being asked to do by the Receivers, the current trustee and the wife, whilst connected to the Settlement Deed that was entered into in February 2012, is separate from it. They seek that I make orders in the following terms:

    1.    The Receivers cause to be paid out of the account created pursuant to Order numbered 5 of the Orders of this Court made on 17 June 2010 (BankSA Investment cash account No. …50) (“controlled account”) the sum of $600,000.00 (inclusive of GST) into a controlled monies account under the joint control of Michael Paul as solicitor for the Wife and Michael Delaney as solicitor for [Mr Senne] as Trustee of the [AM] Trust to abide the further Order of the Court.

    2.    The Receivers be at liberty to have access to and deal with the balance of the funds remaining in the controlled account following the payment contemplated by paragraph 3 above in accordance with their obligations as Receivers and Managers of [W] Nominees No. 2 Pty Ltd (Receivers and Managers appointed)(in liquidation).

    3.    The Receivers be relieved from the undertaking referred to in paragraph 1 of the Orders of this Court dated 4 November 2010 and that they be at liberty to sell the items identified in paragraph 9 of the Affidavit of [Mr Senne] sworn on 2 November 2010 and filed in these proceedings.

  6. The undertaking recorded in paragraph 1 of the orders made 4 November 2010 is in the following terms:

    Subject to further order, that [Mr D] and [Mr CP] in their capacity as joint and several receivers and managers of [W] Nominees No. 2 Pty Ltd (“Receivers”) undertake not to sell items identified in paragraph 9 of the affidavit sworn by [Mr Senne] on 2 November 2010 and filed in these proceedings.

  7. Paragraph 9 of the affidavit of Mr Senne sworn 2 November 2010 contains a schedule of seven other items (two pieces of furniture, three paintings and two chandeliers).

  8. The Receivers made it clear that their objection to the husband’s application to be relieved from the restraint against him as protector of the AM Trust is only to the extent that the appointment of a new trustee would interfere with the Receivers ability to obtain the fruits of the agreement that has been struck with the current trustee, Mr Senne, and the wife. The Receivers’ objections fall away once the consent orders are made as from that time the Receivers will have no interest in any application by the husband to seek reinstatement of his powers as protector of the AM Trust.

  9. Counsel for the husband argues that the Settlement Deed and the proposed consent orders impermissibly give a benefit to the wife in circumstances where the AM Trust Deed prohibits it. That argument is only available if the fund was that of the AM Trust and the wife was receiving a part of it. That submission misunderstands the nature of what is in clause 2.1(a) of the Settlement Deed and what is sought in the consent orders; namely that the wife be one of the stakeholders in relation to the balance of funds that remain after orders are made in favour of the Receivers.

DOCUMENTS RELIED UPON

  1. The evidence relied upon by each party is set out in Schedule 1.

THE CURRENT TRUSTEE’S POSITION IF THE CONSENT ORDERS ARE MADE

  1. Mr Senne, the current trustee of the AM Trust, sought that the consent orders consistent with the Settlement Deed that had been entered into in February 2012 be made by the court. Once those orders were made, the current trustee neither opposed nor consented to the discharge of the injunctive order restraining the husband from exercising his powers as protector of the AM Trust. As I understand it, Mr Senne would then become the former trustee of the AM Trust. He would assert a lien over any assets of the AM Trust in relation to his costs as trustee of the AM Trust and he would remain a party to these proceedings for that purpose.

THE HISTORY OF THE TRUST

  1. My judgment dated 17 June 2010 records:

    59.    The [AM] Trust was established by a deed between [Ms Y] and [AG] Pty Limited dated 2 December 1980 (the [AM] Trust Deed).  At the time the trust deed was entered into, the protector of the trust was a Mr [BA].  On 1 June 1982 Mr [BA] nominated the husband to be the protector of the trust. The husband has remained protector of the trust to the current time. 

    60.    [AG] Pty Limited was a company which the husband controlled and was trustee of the [AM] Trust between December 1980 and May 2020 [sic; 2002].  On 30 May 2002 the husband exercised his powers under the trust deed to remove the original trustee, [AG] Pty Limited, as trustee of the [AM] Trust and appointed Mr [Senne] as the trustee. 

