Allan and Allan & Ors (No 4 )
[2015] FamCA 1081
•4 December 2015
FAMILY COURT OF AUSTRALIA
| ALLAN & ALLAN AND ORS (NO 4 ) | [2015] FamCA 1081 |
| FAMILY LAW – PRACTICE AND PROCEDURE – Slip Rule – Where an application has been made to amend an asserted error in an order made 10 November 2015 – Where that asserted error was made by a mistaken or accidental omission or slip by senior counsel and those instructing him – Where the order is amended accordingly. FAMILY LAW – PROPERTY – Declaration as to the validity of appointment of new trustees – Where applications are brought by two companies who purport to replace the trustee of a trust – Where the application is opposed by the 7th to 11th respondents and the wife but supported by the husband – Whether a declaration should be made that the removal of the current trustee was valid where orders were in place restraining the husband and protector of the trust from replacing the trustee –- Where the current trustee had failed to file evidence and did not appear at the final hearing – Where an order was previously made permitting the husband to change the trustee in the event there was compelling evidence that the trustee would not be able to fulfil his role – Whether there was compelling evidence – Where compelling evidence is found to be a legal standard and not self-referential – Where it is argued that the trust would suffer prejudice if it not represented at the hearing – Where it is found that an order was in place precluding the husband from exercising any power of appointment of a new or additional trustee – Where in the alternative the court would not have been prepared to make the declarations as sought. FAMILY LAW – PROPERTY – Where the 13th respondent seeks to be remunerated for work done as trustee of the trust and to be repaid monies disbursed by him in his former position as trustee of a trust – Where the wife consented to the orders sought by the 13th respondent – Where the husband opposed this application and submitted the 13th respondent had inappropriately continued litigation and had inappropriately reached a compromise with receivers and managers without the consent of the beneficiaries of the trust– Where the trustee is entitled to recoup disbursement – Where the trust provides for the 13th respondent to receive remuneration - Where the husband challenges the validity of that provision because of a retainer agreement between the husband and the 13th respondent – Where that agreement was not operative during the time relevant to the claim – Where the court finds that the 13th respondent was at all relevant times following the husband’s instructions and the husband had involvement in the litigation pursued by the 13th respondent – Where the court does not accept the husband’s assertion that the 13th respondent did not fulfil his fiduciary duties as trustee – Order made that the 13th respondent be paid remuneration and disbursements sought by him out of monies held in an account by the trust. FAMILY LAW – PROPERTY – Where the 13th respondent seeks to be paid monies in accordance with a previous order made by the court against a company of which the wife was formerly a director – Where that company is in liquidation and is unable to pay the monies – Where the 13th respondent seeks the wife pay to him the monies owed – Where the wife opposes that application – Where it is found that by the time the previous order was made, the wife had little capacity to cause the company to comply with the order – Where the liability of the company is limited to its assets – Where it is found that the company is a legal entity separate from its directors and from the wife personally – Where the debt upon which the 13th respondent seeks to rely is a provable debt in the liquidation of the company – Where no asserted power to make the order sought by the 13th respondent was available – Where it is found that there is no basis for the application. FAMILY LAW – PRACTICE AND PROCEDURE – Case guardian – Where the 8th respondent was not present at the hearing – Where medical evidence is provided and it is accepted that the 8th respondent is a person with a disability and can only continue a case by a case guardian – Where the 10th respondent is appointed as the 8th respondent’s case guardian. FAMILY LAW – PROPERTY – Where consent orders are made between the wife and the 7th to 11th respondents – Where the husband opposes the making of those consent orders – Where the husband submitted that to make the consent orders would be a travesty of justice in circumstances where the 8th respondent was to hold the assets in trust for the husband’s family - Where it is submitted by the 7th to 11th respondents that the consent orders are a commercial compromise between the 7th to 11th respondents and the wife – Where the husband has no interest in relation to funds and trusts to which the consent orders relate – Where the compromise is a proper resolution to bring proceedings between the wife and the 7th to 11th respondents to an end and it is proper to make the orders sought. FAMILY LAW – PROPERTY – Where the husband and wife ask that the court make orders by consent for property settlement – Where both parties seek an order that the children of the marriage receive monies and the wife retain the balance of the net assets – Where the court is satisfied that the wife has been competently advised – Where the husband is not legally represented by has been represented over the years and the court is satisfied the husband fully understands the orders – Where there is power under s 79(1) of the Family Law Act 1975 (Cth) to make the orders sought – Where it is appropriate and otherwise just and equitable to make the orders sought |
| Corporations Act 2001 (Cth) Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| Belar Pty Ltd (in liq) v Mahaffey [2000] 1 Qd R 477 Chief Commissioner of Stamp Duties v Buckle (1998) 151 ALR 1 Deputy Commissioner of Taxation v Kliman and Kliman [2002] FLC93-113 Forna Holdings Pty Ltd & McGillivray v Mitchell (No. 2) [2000] FLC 93-053 Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWSC 1344 Linden v Commonwealth (No. 2) (1996) 70 ALJR 541 Octavo Investments v Knight (1979) 144 CLR 360 Re Exhall Coal Co Ltd (1986) 55 ER 970 Trim Perfect Australia v Albrook Constructions [2006] NSWSC 153 |
| APPLICANT: | Ms Allan |
| 1st RESPONDENT: | Mr W Allan |
| 3rd RESPONDENT: | Ms B Allan |
| 4th RESPONDENT: | Mr C Allan |
| 5th RESPONDENT: | Ms D Allan |
| 6th RESPONDENT: | Ms E Allan |
| 7th RESPONDENT: | F Nominees |
| 8th RESPONDENT: | Ms G |
| 9th RESPONDENT: | Mr H |
| 10th RESPONDENT: | Mr K |
| 11th RESPONDENT: | Mr J |
| 13th RESPONDENT: | Mr L |
| 14th RESPONDENT: | Mr DC as trustee for M Trust |
| INTERVENORS : | EE Pty Ltd, as trustee of EE Trust and joint trustee of M Trust with FF nominees AND FF Nominees Pty Ltd, as trustee of FF Trust and joint trustee of M Trust |
| FILE NUMBER: | SYC | 3842 | of | 2008 |
| DATE DELIVERED: | 4 December 2015 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Watts J |
| HEARING DATE: | 16 – 20 November 2015 |
REPRESENTATION
| COUNSEL FOR THE WIFE | Mr Williams |
| SOLICITOR FOR THE WIFE | Mills Oakley Lawyers |
| SOLICITOR FOR THE HUSBAND | Appeared in his personal capacity |
| COUNSEL FOR 7TH – 11TH RESPONDENTS | Mr Sirtes SC with Mr Harper, counsel |
| SOLICITOR FOR 7TH – 11TH RESPONDENTS | Kott Gunning Lawyers |
| COUNSEL FOR THE 13TH RESPONDENT | Mr Auld |
| SOLICITOR FOR THE 13TH RESPONDENT | Delaney Lawyers |
| COUNSEL FOR THE INTERVENORS | Mr Dubler, SC |
| SOLICITOR FOR THE INTERVENORS | Matthews Solicitors |
Orders
Within 14 days, the wife and the 13th respondent do all things and sign all necessary documents to pay to the 13th respondent from the monies in the account established pursuant to order 3 dated 14 April 2014 (by a deposit of $600,000) the sum of $575,572 and to pay the trustee of the M Trust, as identified by the notification referred to in order 3, the balance of the funds in that account, within 14 days of receiving that notification.
Order 15.2 made 29 May 2014 be discharged.
The husband, as soon as is practicable, notify the lawyers for the wife and the 13th respondent, of the identity of the appointed Trustee(s) of the M Trust and the bank account details into which the payment referred to in order 1 is to be made.
The applications by the 13th respondent against the wife are dismissed.
Orders made 17.11.15
Pursuant to the slip rule order 1 made 10 November 2015 be deleted and the following order is made
1. The applications in paragraphs [1] to [22] of the Application in a case filed by EE Pty Ltd and FF Nominees Pty Ltd on 23 October 2015 be dismissed
The applications by EE Pty Ltd and FF Nominees Pty Ltd contained in paragraphs 23 to 27 of the Application in a Case filed 23 October 2015 be dismissed.
The applications for declarations and orders by EE Pty Ltd and FF Nominees Pty Ltd set out in Exhibit 42 at paragraphs 1 to 5 are dismissed and accordingly I do not hear the remaining part of those applications for orders that are set out in Exhibit 42.
I note that Order 15.2 made on the 29 May 2014 continues and I will address what is to happen in respect of that order as part of the final resolution of those proceedings.
The time for the 7th – 11th respondents to bring a costs application in respect of the orders made on 10 November 2015 is extended to the date of expiration of the time allowed under the Rules to bring an application for costs in respect of these proceedings.
I reserve my reasons for order 2 to 5.
Orders made 18.11.15
In relation to the applications by the 13th respondent against the wife for orders 6, 9 and 10 contained in Exhibit 40, I grant leave to the wife to make an oral application for summary dismissal pursuant to rule 10.12 Family Law Rules. I reserve my decision in respect of that oral application.
In the event that I dismiss that oral application, I reserve my decision in relation to those applications.
Order made 19.11.2015
Mr J be appointed case guardian for Ms G.
Orders made 19.11.15
That within 7 days of the 7th to 11th Respondents’ Solicitors receiving a sealed copy of these orders, the 7th to 11th Respondents shall pay or cause to be paid to the Applicant Wife the sum of ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000.00).
The payment referred to in paragraph 1 hereof will be made by the 7th to 11th Respondents into the Trust Account of Mills Oakley, the Wife’s solicitors.
That the funds received by the Wife’s Solicitors pursuant to Paragraphs 1 and 2 hereof are to be held by them on trust pending further Order of the Court.
That subject to Paragraph 5 hereof the 7th to 11th Respondents transfer and assign to the Applicant all and any interest they have in and to the debt owing to them by JJ Pty Ltd (ACN …) being the subject of proceedings in the Supreme Court of Western Australia matter number CIV … of 2011.
That the Applicant prepare and file at her own expense all and any documents necessary to give effect to Paragraph 4 hereof.
That the parties otherwise do all such things and sign all and any documents that are required to give effect to paragraph 4 hereof.
That paragraph 3 of the Orders made by this Honourable Court on 3 November 2008 be and is hereby discharged.
That paragraphs 1, 2, 3, 4 and 5 of the Consent Orders made by this Honourable Court on 16 February 2009 be and are hereby discharged.
That Paragraph 8 of the Orders made by this Honourable Court on 29 May 2014 be discharged.
That Paragraph 6 of the Orders made by this Honourable Court on 3 November 2014 be discharged.
That as between the 7th to 11th Respondents and the wife all reserved Costs Orders are discharged.
[Deliberately Blank]
That the 8th and 9th Respondents be at liberty to remove Caveat number L253287 registered against the property at KK Road, LL Town, which property is more particularly described as:
Lot … on Deposited Plan 254022 and being the whole of the land described in Certificate of Title volume … Folio ...
That all applications against the 7th to 11th Respondents are dismissed.
That the Wife’s Application pursuant to s106B of the Act and the Orders sought in paragraphs 4, 5, 6, including 6.1 to 6.16 and 7 of the Wife’s Further Amended Application filed on 25 February 2015 be dismissed.
That paragraph 8 of the Wife’s Further Amended Application filed on 25 February 2015, insofar as it relates to the 7th and 11th Respondents, be dismissed
That the wife shall be and hereby is restrained by injunction from making or facilitating any further application or claim of any nature whatsoever against the 7th to 11th Respondents which in any way relates to GG Pty Ltd, HH Pty Ltd, EE Trust or FF Trust or in any way relating to the property known as MM Valley in NN Town, Western Australia and the Court notes that the wife releases the 7th to 11th Respondents from any claim she may have had in relation to those matters.
That the 7th to 11th Respondents be discharged from all and any other obligations they may have in respect to all and any other Orders that have been made against them in these proceedings.
That there be no Order for costs for the benefit of the 7th to 11th Respondents as against the wife and no Order for costs against them.
[Deliberately Blank]
That Paragraphs 20 and 21 insofar as it relates to the 7th to 11th Respondents’ Further Amended Response filed on 26 March 2015 be dismissed.
That the parties do all such things and sign all and any documents necessary to give effect to these Orders.
Orders made 20.11.15 by consent
The Minute of Consent Orders signed by the husband and wife dated 20 November 2015 be marked as Exhibit 62.
Pursuant to s 79 Family Law Act I make orders in accordance with paragraphs 1,2,3 and 4 of Exhibit 62 and a declaration in the terms of paragraph 5 of the applicant wife’s document pursuant to the orders of 31 July 2015 which is in the following terms:
That it be declared that the wife is the sole, legal and beneficial owner of the General Household Furniture and Effects referred to in the Valuation Inventory General Household Furniture and Effects dated 2 August 2010 prepared by [OO Auctions Pty Limited] held in the storage at [PP Street, Suburb QQ] in the State of Western Australia and that the wife be entitled to take delivery of the same.
I make an order in accordance with paragraph 5 of Exhibit 62.
I discharge to the date to which they stand paid, all arrears owed by the husband to the wife in respect of any spousal maintenance order that has been made
Apart from these orders, I discharge all other orders as between the husband and the wife and dismiss any other outstanding applications by one against the other.
I note that in relation to this final part of the hearing which involves the claims between the husband and wife, these orders then finally conclude that part of the proceedings.
Exhibit 62
That save as is dealt with by these Orders, the wife is sole, legal and beneficial owner of all property in her name and/or possession as at the date of these Orders.
That within 7 days of the receipt by her of the whole of the funds paid to her by the 7th to 11th respondents pursuant to the orders made on 19 November 2015, the wife pay to the children of the marriage equally between them the sum of nine hundred thousand dollars ($900,000).
That within 28 days of the conclusion of the proceedings between Mr L in his personal capacity against the wife the wife pay to the children of the marriage equally between them the sum of one hundred thousand dollars ($100,000) less the amount of any judgment which L may obtain against the wife.
That the Application of the husband filed in Court on the 19th day of November 2015 be otherwise dismissed.
No order as to costs.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Allan & Allan and Ors (No 4) 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
| Ms Allan |
Applicant
And
| Mr W Allan |
1st Respondent
And
| Ms B Allan |
3rd Respondent
And
| Mr C Allan |
4th Respondent
And
| Ms D Allan |
5th Respondent
And
| Ms E Allan |
6th Respondent
And
| F Nominees |
7th Respondent
And
| Ms G |
8th Respondent
And
| Mr H |
9th Respondent
And
| Mr K |
10th Respondent
And
| Mr J |
11th Respondent
And
| Mr L |
13th Respondent
And
| Mr DC |
14th Respondent
And
| EE Pty Ltd, as trustee of EE Trust and joint trustee of M Trust with FF nominees AND FF Nominees Pty Ltd, as trustee of FF Trust and joint trustee of M Trust |
Intervenors
REASONS FOR JUDGMENT
APPLICATIONS BY EE PTY LTD AND FF NOMINEES PTY LTD
Slip rule application (the following reasons were delivered ex-tempore on 17 November 2015)
Senior counsel for EE Pty Ltd and FF Nominees Pty Ltd (“the two companies”) makes an oral application pursuant to “the slip rule” (r 17.02 of the Family Law Rules 2004 (Cth) (“FLR”)), to correct an error in an order made 10 November 2015. That order dismissed in its entirety an Application in a Case filed on behalf of the two companies on 23 October 2015. The companies contend that the order was made in error based upon a mistaken or accidental omission or slip by senior counsel and those instructing him in providing the concession that is recorded at [48] of the reasons for judgment published on 10 November 2015. Senior counsel for the companies overlooked [23] to [27] of the Application in a Case filed 23 October 2015 which dealt with the position of the M Trust.
I accept that the concession that was made, which is recorded at [48] of the reasons, was given in error as a result of overlooking part of the Application in a Case which was not agitated or mentioned before me in court on that day and in fact was not set down for hearing on that day. The matter that was set down was a discrete hearing in relation to matters relevant to the EE Trust (“EE”) and the FF Trust (“FF”) and not the M Trust (see order made 29 October 2015).
Accordingly, pursuant to the slip rule order 1 made 10 November 2015 be deleted and the following order is made:
The applications in paragraphs [1] to [22] of the Application in a Case filed by EE Pty Ltd and FF Nominees Pty Ltd on 23 October 2015 be dismissed.
Applications for declarations as to the validity of appointment of new trustees
Introduction
Applications for declarations and orders are brought by EE Pty Ltd and FF Nominees Pty Ltd who purport to replace the 14th respondent as the new trustees of the M Trust. Whether or not they are entitled to do so involves a consideration of what the husband, who is the protector of the M Trust, did on 15 October 2015. On 15 October 2015 the husband executed a Deed Sole which on its face, appointed the two companies as trustees of the M Trust and removed the 14th respondent as the trustee of the M Trust.
On 17 November 2015 I made orders which dismissed the applications by the two companies and reserved my reasons for doing so. These are those reasons.
Applications
The two companies had applied for orders 23 to 27 as set out in an Application in a Case filed 23 October 2015. Orders 23 to 25 seek a declaration as valid the removal of the 14th respondent as trustee of the M Trust on 15 October 2015 and as valid the appointment of the two companies as trustee of the M Trust on 15 October 2015. They also apply for an order that the two companies replace the 14th respondent as trustee for the M Trust in these proceedings.
By order 26, the two companies sought a transfer of the frozen $600,000 into an account of the company’s solicitors. There is no need to discuss the history which led to those funds being frozen in an account to await an order being made at the end of this final hearing for a distribution of those funds. No submissions were made in relation to this application. There is no evidence that would support such an application and it will be dismissed.
The two companies did not press the application for order 27.
The two companies also gave notice that they would also be seeking orders as set out in Exhibit 42. Orders 1 to 5 in Exhibit 42 are the same orders as orders 23 to 27 sought in the Application in a Case referred to above. Order 6 is an order that seeks a declaration that the appointment of F Nominees (who is the 7th respondent) by way of Deed in June 2004 was not valid. Order 7 seeks a declaration that F Nominees was ineligible to be appointed as guardian of the two trusts. Order 8 seeks a declaration that F Nominees failed to make determinations by way of corporate resolutions. Order 9 seeks a declaration that F Nominees proceeded on a course which amounted to a fraud on the exercise of power by not making any bona fide consideration of the claims and interests of the beneficiaries. Order 10 seeks that the court appoint new trustees to each of the trusts. Order 11 seeks that the 8th to 11th respondents pay the distribution of capital received by each of them to the new trustee. Order 12 seeks that the 8th to 11th respondents pay the income so distributed to the beneficiaries of the new trust (which excluded the husband as a possible beneficiary). In summary, orders 6 through to 12 in Exhibit 42, as sought are substantive orders aimed at repatriating the significant distributions that have been made out of the EE and the FF and for new trustees to be appointed.
The orders sought by the two companies were opposed by the 7th to 11th respondents and the wife but supported by the husband.
I made orders on 17 November 2015 that the applications for declarations and orders by the companies contained in [23] to [27] of the Application in a Case filed 23 October 2015 be dismissed and that the applications for declarations and orders sought by the companies in [1] to [5] of Exhibit 42 be dismissed. Accordingly I did not hear the remaining applications for orders set out in Exhibit 42.
I set out below the reasons for making those orders.
On 17 November 2015 I also noted that order 15.2 made 29 May 2014, namely that the husband is restrained from exercising any power of appointment of new or additional trustee of the M Trust, continued. I discuss the discharge of that order below.