    61.    On 13 June 2002 Mr [Senne] appointed five persons to be members of the appointed class (the beneficiaries) of the trust.  Those five persons were the wife and the four children.  There are no other members of the trust.  There is doubt as to whether or not, as the trust is presently constituted, the wife was appropriately named as a member of an appointed class, given that she is the wife of the protector. 

    62.    I have not had the benefit of considered argument about the construction of the [AM] Trust Deed.  Consequently, the following are preliminary findings made in the context of this interlocutory application.

    63.    It seems that, unless the husband brings it forward, the closing date for the [AM] Trust is 2 December 2020.  It seems that until that time, the husband, as protector of the trust, can fire and hire the trustee of the trust.  The husband could even install himself or a company he controls as trustee of the trust.  If he was trustee, the husband can nominate any individual or any company as beneficiary of the trust, provided that they do not fall within the definition of “excluded persons”. 

    64.    I have not yet heard argument as to whether the husband could find a strategy which would see the trust property finally come into his own hands.  For example, in Ashton & Ashton (1986) FLC 91-777 the court, on the construction of the trust deed in that case, reached the conclusion that although the husband could not become a named beneficiary, he was not excluded from effectively holding all the shares in a company or all of the interest in a trust, that was installed as a beneficiary. Whilst in this case, clause 1(d)(iv) of the [AM] Trust Deed might prevent this happening through a company structure, it seems it is possible that a willing confidant of the husband, could be installed by the husband as beneficiary and that that person could then hold his interest in the [AM] Trust, upon trust for the husband.

    65.    Whatever the position in relation to the ultimate ownership of the trust property, the husband controls the trust today.

  1. With the benefit of submissions on the husband’s behalf, the statement in [63] of the 2010 Reasons that the husband could even install himself or a company who he controls as trustee of the Trust, is not an accurate statement. Clause 18(5)(b) of the AM Deed excludes the husband himself and any company in which he holds any beneficial interest, from being appointed or acting as trustee once he became protector of the AM Trust. This means that AG Pty Limited’s status as trustee between 1982 and 2002 was not in accordance with the AM Trust Deed. Also, in so far as [61] may give the impression that the children (and inappropriately the wife) are the only members of “the appointed class”, that is incorrect. As was emphasised by counsel for the Receivers, paragraph 1(g)(i) of the AM Trust Deed includes all eligible charities (defined as any corporation, body of persons or trusts established for charitable purposes in accordance with the laws of New South Wales) as members of “the appointed class”. Whilst I acknowledge this point, in the real world, if it was a choice between the four children of the marriage and any charity, the children are the only beneficiaries likely to be the recipient of distributions of capital and/or income from the AM Trust by the trustee of the trust.

  2. Counsel for the husband correctly submits that the Trust Deed does not allow a trustee to retire unless there is someone to replace him.

CAN THE HUSBAND BENEFIT FROM THE TRUST?

  1. It is submitted by the husband that the factual circumstances in Ashton & Ashton (1986) FLC 91-777, Davidson (1991) FLC 92-197 and Goodwin & Goodwin Alpe (1991) FLC 92-192 are inapposite to those in the present proceedings. It was submitted that the distinguishing feature in Ashton was that the husband could under that trust deed be both appointor and trustee. It was submitted that the distinguishing feature in Davidson was that a company of which the husband was a shareholder could be a beneficiary of the trust. In this case, it is submitted that clause 1(d)(vi) prevents that device from being employed. It was submitted that in Goodwin the husband was both the appointor and the beneficiary and that in this case the AM Trust Deed prohibits a protector from becoming a beneficiary, either directly or indirectly through a company. I accept there are some factual differences between those cases and this. However, in the real world, the AM Trust has already purported to have an alter ego of the parties as trustee and the husband, whilst protector, purported to appoint beneficiaries.

  2. The husband in his written and oral submissions asserted that he does not control the AM Trust. It was submitted that any finding that he did was not possible when the terms of the AM Trust Deed are properly construed. It was asserted that the Trust Deed is structured so that the husband cannot have control. It was further submitted that there is no allegation or even suggestion that the husband’s proposed replacement trustee, Mr CC, would breach his obligations under the Trust Deed (and/or fiduciary obligations to the discretionary beneficiaries) to benefit the husband if appointed. Whilst I understand those submissions, they underplay the real power and control held by the person who has the ability to hire and fire the trustee. If the husband was dissatisfied with Mr CC’s performance, he could remove Mr CC and replace him with somebody more amenable. The husband, in fact, has significant real influence over what happens to the capital and income of the trust. It seems the children are closely aligned with their father. A distribution of assets to one of the children or to any other new beneficiary closely aligned to the husband could directly or indirectly benefit the husband.

  3. Having said that, I also acknowledge that as at the day of this hearing, the children are the real beneficiaries of the AM Trust. They have no current vested interest in the Trust. They only have an expectancy and a new trustee could remove them. All of the children are parties to the proceedings. None of the children sought to be heard in the applications, although they had filed affidavits upon which the husband relied.

THE SUBSTANTIAL DISPUTE

  1. A proper question to ask is whether or not, viewed objectively, there is a proper basis for a challenge to the current Trustee exercising his powers to seek that the court make orders consistent with the Settlement Deed.

  2. The trustee must exercise his powers in good faith, taking into account all relevant matters. He must not be motivated by any ulterior motive.

  3. Although the Trustee of the AM Trust namely Mr Senne exercises certain specified powers with the written consent of the protector, the power of the Trustee to compromise claims against the trust fund which is contained in clause 25(7) of the AM Trust Deed is not one of those powers.

  4. Clause 25(7) of the AM Trust Deed provides relevantly:

    The Trustees (in addition and without prejudice to all powers vested in them by law) shall have power –

    …

    (7) To release or compound any debts owing to the trust or to give further time for payment of such debt with or without taking security thereto and also on such evidence as the Trustees may deem sufficient to pay compromise or submit to arbitration any claims against the Trust Fund of whatsoever nature and the Trustees may enter into give execute and do all necessary agreements releases instruments and acts without being responsible for any loss occasioned thereby.

  5. Clause 19(2) of the AM Trust Deed provides that every discretion invested in the Trustees should be absolute and uncontrolled and every power invested in them shall be exercisable at their absolute and their uncontrolled discretion.

  6. When reaching the compromise, Mr Senne as trustee of the AM Trust needed to consider his role in the litigation in relation to the disputed 23 items and those other items that are yet to be sold. The Receivers and the wife claim that these items were owned by W Nominees. One important matter the current trustee had to consider was the commercial viability of litigation in which he set out to establish these items were the property of the AM Trust.

  7. The Receivers submitted, and I accept, that in that litigation the current trustee could reasonably have anticipated the following things:

  8. There would be the need to have a trial as to the ownership of the 23 items and other unsold items and a determination of entitlements in the proceeds from the sale of those items and of the ownership of those items yet to be sold.

  9. Prior to a trial taking place the Receivers would pursue discovery of further records in respect of the ownership of the 23 items (in compliance with previous orders that the Court has made that were not complied with).

  10. There would be a need to undertake further forensic investigation including a detailed forensic accounting report.

  11. Given the husband’s track record in this case there is likely to be continuing difficulty in enforcing compliance with the courts orders for discovery and there are likely to be material gaps in the records for the AM Trust that would bear on the question of ownership of the 23 items.

  12. At any such trial there is likely to be extensive cross-examination of the husband. The Receivers anticipate any such trial would take 10 days. I noted during the hearing the volume of material that has been presented to me which was 600cm in width. A substantial part of this material would require further exploration and would probably be further expanded. The 10 day estimate of time may well be conservative.

  13. There would be a length of time prior to the Court being satisfied that the matter was ready for trial and being able to allocate that block amount of time to the trial during which would lead to issues in respect of accumulated interest on secured debts.

  14. A substantial proportion of the monies remaining in the controlled monies account would be depleted on the cost of such a trial.