The evidence
The evidence relied upon relevant to these applications is as follows:
The two companies
14.1.Affidavit of Mr RR (of nine paragraphs) filed 23 October 2015 but only [1] to [5];
14.2.Affidavit of Mr SS filed in court on 16 November 2015 (Exhibit 43).
7th to 11th Respondents
14.3.Affidavit of TT Org sworn 16 November 2015
Senior counsel for the two companies sought to call the husband as a witness to give evidence relating to his understanding of the current position of the 14th respondent whom the husband had purported to remove as trustee of the M Trust. Senior counsel for the 7th to 11th respondents objected to the companies calling the husband as a witness to give evidence about the 14th respondent’s position and I did not allow that evidence.
History of orders about the husband appointing new trustees to the M Trust
Order 4 made 17 June 2010 provided:
Until further order, the respondent husband be restrained from doing any act or thing whatsoever in his capacity as protector of the M Trust including but not limited to causing the trustee of the M Trust to be removed as trustee and to appoint any substitute or alternate trustee.
On 14 April 2014 this order was discharged, subject to orders 2 to 4 made that day which related to payment of monies to the Receivers, leaving an amount of $600,000 held in a frozen account. It has subsequently been agreed that that amount is an asset of the M Trust.
As he was then entitled to do, the husband on 20 April 2014 appointed the 14th respondent as the new trustee of the M Trust.
An order was made in chambers on 1 May 2014 granting leave to the 14th respondent to become a party to the proceedings in his capacity as trustee for the M Trust.
On 29 May 2014 the restraint upon the husband was reimposed by an order in the following terms:
15.2 That [the husband] be and he is hereby restrained from exercising any power of appointment of new or additional trustee.
Senior counsel for the two companies submitted that the fact there was an order restraining the husband from appointing a new trustee did not affect validity of him doing so but rather might lead to an action for contravention. I do not accept that in an application for the declaration of the validity of an action, it is not relevant to take into consideration that the action in respect of which the declaration of validity is sought, is an action which is contrary to a court order restraining the husband from so acting.
On 21 September 2015, in circumstances where the court had received information apparently from the 14th respondent’s solicitor that the 14th respondent had some difficulty with his heart (the 14th respondent’s solicitor did not personally attend court), an order was made in the following terms (order 17 made 21 September 2015):
In the event that there is compelling evidence that [the 14th respondent] will not be able to fulfil his role as trustee in terms of participating in these proceedings so that the final hearing can proceed on 16 November, then the husband is at liberty to change the trustee.
Senior counsel for the companies submitted that upon an ordinary reading of its structure, order 17 should be interpreted as a self-executing order and that as long as Mr Allan had formed the view that there was “compelling evidence” that the 14th respondent would not be able to fulfil his role as trustee, then the order restraining him from appointing a new trustee had been varied.
Senior counsel for the 7th to 11th respondents submitted that compelling evidence is a legal standard and is not self-referential. I accept that submission. Counsel on behalf of the wife emphasised the opening words of order 17 which were “In the event that there is compelling evidence”. Counsel for the wife submitted that not only was there an absence of compelling evidence of the 14th respondent’s ability to fulfil his role as trustee, there was evidence in the opposite direction.
Clause 5 of the Deed Sole executed by the husband on 15 October 2015 by which the companies were purportedly made trustees of the M Trust, contains the following statement:
5. The Family Court of Australia in Proceedings No. SYC 3842 recommended that [Mr DC] be replaced as trustee of the [M Trust].
That statement in the Deed Sole misstates and misunderstands the wording and intent of order and notation 17 made 21 September 2015.
The statement in clause 6(b) of the preamble is in the following terms:
The current Protector wishes to – remove [the 14th respondent] of [blank] as a Trustee, noting that [the 14th respondent] has verbally advised the Protector he wishes to retire as a Trustee.
This statement in clause 6(b) of the Deed Sole of the 15 October 2015 does not sit easily with:
28.1.There being no evidence at all to satisfy the requirement that there be “compelling evidence” in respect of the 14th respondent’s ability to continue;
28.2.The annexure which is page 103 to Mr SS’s affidavit (exhibit 43) is a letter from the 14th respondent’s lawyers dated 12 November 2015 (the Thursday prior to the commencement of the hearing) which indicated that they had instructions from the 14th respondent. Those instructions would be that he would cease to participate in these proceedings once he had received an indemnity from the M Trust for almost $200,000 worth of expenses that he had incurred and which he asserted he had paid personally;
28.3.Those lawyers filed a notice of ceasing to act in these proceedings on the last working day before the commencement of the hearing but the 14th respondent remains a party to the proceedings.
An ordinary reading of order 17 would require there to be compelling evidence that the 14th respondent would not be able to fulfil his role as trustee. The evidence adduced in this hearing does not constitute compelling evidence that the 14th respondent is not able to fulfil his role as trustee. On that basis the applications by the two companies for declarations cannot succeed.
If I am wrong about that, there are significant reasons why I would not exercise a discretion to make the orders and declarations as sought by the two companies.
What the husband, as protector, has purported to do is not only to appoint a new trustee of the trust, but he has purported to appoint two new corporate trustees. In doing so he has created a flexibility that would allow those controlling those corporate entities to appoint new directors and resign, the result being that any particular person could be the controller of the M Trust from time to time.
On the working day before the first day of the final hearing, Mr RR resigned as a director of the two companies. There is no explanation from the husband, who is the appointor of the trust, as to why Mr RR resigned and why Ms B Allan (the party’s daughter) has now consented to appointment as trustee. Senior counsel for the two companies did however explain that the reason that one of the children had come into the position of being the effective controller of the M Trust, was as a representative of the class of beneficiaries (being the children of the parties to the marriage) and as one child lives in WA and the other three live in NSW, as a matter of convenience, one person, namely B, had been appointed.
I am asked to draw the inference that B’s appointment was in order for the children of the husband and wife to be represented by one of those children as a class of beneficiaries of the M Trust and to take control of the future operation of that trust.
Whilst the children have been parties to the proceedings and at all times have had lawyers on the record and have received orders and directions made from time to time, the children have not been actively involved in the proceedings since about May 2012. Senior counsel for the two companies suggests that the children’s very recent interest in the litigation arises from an assertion that they have become aware for the first time that the wife had settled matters with the 7th to 11th respondents and accordingly the “goal posts had moved”.
Senior counsel for the 7th to 11th respondents pointed out that the assertion that the children have only recently become aware of the probability of a negotiated settlement between the wife and the 7th to 11th respondents is weakened when regard is had to orders and notations from earlier procedural events.
It is important to also consider the history of the participation of the trustee of the M Trust in these proceedings since the husband appointed the 14th respondent.
Exhibit 45 was a selection of previous orders relevant to the applications which are the subject of these reasons. The 14th respondent had, on a number of occasions, failed to engage with the litigation and knew that from 30 March 2015 the matter was tentatively listed to commence for final hearing on 16 November 2015.
Importantly on 31 July 2015 I made the following orders:
1.It is noted that on 30 March 2015 the final hearing of this matter was tentatively listed to commence on 16 November 2015. There have been five days allocated for this hearing with some days reserved in the following week if they become necessary
2.This matter is listed for procedural directions on 21 September 2015 at 9.15am.
3.By 2pm on 11 September 2015, each party is to provide my associate and to each other party a document setting out the following:
3.1The orders that a party seeks at the final hearing;
3.2The issues and events that party seeks to set out in any affidavit;
3.3The witnesses who will give evidence in that parties’ case;
3.4Any document or group of documents that that party wishes to rely upon by way of tender at the final hearing.
4It is the intention of the court on 21 September to make an order that each party file one affidavit and one affidavit from any witness that is relied upon confined to evidence relevant to any application which is being made.
There was a total non-compliance by the 14th respondent in respect of order 3, failing to file and serve anything by 11 September 2015, or seeking leave to do so since.
On 21 September 2015 there was no appearance by the 14th respondent. The 14th respondent also has not appeared at the events that have happened since 21 September 2015 and whilst he is still a party to the proceedings, his solicitor filed a notice of ceasing to act on the last working day before the final hearing.
From the time the 14th respondent was appointed as trustee of the M Trust in May 2014, the husband knew of the occasions on which the 14th respondent had failed to appear and the occasions on which the 14th respondent had failed to comply with court orders. Significantly, the husband knew on 11 September 2015 that he had not been provided with a document setting out the orders that the 14th respondent sought at the final hearing, nor the issues or events that the 14th respondent sought to set out in an affidavit, nor the witnesses the 14th respondent sought to call, nor any document or group of documents that the 14th respondent wanted to rely upon by way of tender at the final hearing.
The husband could have, at any procedural event or otherwise after the order of 29 May 2014, approached the court for permission to appoint a new trustee if he had formed the view that the 14th respondent’s performance was inadequate.
Whilst senior counsel for the two companies did acknowledge the force of arguments against him arising out of case management principles, he submitted that the overarching consideration was the interest of justice for the beneficiaries of the trust which he submitted would be denied if they were not permitted to have submissions made on their behalf by the companies.
Senior counsel for the companies pointed to the fact that on Friday the 14th respondent’s lawyer filed a notice of ceasing to act and that there was no appearance at the hearing by the 14th respondent.
Senior counsel for the companies suggested that these past failures should not shut the companies out from now acting in the role of trustees of the M Trust in these proceedings, particularly in circumstances where it was asserted the trust will suffer real prejudice if it is not represented. What is being proposed by way of applications to be prosecuted by the two companies as trustees of the M Trust represents a dramatic change from relief that has been previously sought on a final basis.
The two companies have made it clear that the purpose and intent of installing Ms B Allan as controller of the M Trust is to facilitate:
46.1.The M Trust being a contradictor to the 13th respondent’s claim by way of lien against the frozen amount of $600,000;
46.2.To pursue a claim on behalf of the M Trust as a potential discretionary beneficiary of EE and the FF for the orders set out earlier in these reasons;
46.3.To repatriate back to those trusts, monies distributed to the 8th to 11th respondents and for the appointment of new trustees of that trust. That is, the two companies controlled by Ms B would seek to take an active part in the current applications between the wife and the 7th to 11th respondents.