  15. Mr Senne could reasonably anticipate significant difficulties at any final hearing where there was a contest in respect of whether or not the AM Trust or W Nominees owned the 23 items and the unsold items. The following observations are relevant:

  16. Mr CP in his affidavit sworn 23 January 2013 at paragraphs 30 – 56 highlights material deficiencies in documents disclosed by the AM Trust to support the trustee’s contention as to ownership of the 23 items.

  17. Claims in relation of the ownership of the items by the AM Trust are largely dependent upon the evidence of the husband. The Receivers submit that that evidence has been contradictory and varied according to the time and self-interest of the husband at the time that the sworn evidence was given by the husband (see the affidavit of Mr CP sworn 31 January 2013 at paragraphs 57 – 60). Prima facie there seems to be substance in that submission. Mr Senne would have taken into account when entering into the Settlement Deed that his primary witness would be faced with seemingly contradictory prior statements in cross-examination and be required to explain why he had made them.

  18. The husband’s written submissions deal with the evidence that he gave in a witness statement signed on 29 August 2008 for proceedings in the Supreme Court of Western Australia,:

    Since 1980 all the assets that I have brought for my family, including our residential and holiday homes and the many antiques, paintings and collectables which I have bought, have been bought by [W Nominees] as trustee of the [Allan] Family Trust. I refer to [W Nominee’s] financial records, its balance sheets, recording at costs its assets including the antiques, paintings and collectables. [the husband highlights the last sentence]

  19. The husband submits that when the statement is read in full and taken in the proper context, it is clear that the husband was giving evidence solely in relation to the assets of [W] Nominees No. 2 – not any assets of the [AM] Trust. The husband asserts there is no prior inconsistent statement.

  20. The current trustee would be reasonably apprehensive that the husband may not be able to easily explain away the clear statement about which trust bought the collectables which commences with the words “Since 1980 all...”.

  21. The position is also confused by both the fact that the AM Trust purported, up until 2002, to have a trustee who was an alter ego of the husband and wife and the fact that the children were not validly appointed as beneficiaries of the trust until 2002.

  22. Another concern of a similar nature was the husband’s failure to disclose the AM Trust in proceedings in this court in 2009 and 2010. The husband submits that the answer to that complaint is that he, at all times, was of the view that the children were entirely entitled to the assets of the trust and so on that basis there was no need for him to mention it. That submission however misses the point that is being made. In my Reasons for Judgment of 17 June 2010 (relevantly at paragraphs 16, 19, 76 and 89) I refer to the fact that in December 2009 the Receivers had made an application to sell the collectables. I made an order on 2 December 2009 that in the event the husband or any third party wished to oppose that application, then I would deal with that matter on 1 February 2010. The husband at that point did not indicate that it was his contention that some of the collectables were owned by the AM Trust. In fact, the first that the wife and the court knew about that was on 28 May 2010 in the context of an application which sought to abort the auction of the collectables which I had ordered. The Receivers submit that the husband appeared to be “lying doggo” throughout the period between December 2009 and May 2010 and not telling anyone that items that had been seized and that were on their way to auction, were said by him, not to be owned by W Nominees.

  23. The Receivers assert that the current claims of ownership relied on behalf of the AM Trust are not supported by contemporaneous records (see Mr CP’s affidavit 31 January 2013 paragraphs 30 – 56). Counsel for the Receivers specifically referred to a painting (“Lot [EE]”) which was sold by W Nominees to a third party on 17 February 2003. It was subsequently repurchased by W Nominees on 1 February 2004 for $375,000 (plus GST). Lot EE was sold at auction and in June 2010 for the sum of $321,900 (including GST). The proceeds have since accrued interest. The amount involved in this one item is not an insignificant amount, given the funds in the controlled monies account are in the approximate total of $1,570,000. Counsel for the Receivers submitted that the painting was clearly owned by W Nominees at the time of the auction, not by the AM Trust. The husband says that the painting was never collected by the third party and it “remained… as an [AM] Trust asset”. He says the third party decided they did not want the painting and the amount of $375,000 was repaid to the third party on 9 February 2004. He says the payment was not made by W Nominees. The husband points to the fact that GST was not paid, because “it was not a repurchase, it was a refund.” The current trustee might struggle with that argument given the amount of $375,000 paid from W Nominees on 3 February 2004 (albeit that amount is entered in W  Nominees’ general ledger as “ING interest” but with a “?”).