It is not the case that there will be no contradictor to claims against the M Trust. The husband, who is the protector of the trust, continues to be a party to the proceedings and continues to oppose orders sought by the 13th respondent against the trust. He will have an opportunity to oppose the 13th respondent’s application and to cross examine the 13th respondent. Senior counsel for the companies submitted that as a minimalist position, the companies sought an opportunity to now on behalf of the trust, comply with order 3.1 made 31 July 2015 (an order which was required to be complied with by the trustee of the trust by 11 September 2015). That order, as set out above, required the trustee to set out the orders that the trustee sought at the final order. Further, senior counsel for the companies wished to agitate for standing to make submissions in respect of the orders that the trustee would seek.
Senior counsel for the companies points to the fact that the husband had no funds to be represented and would be hampered in putting forward interest or retaining lawyers to put forward arguments on behalf of the M Trust. That submission was made in circumstances where an order had been made against the companies to provide notice pursuant to the rules as to the source of funds from which the companies were paying their lawyers. At the time that the orders which were the subject of these reasons were made, that order had yet to be complied with.
Conclusion
For the reasons set out, I decline to make the orders and declarations as sought by the two companies on the basis that there was an order of 29 May 2014 which had not been varied restraining the husband from exercising any power of appointment of a new or additional trustee to the M Trust.
If I am incorrect about that because of order 17 made 21 September 2015, then as a matter of discretion, I would not have been prepared to make the declarations as sought in orders 23 to 25 of the Application in a Case filed 23 October 2015 and replicated in orders 1 to 3 of Exhibit 42.
CLAIM BY THE 13TH RESPONDENT FOR PAYMENT OF THE SUM OF $575,572
The 13th respondent seeks the following orders:
1. The order made by Her Honour Justice Stevenson on 4 November 2010, be implemented by payment to the 13th respondent of his costs due from the M Trust.
2. The 13th respondent be repaid for all monies disbursed by him in his former positon as Trustee of the M Trust sufficient to permit him to discharge all liabilities incurred by him for legal services and costs associated with these proceedings from the M Trust.
3. The 13th respondent be reimbursed or be paid for his services for the M Trust in the conduct of these proceedings.
4. The 13th respondent be reimbursed for interest paid by him for monies borrowed inclusive of credit cards to enable him to meet liabilities incurred by him in the conduct of these proceedings.
The 13th respondent did not press an application for the 14th respondent to pay his costs from 20 April 2014 (the date of the appointment of the 14th respondent as trustee of the M Trust).
By way of refinement, the 13th respondent seeks that from the monies in the account established pursuant to order 3 dated 14 April 2014 (by a deposit of $600,000), the sum of $575,572 be paid to him. The wife consented to the order sought by the 13th respondent for payment of this sum from the frozen account. The husband opposed any order that would put any of these funds in the hands of the 13th respondent.
The 13th respondent relied upon evidence contained in [6] to [62] of his affidavit filed 24 February 2015 and to various pages of Exhibit “PS1” to the affidavit filed 24 February 2015 and in particular, pages 139 to 311.
The husband did not give any evidence himself in relation to this claim nor did he call any evidence from any of the children of the marriage or a barrister who the husband asserted during his cross examination of the 13th respondent was present at a meeting between the 13th respondent, three of the children and a spouse of one of the children on 11 April 2012.
The quantification of the claim by the 13th respondent is contained in Exhibit “PS1” at page 139. The particularised legal costs are in the sum of $375,787, with an overall summary being at page 139 and a more detailed summary at pages 141 to 143. Supporting invoices are at pages 146 to 306. The 13th respondent’s personal costs in acting as the trustee of the trust are in the sum of $199,785, particulars of which are given at pages 139, 140, 144, and 308 to 311 of Exhibit “PS1”.
Background
During this part of the final hearing, the husband described the 13th respondent as his trusted lieutenant of 20 years. The two men had a falling out in April 2014 and had not spoken to one another since then until the husband commenced to cross examine the 13th respondent (apart from a short conversation at the funeral for the wife of the 13th respondent).
The M Trust was created by a Deed dated 2 December 1980. By a Deed dated 1 June 1982 the husband was appointed protector of the trust. On 30 May 2002 the 13th respondent entered into a Deed with the husband, as a result of which the 13th respondent was appointed as trustee of the M Trust.
On 13 June 2002 the 13th respondent nominated the children of the husband and wife as beneficiaries.
At the time he was appointed trustee, the 13th respondent received the books and records of the trust. Those books and records contained information and documents relevant to assets acquired by the trust prior to 1985. The trust had not acquired any items since that time.
The 13th respondent had retained photocopies of some of the records he was given when he was appointed trustee and those records are in evidence. He also said that after he was appointed as trustee, the husband showed him a number of black folders he kept in his office. Those folders contained invoices and accompanying photos of acquisitions said to have been made by the M Trust and notes in relation to those items. The 13th respondent said that collectables including antique furniture, paintings and books were kept either on the family’s estate in New South Wales or at places in Western Australia. The black folders were seized by the Receivers.
The 13th respondent says he was not present when the Receivers and Managers removed items from the control of the trust and, after that time, he endeavoured to establish from documents in his possession, those assets of the M Trust that had been removed by the Receivers.
The 13th respondent was, since 2010, actively engage in this litigation in his capacity as trustee of the M Trust and I accept that he was involved in court attendances, conferences, inspection of records, comparison of records and preparation of lists of the collectables and preparation of evidence for various court events.
In 2010 the 13th respondent made two trips to Perth for the purposes of examining records relating to the ownership of the antiques and collectables. The 13th respondent was involved in 2010 in researching invoices and financial records of the M Trust and endeavouring to identify purchases and payments, preparing schedules of purchases by the M Trust, by W Nominees Pty Limited (“W”), and by the husband. I accept that he did work in attempting to reconcile various invoices of purchases. In 2010, the 13th respondent, in proceedings before me, unsuccessfully attempted to prevent the sale by the Receivers of certain disputed items and a large auction of collectables which were primarily owned by W.
After the 13th respondent’s unsuccessful applications to the court at first instance, the 13th respondent, at the request and suggestion of the husband, retained senior counsel to provide an advice in respect of grounds for appeal. Based on that advice the 13th respondent lodged an appeal. The 13th respondent approached the beneficiaries of the trust and the wife with a view to find finances to prosecute the appeal. He approached the husband who advised him that he had no ability to fund the appeal. The husband introduced the 13th respondent to one litigation funder and the 13th respondent made extensive submissions to that litigation funder and two others with a view of obtaining monies to enable him to prosecute the proposed appeal. Those applications for funding were not successful. Further approaches through one of the children to the wife to access her superannuation funds for the purposes of funding the appeal were not successful.
In these circumstances, the 13th respondent did not proceed with the appeal and entered into negotiations with the Receivers and Managers with a view to endeavouring to effect a settlement by way of payment of some of the monies from the sale of the disputed items, to the M Trust.
The 13th respondent gave evidence that before negotiating with the Receivers and Managers, he had direct communication with the beneficiaries and in particular, one of the children of the marriage, and forwarded to that child correspondence containing advice received by him from his solicitors and various documents. He said that the beneficiaries informed him that they were not prepared to give evidence of their knowledge of the M Trust or the whereabouts of the collectables over the years as they did not wish to be involved in the litigation between their parents.
The 13th respondent gave evidence that there were a number of matters that he considered an exercise in his discretion to compromise the matter.
The 13th respondent said he had advice from lawyers at that time that:
69.1.The appeal would be successful;
69.2.The probable outcome would be for a rehearing at first instance to determine the ownership of the collectables;
69.3.That such a hearing could take up to two weeks of court time;
69.4.That the hearing would require extensive discovery and analysis of records and the obtaining of expert evidence.
The 13th respondent said that he took into account my reasons for judgment delivered 17 June 2010 and particularly in relation to findings made at [106] and [112] through to [119]. The 13th respondent also had regard to the transcripts of evidence in a bankruptcy court involving the husband and the comments made in relation to his evidence in that court. He had also read transcripts of evidence given by the husband in proceedings in Western Australia which were apparently inconsistent on the face of that evidence to the evidence given in these proceedings.
The 13th respondent said he sought advice of senior counsel in relation to the course of action to take and followed that advice.
The original offer made by the Receivers and Managers was $100,000. That offer was rejected by the 13th respondent. Negotiations continued and the 13th respondent ultimately negotiated a payment of $600,000 to the M Trust. At that time the 13th respondent estimated his costs were less than $400,000 and he anticipated that there would be a total return to the beneficiaries, the four children of the marriage, of an amount of approximately $200,000 in total. In addition, the 13th respondent had negotiated with the Receivers a release from any claim by the Receivers against one of the children who had sold a painting by a recognised artist for $200,000 and retained the proceedings. As mentioned, the 13th respondent gave evidence that on 11 April 2012 there was a meeting between three of the children, the husband of one of them, himself and lawyers where an agreement was reached in relation to this arrangement.
The 13th respondent believed that there was no better deal available for the M Trust and ultimately the beneficiaries.
The 13th respondent signed a settlement deed on 14 February 2012. That Deed was between the Receivers and Managers, the 13th respondent, the wife and A Finance Ltd. Orders were ultimately made on 14 April 2014 in similar terms to that Deed.
The 14th respondent as the newly appointed trustee of the M Trust, sought to appeal the orders of 14 April 2014 out of time. The Full Court refused the 14th respondent leave to prosecute the appeal, essentially on the basis that the appeal had no chance of being successful.
I accept that the 13th respondent was entitled to form the opinion that it was in the best interest of the trust and the potential beneficiaries to settle the appeal and the claim against the Receivers and Managers on the terms that were able to be obtained by the 13th respondent.
Claim for fees and disbursements as trustee
The M Trust in [15](1)(a) provides that the 13th respondent shall be entitled to remuneration in accordance with their scale of fees from time to time in force.
Section 59 of the Trustee Act 1925 is in the following terms:
(4) A trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee’s trusts or powers.
Relevant principles were analysed by Austin J in Trim Perfect Australia v Albrook Constructions [2006] NSWSC 153 and summarised by Brereton J in Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWSC 1344 particularly at [12] and following. The thirteenth respondent has a right of indemnity to recoup his costs and disbursements incurred and has an equitable lien over the trust assets which confers a proprietary interest in the nature of a security interest (see Octavo Investments v Knight (1979) 144 CLR 360; Chief Commissioner of Stamp Duties v Buckle (1998) 151 ALR 1). If trust property is transferred to a new trustee, the lien survives and the new trustee takes subject to the lien of the old trustee (Belar Pty Ltd (in liq) v Mahaffey [1999] QCA 2; [2000] 1 Qd R 477, [20]; Octavo Investments v Knight, 370; Chief Commissioner of Stamp Duty v Buckle, 246; Re Exhall Coal Co Ltd (1986) 55 ER 970).
In relation to the 13th respondent’s professional fees in the sum of $199,785 incurred in his capacity as trustee, the 13th respondent had, subsequent to his involvement in these proceedings on behalf of the trust, recorded the hours expended by himself which have been involved in the defence of the position of the trust. He has charged those hours at a rate of $145 per hour plus GST. I accept that that is a substantial reduction on his normal professional rates.
The husband cross examined the 13th respondent about his retain and role as trustee.
The husband suggested to the 13th respondent that a retainer agreement dated 2 May 1988 signed by the 13th respondent on the letterhead of W addressed to UU Pty Ltd, the family company of the 13th respondent, precluded the 13th respondent from making the claim he now does for his costs of acting as trustee.
That letter by W to UU is in the following terms:
Re: Provision of Management Services
We advise the following new arrangement will apply between your Company and [W Nominees Pty Limited]. This new arrangement has also been agreed to by [Mr Allan].
a. [UU Pty. Limited] will provide full management services to [W Nominees Pty Limited] and any other associated company or individual as directed by the Company and/or [Mr Allan].
b. An annual management fee of $100,000 will apply, payable by 12 equal monthly instalments.
c. In addition to the annual management fee, the Company will provide to your Company the property situated at [V Town Road, V Town] for use as an office and residence during the currency of this arrangement. Your Company will be responsible for the general maintenance of the buildings, improvements of the landscaping and all costs of power, telephone and sullage removal.
d. This arrangement will commence from the date of this letter and continue on a year to year basis until further notice.
As I have said, the husband asserted that this long term retainer agreement meant that the 13th respondent could not make a claim for his costs of acting as trustee of the M Trust. There are two answers to that assertion. The first is that the expression “and any other associated company or individual” may not technically cover any trust including the M Trust (although in the spirit of the agreement between the husband and 13th respondent, I accept that it would be probably be interpreted by both of them to cover any work the 13th respondent did for the M Trust). The more fundamental issue is that by the time the 13th respondent commenced to do the work that has been described above from 2010, this retainer agreement had not been operating for at least three years because since 2007 there had been no annual management fee of $100,000 paid by W to the 13th respondent’s company and the 13th respondent had not been remunerated in any other way by the husband.
The 13th respondent agreed that part of the package had been a beautiful home on a property on the outskirts of the estate of the husband and wife in New South Wales upon which he had lived between 1988 and 2011. He had initially resided there with his daughter until she turned 16 in 1993 and with his son who left home as a tradesman when he was 20 in 2003. He and his wife had resided there after that time until his son had had an accident in 2009 which rendered him as a quadriplegic at which time his son returned to being an ordinary member of the household and resident at the property. The 13th respondent and his family were removed from the home in 2011 by the Receivers.
During cross examination, the husband sought to challenge the performance of the 13th respondent as trustee of the M Trust by suggesting:
86.1.That the 13th respondent had inappropriately continued litigation, and specifically the appeal, when it should have been clear to the trustee that there was no funds to do so;
86.2.The 13th respondent had inappropriately reached a compromise with the Receivers and Managers without the consent of the beneficiaries.
The husband had not sought an order by way of cross claim against the 13th respondent in negligence, for breach of fiduciary duty or otherwise. More importantly however, the only evidence that I have on those issues is the evidence of the 13th respondent which was unshaken during cross examination.
I accept the 13th respondent’s evidence that at all relevant times he was following the husband’s instructions and that the husband encouraged the preparation of the appeal against the orders I made which allowed the auction of collectables to proceed. I accept the 13th respondent’s evidence in relation to the husband’s involvement in suggesting litigation funding.
Although it was not necessary, counsel for the 13th respondent also sought to rely upon order 4 made by Stevenson J on 4 November 2010. That order was in the following terms (the 13th respondent was then known as the 12th respondent):
The [M Trust] reimburse the 12th respondent for his expenses incurred as Trustee of the [M Trust].
At the time that order was made, the costs incurred by the 13th respondent were not of any significant amount. I accept the husband’s submission that that order should be interpreted to relate to the costs incurred by the 13th respondent to the date of the order and not in any prospective way.
I do not accept the husband’s assertion that the 13th respondent did not fulfil his fiduciary duties as trustee of the M Trust.
I accept the 13th respondent’s evidence that the involvement of Mr Burbidge QC and Mr Corsaro SC and retaining Delaney Lawyers, were all at the suggestion of the husband.
The 13th respondent gives evidence that:
50. During the course of the proceedings, I [the 13th respondent] received itemised accounts from the lawyers retained by me on a regular basis in accordance with the terms of the costs agreement I had executed.
51. I examined the accounts to satisfy myself of the accuracy of same. On some occasions, I found some minor amendments. Their accounts were amended and reissued. I am satisfied the charges undertaken were incurred in accordance with my instructions and reflected the fees set forth on a schedule to the costs agreement.
The husband did not cross examine the 13th respondent about this evidence nor put in issue any item of professional costs claimed.
Conclusion
Accordingly an order will be made that the wife and the 13th respondent do all things and sign all necessary documents to pay to the lawyers of the 13th respondent for payment out to the 13th respondent the sum of $575,572.
Given that the original capital placed on deposit in April 2014 was a sum of $600,000, there will be monies left over in the account established pursuant to order 3 dated 14 April 2014. The wife and the 13th respondent are to do what is necessary to pay to the trustee of the M Trust as identified by the notification I will now refer to, the balance of the funds in the account. The husband at the conclusion of submissions inquired about the current status of order 15.2 made 29 May 2014. As set out above, that order is in the following terms:
15.2 That [the husband] be and he is hereby restrained from exercising any power of appointment of new or additional trustee.
That order should now be discharged so that the husband is free to rely upon any appointment that he has made of new trustees for the M Trust.
The husband, as soon as practicable, should notify the lawyers for the wife and the 13th respondent of the identity of the appointed trustee(s) of the M Trust and the bank account details into which the payment of the balance of the frozen fund is to be made. The wife and the 13th respondent should pay the balance funds after the payment of $575,572 is made to the 13th respondent, to the nominated trustee(s) of the M Trust.
CLAIM BY THE 13TH RESPONDENT AGAINST THE WIFE FOR $97,400
On 8 October 2010 this court made orders by consent that the 2nd respondent, W pay $97,400 to the 13th respondent:
1. That the 2nd respondent [W] pay to the 13th respondent the amount of $97,400.00 upon receipt by it of funds released to it, from whatever source and that such payment shall rank first in priority of any claim by any creditor of the 2nd respondent with respect to those funds.
The 13th respondent by way of amended summary of position document dated 18 September 2015 (exhibit 40) seeks the following orders against the wife:
6. The applicant [wife’s name] in compliance with the orders of Registrar Chayna made 1 December 2009 pay to [the 13th respondent] the sum of $97,400 together with interest from 11 December 2009.
7....
8....
9. The applicant [wife’s name] pay to [the 13th respondent] the costs incurred to enforce the orders of 1 September 2009 on an indemnity basis.
10. The applicant [wife’s name] pay the cost of [the 13th respondent] incurred to enforce the orders of 8 October 2010 on an indemnity basis.
The 13th respondent did not press application 7 against the wife which was for a final order in the following terms:
7. In the alternative, the applicant [wife’s name] in her capacity as the director of [W Nominees Pty Ltd] cause to be paid to [the 13th respondent] the sum of $97,400 together with the interest from 8 October 2010.
The wife opposed the orders sought against her. She sought summary dismissal of these applications pursuant to rule 10.12 FLR but if the order for summary dismissal was not made, she sought that the applications be dismissed after a full hearing. Both counsel for the 13th respondent and counsel for the wife agreed that given there would be no cross examination of either party, it was expedient to hear the rule 10.12 FLR application and the substantive application at the same time.
On 18 November 2015 I made the following orders and notations:
1.In relation to the applications by the 13th respondent against the wife for orders 6, 9 and 10 contained in Exhibit 40, I grant leave to the wife to make an oral application for summary dismissal pursuant to rule 10.12 Family Law Rules. I reserve my decision in respect of that oral application.
2.In the event that I dismiss that oral application, I reserve my decision in relation to those applications.
By way of written submissions (Exhibit 49), counsel for the 13th respondent indicated that the application for order 6 was sought relying upon any or all of the following sections in the Family Law Act 1975 (Cth) (“the Act”):
104.1.Pursuant to s 112AB of the Act;
104.2.Pursuant to s 80(1)(k) of the Act;
104.3.Pursuant to s 114 of the Act.
Counsel for the 13th respondent in oral submissions originally also relied on s 105 of the Act as a source of power for the order sought. Later in oral submissions he abandoned that position. Section 105 is the power to which reference would ordinarily be made for the enforcement of a money order. The reason for abandoning the submission I assume was the same reason that application 7 was not pressed, namely that counsel for the 13th respondent accepted that the money order had been made against W, a company in liquidation and not against the wife in her personal capacity.