  24. The current trustee has not been supported by the husband or the children either with respect of the costs of the prosecution of the claim or the funding of the proceedings (see Mr Senne’s affidavits sworn 18 March 2013 at paragraphs 7, 9 and 11).

  25. Against these difficulties and contingencies, the husband now points to a body of evidence, which he asserts is supportive of the proposition that the disputed items are owned by the AM Trust.

  26. The husband heavily relies upon the income tax returns of the AM Trust filed in 1981, 1982, 1983 and 1984.

  27. The husband submits that the balance sheets for the AM Trust for the period 1 July 1980 to 30 June 1984 support the gradual acquisition of the antique assets (excluding Type DD goods) in the AM Trust:

    (a) year ending 30 June 1981 - $1,545,898;

    (b) year ending 30 June 1982 $3,884,836 (increase of $2,338,938);

    (c) year ending 30 June 1983 - $4,426,312 (increase of $541,476); and

    (d) year ending 30 June 1984 - $4,665,274 (increase of $238,962).

  28. The husband points to the fact that the balance sheet for the AM Trust for the year ended 30 June 1984 also discloses assets in antique Type DD goods at an acquisition cost of $646,847, bringing the total value (based on acquisition costs) as at 30 June 1984 to $5,312,121 (the reference to these figures is husband’s 16 May affidavit annexures U, V, W and X). The husband placed some reliance upon the acquisition costs of the chattels. I agree with the submission by counsel for the Receivers that that conflates two concepts. I am primarily dealing with a fund which is the proceeds of the sale of chattels by auction. The acquisition price of the chattels is not a relevant matter in the context of this hearing.

  29. The husband’s argument is that, given the current trustee’s compromise, there is no contradictor to advance the arguments which the protector of the trust believes should be tested in a fully contested final hearing.

  30. I accept that the proposed consent orders give to the Receivers the minimum amount that they were prepared to receive without going to trial. Mr D in his affidavit sworn 31 January 2013, at paragraphs 21 and 24, gave evidence which was not challenged that the Receivers were not prepared to agree to settlement terms on any basis less advantageous than those ultimately struck.

IS THE CURRENT TRUSTEE ACTUATED BY AN ULTERIOR MOTIVE?

  1. The husband submits that Mr Senne, in joining in seeking the consent orders, is acting to secure his own interests.

  2. The husband points to the fact that the current trustee’s solicitor wrote to the current trustee (tab D of the husband’s affidavit of 27 June 2012) in which the solicitor advises:

    You should consider the matter purely from your own point of view as trustee

  3. The assertion is that that demonstrates that the current trustee was advised to put his own interests before that of the beneficiaries. I accept the submission by counsel for the Receivers that that type of reading is not required by that paragraph. I accept that the current trustee did not see anything untoward in relation to the advice he was given. The current trustee gave the husband a copy of the letter of advice.

  4. The husband’s argument is to the effect that if Mr Senne ran the litigation against the Receivers and lost entirely, the Receivers would take the whole of the fund and consequently Mr Senne would then lose his lien over the fund in relation to his costs. The husband seems to argue that avoiding a full hearing secures Mr Senne’s lien and is consequently an improper motive which leads Mr Senne to consent to the orders that are sought. This is on the basis that the orders sought create a potential sum in the AM Trust against which Mr Senne’s lien can operate. I have difficulty following the logic of this argument given that it is the husband’s position that the whole of the fund is an asset of the AM Trust and on the husband’s case, the Receivers have no prospect of receiving any of it. If the husband was right about that, then Mr Senne’s lien would also be secure. If on the other hand the husband’s point is that Mr Senne has concluded that his lien is compromised because of weakness in the AM Trust’s position vis-à-vis W Nominees (and he accordingly has settled to protect his lien), that only goes to underscore the efficacy of Mr Senne’s concerns about weakness in the claims that could be mounted on behalf of the trust. I accept that Mr Senne has done what he can to potentially preserve what he can for the AM Trust. I find that there is no conflict of his fiduciary duty as trustee in seeking the consent orders.