Documents relied upon
The 13th respondent relies upon his affidavit filed 24 February 2015, [55] to [62]. Exhibit PS1 to that affidavit sets out a schedule of payments made by A Finance pursuant to an order which allowed W to procure a further advance of $2.5 million. That advance was primarily permitted by the court to allow W to advance if possible its intention to subdivide the R property.
The wife relies upon [8] to [18] of an affidavit sworn 12 November 2015 (Exhibit 52).
Background
On 27 March 2009 Receivers and Managers were appointed for W.
On 26 June 2009 the court made orders appointing the wife as the sole director and secretary of W [order 5].
On 1 December 2009 Registrar Chayna made orders that W pay $147,500 to the 13th respondent. The order provided, in part, as follows:
1.That [orders previously made] be further modified to enable W to borrow from the existing loan facility with A Finance Limited and to apply such borrowings in the following manner:
.....
1.3to meet fees presently outstanding and payable to [the 13th respondent] in relation to the preparation of financial statements and income tax returns on behalf of the W Allan Trust and associated entities in the sum of $147,400 .....
I pause to observe that although it might be the spirit of the order, there is no explicit order that W pay the 13th respondent, only that the 13th respondent be permitted to borrow to enable it to do so.
That order was made with the consent of the wife and husband.
On 11 December 2009, the 13th respondent received from W payment of $50,000 in part satisfaction of the debt W owed the 13th respondent.
During the period from 11 December 2009 to 27 September 2010, various other orders were made by this court regarding the loan facility:
113.1.On 1 February 2010 by consent, W was permitted to drawn down the loan facility so as to apply the sum of $180,000 in payment to solicitors acting for W in proceedings brought against it by ASIC (referred to in the orders as “the Firepower proceedings” – order 1, referring to Exhibit J);
113.2.On 16 April 2010 by consent, the wife was permitted to draw down the loan facility so as to apply the sum of $20,000 in payment to solicitors acting for W in wind-up proceedings brought by Solomon Brothers (order 1);
113.3.On 28 May 2010 the wife was permitted to draw down the loan facility in the sum of $188,757.787 (order 14).
As already mentioned on 8 October 2010 the order that is the subject of this application was made by consent and required W to pay the 13th respondent an amount of $97,400 upon receipt by W of funds released to it, from whatever source and that such payment shall rank first in priority on any claim by any creditor to W with respect of those funds. I infer that an order was made in those specific terms because W had not received the full amount of $147,500 as was seemingly envisaged in the order made by Registrar Chayna on 1 December 2009.
The 13th respondent provided a schedule of the drawings by the wife against the A Finance W loan facility. Annexure B to the wife’s affidavit sworn 12 November 2015 sets out part of the disbursement of monies that W borrowed from A Finance Pty Ltd. A perusal of that schedule of draw-downs from the loan facility of $2.5 million, would indicate that the majority of the payments were to professionals associated with giving advice and preparing material to attempt to obtain a subdivision of the R property. At the time the 13th respondent was paid $50,000 on 9 December 2009, a little under $1 million had been drawn from the loan facility and there was ample scope at that time for the wife to cause W to make the full payment of $147,400 to the 13th respondent.
The wife says that there were deductions made from the loan facility by N (from whom the $2.5 million was borrow) which the wife had no idea about at the time of entering the loan agreement with them. Those deductions were in the sum of $200,000 and made 30 November 2009 and 1 December 2009. The wife asserts that N also deducted interest payments from the borrowings.
The wife claims that the 13th respondent did not provide W with financial statements and tax returns and that the deductions by N affected her ability to cause W to comply with the 2010 order. In fact, it is clear from the wife’s evidence that by the time the order was made on 8 October 2010, there was virtually nothing left of the $2.5 million draw-down.
On 23 November 2010 W was put into liquidation.
It is an agreed fact the debt upon which the 13th respondent seeks to rely is a provable debt in the liquidation of W. It is also an agreed fact that the debt, referable to the claim that has been made by the 13th respondent, appears in the books of the liquidators of W.
Section 112AB of the Act
Counsel indicated that he wished to rely upon s 112AB of the Act as a source of power to ground his application and seemingly I was unable to disabuse him of his inability to do so. He relied upon Forna Holdings Pty Ltd & McGillivray v Mitchell (No. 2) [2000] FLC 93-053. In that case the directors of a company were convicted under s 112AP of the Act for aiding and abetting a company in breaching injunctions which restrained the company.
I pointed out to counsel for the 13th respondent that s 112AB was a definition section contained in Part XIIIA of the Act. That Part deals with contravention of orders and aiding and abetting the contravention of orders. If power to make the order sought is to be found, it is in s 112AP(6)(a) or s 112AD(4) of the Act. In order for Part XIIIA to be enlivened, an application for contravention of orders needs to be filed.
Charging somebody with contravention of a court order is a serious matter. It is a quasi-criminal proceeding because of the possibilities of the sanctions that might be imposed, including a possibility of a fine and at worst, of a sentence of imprisonment. The FLR provide that such an application be made on a particular form (see Rule 21.02; Table 21.1; Item 3). Rule 21.08 FLR sets out the procedure that the court must follow at the hearing of any such application. It has never been suggested that the 13th respondent wished the wife to be charged with a contravention of orders. It is not possible to read order 6 of Exhibit 40 as an application under Part XIIIA. Accordingly, neither s 112AP nor s 112AD of the Act can be a source of power for the orders sought.
Section 80(1)(k) of the Act
Counsel for the 13th respondent makes the following submissions:
12.In circumstances where:
a. [The 13th respondent] provided professional services to companies in the control of the wife and/or the husband;
b. Twice orders have been made that [W] pay those sums outstanding to [the 13th respondent]; [as I have indicated above, the first order does not explicitly order payment]
c. That those orders were made by consent of the wife and husband;
d. At the time of making of those orders, the wife was the sole director and shareholder of [W];
e. That the loan facility was drawn down upon in excess of the payments contemplated in the first orders, made on 1 December 2009; and
f. That those payments included payments:
i.The sum of $87,366.26 was paid to employees of [W] [orders 1.1 and 1.2], a discrepancy of some $46,198.26;
ii.The sum of $51,909.50 was paid to Mallesons [order 1.4], a discrepancy of some $31,909.50;
iii.The sum of $219,001.09 was paid to [BU] [orders 1.9 and 1.10], a discrepancy of some $179,001.09;
iv.various sums were paid to consultancies, surveyors, archaeologists and others providing services on the proposed subdivision of the [R] property. Those sums total approximately $379,374.04.
it is necessary for the court to make the order sought by the 13th respondent against the wife in order to do justice in this case.
13.Further, when taken with the courts power under section 79, the court will be required to take into account the debt owed to [the 13th respondent] and balanced against the rights of the wife, and the husband, to orders altering the interest of any property (including those sought by consent by the wife and the 7-11th respondents): In the marriage of Biltoff and Biltoff (1995) FLC 92-614.
14.Gibbs J (with whom Stephen, Aickin and Wilson JJ agreed) in Ascot Investments Pty limited v Harper and Harper (1981) 148 CLR 337, (1981) FLC 91-100, concerning orders sought against a third party company, after stating that sham transactions by a party to a marriage may be disregarded, said at 76061:
Similarly, if a company is completely controlled by one party to a marriage, so that in reality an order against the company is an order against the party, the fact that in form the order appears to affect the rights of the company may not necessarily invalidate it.
15.In this case, the wife was the sole director and secretary of [W], while the husband and wife were shareholders of [W].
16.At the time of making the 1 December 2009 orders, the wife was the controlling mind of [W] and was seeking in large part orders to further advance the marital parties attempts to subdivide the property known as [R], that is, to further realize the potential windfall growth of a marital asset.
17.The payments made in excess of the 1 December 2009 orders, and in priority over the payment ordered to be made to [the 13th respondent], were directed to benefiting (and in the hope of benefiting) the marital parties over the interests of [the 13th respondent] who was owed a debt by the parties, through a company controlled at various times by each of the wife and husband.
18.In that same case, Barwick CJ said at 76054:
It may at once be conceded that the Family Court may make orders which are appropriate to render effective orders made by it within its jurisdiction. Such enforcing orders must, of course, do no more than is necessary and appropriate for the enforcement of the substantive order or orders. They cannot directly affect the rights of third parties. But it is no objection to such an enforcing order that it binds or operates upon a stranger to the Family Court proceedings or that compliance with it may indirectly or consequentially affect substantive rights of the stranger.
19.In this case, the position of [the 13th respondent] is stronger:
a. He seeks orders against a party;
b. Each of the parties consented to the orders providing for payment of those sums to [the 13th respondent];
c. The wife at that time was the controlling mind of W; and
d. The wife directed payments be made in a manner that would see the order to pay [the 13th respondent] go unsatisfied.
I will deal seriatim with the submissions made by counsel for the 13th respondent. I accept that the wife at the time of the 2009 orders had the capacity to cause W to make a payment of $147,500 to the 13th respondent.
The fundamental difficulty with the submission that the court should make an order to do justice in this case is that, as indicated above, it is agreed that the amounts now sought under the 2010 orders appear as a provable debt in the books of W’s liquidator.
What flows from that is that it would be double dipping to take that debt into account in the proceedings between the husband and wife pursuant to s 79 of the Act.
The passages to which counsel for the 13th respondent has referred from Ascot Investments deal with companies and trusts being the alter-ego of spouses, not spouses being the alter-egos of companies and trusts. So far as third party creditors were concerned, W was an independent legal entity.
Section 80(1)(k) of the Act is not an independent source of power. There is no basis to make an order under that section in favour of the 13th respondent in the context of the s 79 proceedings for a property settlement order between the husband and wife.
Section 114(1) of the Act
Counsel for the 13th respondent relies upon s 114 as a basis for making a mandatory injunction against the wife for payment of the sum of $97,400 to the 13th respondent on the basis that the making of such an injunction would be proper.