ALLEGED PROMISE MADE BY THE TRUSTEE TO THE CHILDREN

  1. The husband submits that the solicitor for the current trustee wrote to the solicitors acting for the children promising, on behalf of the trustee, that no action would be taken without consultation with them. The husband’s counsel submits that the children’s evidence indicates that the compromise was reached without further consultation with them. The husband relies upon statements made in a letter dated 22 November 2011 from the current trustees’ lawyers to the lawyers for the children. That letter is annexure B to the affidavit of Ms C Allan filed 26 November 2012. The observations relied upon in that letter are “Our client is not prepared to release the [Type DD goods] or settle the matter without your client’s specific authority” and “We confirm that we have received senior counsel’s advice that the likelihood of success on Appeal is considered to be favourable”. Whilst the children did not play any active part in this hearing, it seemed common ground that there is currently no longer support for what the trustee proposes.

  2. In paragraph 9 of the current trustee’s affidavit filed 20 March 2013 (which was not the subject of any objection), the current trustee says:

    On 11 April 2012 I convened a meeting with the beneficiaries, their legal adviser and Mr [FF], the husband of one of the beneficiaries, to discuss the offers received from the Receivers/Managers, the possibility of obtaining further funds and the actions that would need to be taken pursuant to the claim. On the conclusion of that meeting the beneficiaries considered it would be in their best interests to accept the settlement sum of $600,000.

  3. When the order for the sale of the collectables was made, the children were active parties in the proceedings and counsel for the children then appearing indicated that the children did not want to become involved in the dispute and they consented to the order for sale that was sought (see paragraph 9 of my Reasons for Judgment dated 17 June 2010).

  4. The evidence of the current trustee is that the children agreed to the settlement but now changed their minds. This hearing took place on the basis that there was to be no cross examination. I am unable to resolve, as between the trustee and the children on this point, who is giving an accurate history. In those circumstances I can place little weight on the submission that there has been some promise made by the trustee to the children that has not been honoured and that that should be a matter of some importance when choosing between the current competing applications.

  1. Just as the children may have given approval and then withdrawn it (and that is the inference to draw from the current state of the unchallenged evidence), the trustee may have at one point indicated that he would not proceed without the children’s authority, but has subsequently changed his position. The reasons for that are partly canvassed in the current trustee’s affidavit filed 14 March 2012 and otherwise referred to in these reasons. The current trustee did not need and does not need the discretionary beneficiaries’ authority to enter into the compromise he proposes.

CONCLUSION

  1. I accept the Receivers’ submission that the two applications that I am asked to decide are interwoven.

  2. The consideration as to whether or not the husband’s application to be relieved from the injunction against him limiting his ability to act as protector of the AM Trust needs to be decided in the context of what would flow from the result of that application being successful.

  3. The result of the lifting of the injunction would be that Mr CC would be appointed as Trustee of the AM Trust with the consequence that the Trustee of the AM Trust would no longer support the consent orders which are sought by the current trustee. The husband submitted, in an orderly working out of what should happen with a very significant asset, it was appropriate that a contradictor (Mr CC) be appointed.

  4. I find that in order to make a decision about reinstalling the husband’s powers as protector, there needs to be a consideration in respect of whether or not Mr Senne has exceeded his powers in respect of compromising any claim that the AM Trust may have to the proceeds of the sale of the 23 items and in respect of the unsold items.

  5. Between 2002 and the current application by the husband, Mr Senne was chosen and maintained by the husband as trustee of the AM Trust. Given the nature of the hearing and the difficulties Mr Senne would have faced in the foreshadowed litigation and in seeking orders of the court in accordance with the compromise, I find that Mr Senne’s decision to compromise, in the way in which he has, is well within a proper exercise by him as trustee of the AM Trust. The Receiver and wife have negotiated in good faith with the current trustee of the AM Trust. I find that the judgment made by the current trustee should be allowed to stand.

  6. I conclude that the injunctive order against the husband should not be discharged until after the consent orders are made.  

CONTINUED DISPUTE IN RESPECT OF THE REMAINING $600,000

  1. The amount of $600,000 remains in dispute. As I understand it, the current trustee of the AM Trust asserts a lien against those funds. It is probable that Mr CC will become the 12th respondent and will assert that those funds belong to the AM Trust (although I am not aware as to what Mr CC’s position will be in relation to the claim by Mr Senne in relation to his costs as the former trustee of the AM Trust). The husband, so far as I understand it, will continue to assert that the whole of these funds are the property of the AM Trust (and are available to the four children of the marriage for distribution at the discretion of Mr CC). The wife’s primary position is that these funds are the funds of W Nominees No. 2 Pty Ltd and consequently are the remaining matrimonial property to be distributed pursuant to the extant applications brought under s 79 Family Law Act. I am unaware of what the wife’s current position is in relation to Mr Senne’s outstanding costs. The wife’s alternate position is that if these funds are the property of the AM Trust, then that property should be dealt with in accordance with the provisions of s 85A Family Law Act.

  2. I intend to relist this matter before myself on 29 May 2014 at 9.30am. Seven days before that listing, any party to these proceedings who wishes to seek an order in respect of the amount of $600,000 or part of it, should forward to my associate a minute setting out what orders they seek in relation to the fund together with a short explanation as to the basis upon which that order is sought and a minute of any other consequential orders that are still sought.

I certify that the preceding seventy-eight (78) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 14 April 2014

Associate:   

Date:  14.4.2014

SCHEDULE ONE 

  1. The applicant husband relied on:

    1.1.Affidavit of the husband filed 16 May 2012

    1.2.Affidavit of the husband filed 1 June 2012

    1.3.Affidavit of the husband filed 14 June 2012

    1.4.Affidavit of the husband filed 27 June 2012

    1.5.Affidavit of the husband filed 26 November 2012

    1.6.Affidavit of the husband filed 6 December 2012

    1.7.Affidavit of the husband filed 27 February 2013

    1.8.Affidavit of Ms C Allan filed 26 November 2012

    1.9.Affidavit of Ms C Allan filed 27 February 2013

    1.10.Affidavit of Ms H Allan filed 26 February 2013

    1.11.Affidavit of Ms E Allan filed 26 February 2013

    1.12.Affidavit of Mr L Allan filed 27 February 2013

    1.13.Affidavit of Mr Senne filed 2 November 2010

    1.14.Affidavit of Mr Senne filed 21 May 2012

  2. Mr CC is not a party and the husband did not rely upon any evidence from him.

  3. The Receivers relied on:

    3.1.Affidavit of Mr CP sworn 9 June 2010

    3.2.Affidavit of Mr CP sworn 31 January 2013

    3.3.Affidavit of Ms FN sworn 3 November 2010

    3.4.Affidavit of Mr IC sworn 1 March 2012

    3.5.Affidavit of Mr IC sworn 14 June 2012

    3.6.Affidavit of Mr Senne sworn 6 March 2012

    3.7.Affidavit of Mr Senne sworn 20 March 2013

  4. Mr Senne relied on:

    4.1.Affidavit of Mr Senne sworn 27 May 2010

    4.2.Affidavit of Mr Senne sworn 8 October 2010

    4.3.Affidavit of Mr Senne sworn 2 November 2010

    4.4.Affidavit of Mr Senne filed 14 March 2012

    4.5.Affidavit of Mr Senne sworn 24 January 2013

    4.6.Affidavit of Mr Senne sworn 18 March 2013

    4.7.Affidavit of Michael Delaney sworn 14 November 2010

  5. On 14 June 2013 I received both the husband’s and Receivers’ list of agreed deletions and restrictions to evidence.

Key Legal Topics

Areas of Law

  • Family Law

  • Civil Procedure

  • Insolvency

Legal Concepts

  • Appeal

  • Costs

  • Injunction

  • Jurisdiction

  • Remedies

  • Stay of Proceedings

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