The matter was not fully argued before me but I have some grave reservations about s 114 being a power pursuant to which an order for a payment of money could be made in circumstances where a third party was attempting to enforce a debt against a party to a marriage, whether arising from an order made under the Act or otherwise. Such orders would ordinarily be made under s 105 of the Act or by way of exercise of accrued jurisdiction.
In his written submissions, counsel for the 13th respondent relies upon Deputy Commissioner of Taxation v Kliman and Kliman [2002] FLC93-113. In that case, an injunction was granted in favour of the Deputy Commissioner of Taxation too freeze assets where the Deputy Commissioner of Taxation had an “existing legal entitlement against a party”. In that case the injunctive power was not used as a basis for ordering a payment to the Deputy Commissioner of Taxation. The fundamental difficulty in this case is the same as previously discussed, namely, the debt appears in the 13th respondent’s name as a provable debt in the books of W’s liquidator.
Conclusion
Prima facie, the case against the wife is that she did not cause W to comply with the spirit of the December 2009 order, which she had the capacity to do at the time. That however is not the order that the 13th respondent seeks to enforce (and as indicated above, there may be problems in seeking to enforce the December 2009 order given the terms in which it was made).
I accept by the time the 2010 order was made, the wife had little capacity to cause W to comply with the order and some hint of that is given by the fact that the order itself deals with the issue of priority of debts.
In so far as there was consent for W to pay monies to the 13th respondent it was given by the wife in her capacity as a sole director.
I find that the liability of W is limited to its assets. W is not an unlimited liability company. It is a legal entity separate from its directors or from the wife personally. A creditor does not have recourse in these circumstances to pursue a director personally. The wife did not afford any personal guarantee. There is very limited scope under the Corporations Act2001 (Cth) (“the Corporations Act”) for claims to be made by a creditor against a director personally, for example, questions of insolvent trading, but before a claim could be made, s 588R Corporations Act requires the consent of a liquidator or leave of the court after consent is not forthcoming (see s 588T Corporations Act). The current application against the wife has not been framed in that way.
I need to consider whether or not I deal with this matter under rule 10.12 FLR or on its merits. Kirby J in Linden v Commonwealth (No. 2) (1996) 70 ALJR 541 said of summary dismissal applications:
..... Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment.
However, it follows from the discussion above that there was no basis on any power identified by counsel for the 13th respondent to make the order sought, even taking the 13th respondent’s case at its highest.
Accordingly, pursuant to rule 10.12(d) FLR, the 13th respondent’s application must be dismissed on the basis that there was no reasonable likelihood of its success. If I am wrong about that when all the evidence is considered, there is in any event no merit to the application.
For these reasons, order 6 as sought by the 13th respondent against the wife shall be dismissed. Accordingly, order 10 would also not be made. There is no basis to make an order in the 13th respondent’s favour against the wife for costs incurred to enforce orders of 1 September 2009 as no evidence or submissions were led in relation to that application.
APPOINTMENT OF THE 10TH RESPONDENT AS GUARDIAN FOR THE 8TH RESPONDENT (Ex Tempore Reasons)
On 19 November 2015 the following order was made pursuant to Part 6.3 FLR:
1. [the 10th respondent] be appointed case guardian for [the 8th respondent].
The making of this order was opposed by the husband. The following ex tempore reasons were given for making this order.
An oral application has been made in this case for [the 10th respondent] to be appointed as the 8th respondent’s case guardian. . I dispense with any rule that would create any impediment in dealing with this application today. I have regard to the affidavit sworn on 16 November 2015 by TT Org (Exhibit 46). Annexure A to that affidavit is a medical certificate from Dr VV, dated 16 November 2015. Dr VV is the 8th respondent’s treating general practitioner. He opines that the 8th respondent has dementia of an Alzheimer’s type. He expresses observations and opinions that would lead me to conclude that the 8th respondent is a person with a disability and is a person who can continue a case only by a case guardian.
By way of background to this application, I have regard to the affidavits that have been filed, that have been relied upon by the 7th to 11th respondents and, in particular, the affidavit of the 10th respondent of 20 October 2015, the 11th respondent of 18 October 2015, and the 9th respondent of 20 October 2015. I also have regard to the affidavit filed by the husband on 23 October 2015 and, in particular paragraphs 34 to 39, and the husband’s affidavit of 30 January 2015. I also have regard to [33] of exhibit 53, which is an affidavit filed by the husband in these proceedings on 13 August 2008. There the husband says:
In about June 1998 the [FF Trust] bought a property known as “[MM Valley]” at [NN Town] in Western Australia for approximately $4.5 million. For the last 30 years my sister [the husband’s sister’s name], her husband and their 3 sons worked on various farms owned by the Trust. I had promised that in the future I would arrange for them to own a property for their future. My sister and her family lived on “[MM Valley]” and worked the property. In about 2004 the property was transferred to my sister and sold for approximately $14 million in April 2008.
The 10th respondent is the adult son of the 8th respondent. He has given his written consent for the order to be made (Exhibit 56). He indicates that he considers that he does not have any interest in these proceedings adverse to that of his mother and I accept that is so, on the basis of the evidence in the affidavits to which I have just referred. I also accept that he can fairly and competently conduct the case for his mother.
Senior counsel for the 7th to the 11th respondents has asked for a dispensation of rule 6.12 FLR and I do so.
I find that it is appropriate to make an order that the 10th respondent be appointed as case guardian for the 8th respondent in these proceedings.
Ordinarily, under rule 6.12 FLR, a person appointed as a case guardian must give written notice of the appointment to each of the other parties. All relevant parties are present and are aware of the appointment.
APPLICATION BY THE WIFE AND THE 7TH to 11TH RESPONDENTS TO MAKE CONSENT ORDERS WHICH WAS OPPOSED BY THE HUSBAND
I dispense with rule 16.13(1)(d) FLR which would otherwise require the 10th respondent, as his mother’s case guardian, to file an affidavit setting out the facts relied upon to satisfy the court that the order sought is in his mother’s best interests.
On 19 November 2015 I made a series of orders at the request of the 7th to 11th respondents and the wife over the objection of the husband. I reserved my reasons for making those orders. These are those reasons.
Short relevant factual background
The 7th respondent is a trustee company. The sole shareholder and director of that company was initially the husband’s sister. By the time of the trial, the husband’s sister’s husband and her son were both directors of the 7th respondent. The 8th respondent is the husband’s sister. The 9th respondent is the husband’s sister’s husband. The 10th and 11th respondents are the children of the husband’s sister.
From 1982 through to 2010, the husband’s sister’s family worked upon various farming properties which were owned by entities connected with the husband.
It was the position of the 7th to 11th respondents that at various points during the years between 1982 and 2004, the husband had made promises and representations to various members of his sister’s family to the effect that he would buy a farm for his sister and each of her sons. The 9th to 11th respondents give evidence that from time to time they did things which relied upon the husband’s promises and representations.
The husband’s case is that what he had done from time to time was provide to his sister’s family the ability for them to work on valuable properties and to retain the whole of the proceeds from the produce from those properties.
In December 1999 the husband set up two trusts to acquire the MM Valley farms in NN Town, Western Australia.
The EE and the FF were each created by a separate Deed of Settlement dated 4 May 1989. The original trustee of EE was GG Pty Ltd and the original trustee of FF was HH Pty Ltd.
Both the trusts were discretionary trusts. The husband was the appointor and guardian of both trusts.
On 9 June 2004 the husband executed two deeds between himself and the 7th respondent. Each deed provided for the removal of the existing trustees of both trusts and the appointment of the 7th respondent in their place and for the husband to resign as appointor and guardian and appoint the 7th respondent in his place to both offices.
It was the case of the 7th to 11th respondents that the 2004 deeds were the mechanism by which the husband fulfilled his promise to provide farming properties to the husband’s sister’s family, as the deeds put the husband’s sister in control of those assets with the ability for her to distribute them to members of her family.
The MM Valley farms were sold with a settlement of the sale taking place on 1 April 2008. After the payment of agent’s commission, F Nominees Pty Ltd received about $11.7 million. In August 2008 F Nominees distributed $2.5 million of the proceeds of the sale to each of the 8th to 11th respondents ($10 million in all). Further, F Nominees distributed to a superannuation fund in respect of the 8th, 9th and 10th respondents further amounts totalling $500,000 each (a total of $1.5 million). The husband claimed in these proceedings that he was not aware at the time that those distributions had been made by F Nominees to members of his sister’s family.
The wife brought an application against the 7th to 11th respondents under s 106B of the Act seeking to set aside the initial deeds of 9 June 2004 by which F Nominees took control of the MM Valley farms and to set aside the subsequent disposition of the proceeds of the sale of the MM Valley farms in 2008.
The gist of the husband’s sister’s family’s case was that:
161.1.The husband had over a long period of time promised to do what he did in 2004 and sign farming properties over to his sister’s property;
161.2.He was a man of significant wealth at that time and had a history of being similarly generous on other occasions to other persons;
161.3.The husband’s sister’s family had in various ways over the years relied upon assurances and representations given by the husband; had conducted themselves by making contributions to various farming properties over the years and had given up other opportunities in reliance upon promises made by the husband.
The application before me
The wife and the 7th to 11th respondents now seek that I make orders in accordance with a compromise that they have reached between themselves. The husband opposes that order being made.
The orders that the wife and the 7th to 11th respondents wish me to make can be summarised in the following way:
163.1.A payment to the wife by the 7th to 11th respondents of $1.8 million, which amount would be held in trust pending further order of the court;
163.2.A transfer by the 7th to 11th respondents to the wife of all or any interest they have in a judgment debt against a third party (it turned out that that order was related to a deed the wife had already entered into with a third party. The arrangement entered into with the third party was that in exchange for not enforcing that judgment debt, the third party would discharge a second mortgage on the wife’s residence (which had an effective value of about $200,000) and pay to the wife an amount of $150,000 within a period of three years (see Exhibit 59);
163.3.A discharge of previous restraints imposed by this court upon the 7th to 11th respondents in respect of them disposing of property and requiring the 7th to 11th respondents to report on a regular basis in relation to their financial affairs;
163.4.An ability given to the 8th to 9th respondents to remove a caveat that had been placed on a property at LL Town;
163.5.A dismissal of the wife’s application under s 106B of the Act;
163.6.A restraint on the wife from pursuing any further claim of any nature whatsoever nature in relation to the MM Valley farms;
163.7.No order for costs be made and that any other orders or applications against the 7th to 11th respondents be either discharged or dismissed.
The evidence relevant to this application
I have written evidence from the wife, the husband, the 9th, 10th and 11th respondents. The 7th to 11th respondents also rely upon [33] of the husband’s 2008 affidavit. The husband chose not to cross examine any of the 9th, 10th or 11th respondents. The wife and the 7th to 11th respondents chose not to cross examine the husband. The matter proceeded before me on the basis of submissions.
The evidence of the husband in his 2008 affidavit seems to generally corroborate the more specific evidence given by the 9th, 10th and 11th respondents in their affidavits. The husband did not provide any evidence that put into issue the history of the promises that were made in the years of sacrifice that the 9th to 11th respondents attest to. Their evidence is not contradicted in these proceedings.
It is of some significance to observe that in the final hearing the husband did not seek to advance a s 106B application against the 7th to 11th respondents himself. He did seemingly at one point in the litigation, purport to do so. In the husband’s Further Amended Response filed 26 March 2015, the husband set out a series of orders that he sought against the 9th and 10th respondents as directors of F Nominees and against the 8th, 9th, 10th and 11th respondents for repayment of the monies distributed in 2008. However, the final order sought by the husband in the final hearing was simply in the following terms:
A declaration that the assets of the [EE and FF] are not part of the pool available for distribution between the husband and wife.
He did not in the document that set out the orders that he sought at the final hearing maintain an application for any orders against the 7th to 11th respondents.
Senior counsel for the 7th to 11th respondent said the power to make these orders was said to be found in s 114 of the Act and was said to be proper on the basis that they were orders to be made by consent. In addition there is power under Part VIIIAA of the Act and specifically s 90AF(2)(b) of the Act to make the orders sought in s 114 proceedings.
Discussion
Senior counsel for the 7th to 11th respondents submitted the consent orders were a commercial compromise between the 7th to 11th respondents and the wife. The 7th to 11th respondents made no admission one way or the other in relation to the merits of the application under s 106B except to submit that the evidence disclosed that there was a flat conflict in the evidence of the husband between the evidence he gave in January this year compared with what he said in [33] of the affidavit he swore in 2008 (as set out earlier in these reasons).
Senior counsel for the 7th to 11th respondents pointed to the fact that the husband had in 2004 relinquished any control and interest that he had in respect of the EE and the FF and as such, having removed himself as appointor and guardian and having effectively given up any interest or control in the trust, he had, since 2004 no interest that he could assert in relation to the funds in those trusts. Senior counsel for the 7th to 11th respondents submitted that the husband’s actions in 2004 were consistent with the intention evidenced in [33] of Exhibit 53, having taken the action that he did in 2004 on a final and permanent basis.
Senior counsel for the 7th to 11th respondents also submitted as against the husband’s position that the payment now being proffered to the wife does not come from the trust but comes from distributions made from the trust, in circumstances where the husband has not sought to set aside those dispositions.
Senior counsel for the 7th to 11th respondents asks me to accept that the compromise is a proper resolution to bring proceedings between the wife and the 7th to 11th respondents to an end.
Counsel for the wife contends that the compromise reflects the commercial settlement between legally represented parties to these proceedings and takes into account a range of factors, including from the wife’s perspective, an assertion by her that at a time when an order in these proceedings could be anticipated, dispositions were made by the husband that were amenable to be set aside under s 106B.
The wife’s case was based upon an assertion that the court would set aside those dispositions notwithstanding the fact that s 106B(3) of the Act required the court to have regard to the interests of and to make any order proper for the protection of, a bona fide purchaser or other person interested. I note in that context that s 106B(3) does not include the words “for value”.
Counsel for the wife submitted that when reaching the compromise the wife has taken into account the almost irreconcilable and internal inconsistencies in the husband’s sworn evidence, the litigation risks that she faces, as well as the time that has passed since dispositions happened.
Some of what the husband said in submissions was not in evidence before me. During his submissions, the husband emphasised that the promise he made to his sister was to arrange for her family to get into farming properties so that they could work those properties, not so that they could own them. The husband submitted that any sacrifices made by his sister’s family were offset by their capacity as occupants of these properties to make millions a year from which the husband’s family received no dividend. The husband asserted that it was he who sold the MM Valley farms (and there is a contradiction in the written evidence which remained untested in relation to that issue which I am unable to resolve). The husband submitted that it was not credible that he would transfer control over $11.5 million to his sister’s family.
He emphasised that MM Valley farms and its proceeds were the assets in his view of the 3rd to 6th respondents (the children of the marriage of the husband and wife). The husband’s submission was that it was not proper or fair to sanction the agreement to accept $1.8 million and what other benefits might flow from being assigned the judgment debt in relation to the third party company, and for his sister’s family to gain $11.5 million which the husband asserted in today’s values was more like $20 million.
The husband submitted that to make the consent orders would be a travesty of justice in circumstances where his sister was supposed to be holding these assets in trust for the husband’s family and in circumstances where the sister no longer has the capacity to be involved personally in the case. The husband thought that the quantum of the compromise was ridiculous, saying that the cash that should have been offered was $3.6 million and not $1.8 million.
Based on the evidence which is before me, by executing the 2004 deeds the husband intended to do what he said in [33] of his affidavit filed 13 August 2008, namely transfer MM Valley farms to his sister for the benefit of her family. Accordingly, there is substance in the submission that the husband has no ability as the former protector of the EE and FF to say otherwise.
In so far as the husband purports to speak for the children in these proceedings, on the evidence I have, I find that it is proper to make the orders sought by the wife and the 7th to 11th respondents. Those orders represent a reasonable compromise based on the evidence as it has been presented to me. That consent order may be made under s 114 of the Act. It alternatively may be made under s 90AF(2)(b) of the Act and given the consent of the third party all relevant matters under s 90AF(3) and (4) of the Act are satisfied.
I am mindful the husband indicated that he intended to ensure that the children (or I infer possibly the M Trust) bring further action in a state court against the 7th to 11th respondents arising from arguments relating to whether or not F Nominees Pty Ltd was eligible to be appointed as trustee of the two trusts and assertions that the distribution by F Nominees to the 8th to 11th respondents amounted to a fraud on the exercise of power by not undertaking a bona fide consideration of the other claims and interests of the beneficiaries of the trust.
APPLICATION BY THE WIFE AND HUSBAND TO MAKE CONSENT ORDERS PURSUANT TO s 79 OF THE ACT
The wife and the husband both ask that I make an order, by consent, for property settlement.
The parties married in 1967 and separated in late 2007 (with a short period of reconciliation in 2008). They have not divorced. There are four adult children of the marriage.
The husband seriously estimated that at one point the family wealth was $250 million. The husband told the wife at another time he thought their wealth was $440 million. The parties held, through family trusts, a significant land holding and an extensive collection of antiques of all sorts, but the assets were also significantly encumbered. The estimated wealth of the parties was in great part based upon an assumption that approval could be obtained for a subdivision of a large parcel of land upon which the family’s historic homestead stood. Much of the long history of the litigation in this court involved attempts to get the subdivision approved and secured creditors calling in debts and liquidating assets.
There is now comparatively little left. The husband is a bankrupt and his bankruptcy will not be discharged until 2021. The husband’s trustee in bankruptcy has not participated in these proceedings in any way since the husband became a bankrupt in November 2011. The husband’s trustee in bankruptcy indicated to the wife’s lawyers on 17 March 2015 that they did not wish to participate in the final hearing and they have not responded to subsequent correspondence in June 2015 to correspondence from the wife which asked the trustees to consent to orders which the wife proposed.
The wife has net assets including assets in a self-managed superannuation fund of about $3.377 million in total. More than half of those assets arise from the result of orders now made in respect of the claim by the wife against the husband’s sister’s family pursuant to s 106B of the Act (although the final orders were made pursuant to s 114 of the Act).
In the proceedings the parties bring for a property settlement order, the wife had sought an order that would leave all of the net assets which she holds with her. The husband sought an order in the following terms:
Pursuant to s 79 the $1.8 million payable to the wife by the 7th to 11th respondents be paid to the children of the marriage in equal shares within 7 days of the grant of this order.
I had commenced to hear the property proceedings between the husband and wife. I had read the material both relied upon in those proceedings relating to the financial history of the marriage and have a more general knowledge of the history of the parties’ financial affairs having managed this case through all its machinations since 2009.
Both parties now seek an order that the children each receive $225,000 or $250,000 (depending upon my determination of the claim by the 13th respondent against the wife) and for the wife to retain the balance of the net assets. Given my decision set out above, the amount will be $250,000 to each child.
I take into account that the wife is legally represented and I am satisfied that she has been competently advised and seeks that I make these orders by consent. Although the husband is currently not legally represented, he has been represented over the years by various senior counsel and lawyers have filed, on his behalf, the evidence to which I have regard. From my conversation with the husband about the terms of settlement, I am satisfied that he fully understands them and I take into account he is a man of extensive commercial experience.
There is power under s 79(1) of the Act, in property settlement proceedings, for a court to make an order for the benefit of a child, including an adult child, of the marriage upon the application of a party to that marriage.
I am satisfied in all the circumstances of this case, it is appropriate and is otherwise just and equitable, to make the order pursuant to s 79 of the Act sought by the parties and I do so.
I certify that the preceding one hundred and ninety-two (192) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 4 December 2015.
Associate:
Date: 4.12.2015
0
7
3