Chang & Song
[2023] FedCFamC1F 387
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Chang & Song [2023] FedCFamC1F 387
File number(s): SYC 4261 of 2018 Judgment of: CURRAN J Date of judgment: 12 May 2023 Catchwords: FAMILY LAW – Property – Interim Hearing – Trusts – Valuations – Where the husband and his family have interests in complex network of companies and trusts – Where companies and trusts own various businesses and real property – Dispute over valuation of family trust - which assets are to be valued – Issue of valuation of personal property in the form of equitable chose in action – Where properties and businesses sought to be valued are owned and operated by third parties who have not been given the opportunity to be heard – Where wife to bare costs of the valuations at first instance – Orders for valuation of trust assets, disputed entities and properties allowed – Where an application to photocopy subpoena material made in circumstances where application had been determined by Senior Judicial Registrar and no review sought – Orders for photocopy access to subpoena refused Legislation: Family Law Act 1975 (Cth) ss 75, 79
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 r 7.04
Cases cited: Dovgan & Dovgan [2021] FamCA 306
Hall & Hall [2016] 257 CLR 490
Kelly & Kelly (No 2) (1981) 7 Fam LR 762
Kennon & Spry (2008) 238 CLR 366
Marvel & Marvel [2010] 43 Fam LR 348
Wheeler & Loggins [2023] FedCFamC1F 66
Woodcock & Woodcock [2021] FedCFamC1F 88
Division: Division 1 First Instance Number of paragraphs: 67 Date of hearing: 10 May 2023 Place: Sydney Counsel for the Applicant: Mr Henry SC Solicitor for the Applicant: Pearson Emerson Family Lawyers Counsel for the First Respondent: Mr Bunning Solicitor for the First Respondent: Watts Mccray Solicitor for the Second, Third and Fourth Respondents: Ms Todd of Petkovic & Todd ORDERS
SYC 4261 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR CHANG
Applicant
AND: MS SONG
First Respondent
MS Z
Second Respondent
MR F SONG (and another named in the Schedule)
Third Respondent
order made by:
CURRAN J
DATE OF ORDER:
12 MAY 2023
Amended pursuant to Rule 10.13 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021
THE COURT ORDERS THAT:
Valuation of property (owned by the G Family Trust)
1.That within fourteen (14) days the Wife is to nominate three (3) prospective valuers to be appointed as a single expert for the purpose of preparing written valuation reports for the properties (owned by the G Family Trust), being:
(a)H Street, Suburb J NSW;
(b)Y Street, Suburb AA NSW; and
(c)The property owned by CC5 Pty Ltd as trustee for the EE Trust, being the property situated at FF Street, Suburb AA NSW.
2.That within seven (7) days of receipt of the three proposed valuers, the Husband is to select one (1) of the three (3) single expert valuers nominated by the Wife for the purposes of preparing a written valuation report.
3.That within a further seven (7) days the Wife is to prepare and forward to the solicitors for the Husband a draft joint letter of instruction to the valuer.
4.That within five (5) days of receipt of the draft joint letter:
(a)the Husband is to respond to the Wife in relation to the final draft joint letter of instruction;
(b)the finalised joint letter of instruction is to be forwarded to the single expert valuer; and
(c)the single expert valuer is to be instructed to deliver their report by no later than
1520 June 2023.
5.The Wife is to pay the costs of the single expert valuer.
Valuation of further trust assets (owned by G Family Trust)
6.That within fourteen (14) days, the Applicant Husband the Respondent Wife forthwith do all acts and things, provide all financial documents necessary and the wife is to pay all expenses necessary to instruct the Single Expert Ms GG of HH Valuers to value as at:
(a)30 June 2022; and
(b)30 June 2017
the value of the assets held by the G Family Trust and, where the Single Expert considers it necessary, the following entities held by the Trust:
(i)G Investments Pty Ltd;
(ii)G Pty Ltd;
(iii)JJ Pty Ltd;
(iv)CC1 Pty Ltd;
(v)CC2 Pty Ltd;
(vi)CC3 Pty Ltd ATF EE Trust;
(vii)CC4 Pty Ltd;
(viii)CC5 Pty Ltd;
(ix)KK Pty Ltd;
(x)LL Pty Ltd;
(xi)MM Pty Ltd;
(xii)CC7 Pty Ltd; and
(xiii)CC6 Pty Ltd.
7.That the Husband and Wife shall instruct Ms GG to deliver her report no later than 30 June 2023.
8.That the Husband and Wife shall provide Ms GG with a copy of the report prepared by the single expert valuer (in accordance with Order 5 above) as soon as it is received.
9.The Wife is to file and serve an Affidavit by Ms GG annexing her reports referred to above within seven (7) days of the issue of her report.
10.The wife is to serve a copy of these orders on the Trustees of G Family Trust within 7 days of the date of these orders.
11.Leave is granted to the Trustee of the G Family Trust to apply to relist the proceedings to be heard in relation to the form of order or any other application.
12.The wife is to pay the costs of the single expert valuers appointed pursuant to these Orders to value the G Family Trust property and trust assets in the first instance.
NOTATIONS:
A.At the conclusion of submissions the Respondent Wife’s counsel sought the costs of a single expert valuer be paid by the wife at first instance.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Chang & Song has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
CURRAN J:
These reasons for judgment were delivered orally in court and have been corrected from the transcript.
INTRODUCTION
There are substantive property proceedings between the applicant husband, the respondent wife and various other named third parties. This is a complex matter which concerns property, businesses, trusts, shareholdings and real estate.
This Application in a Proceeding has been listed urgently due to a contention that urgent valuation evidence is required, and with the hearing listed three months from now, it required urgent determination. The husband in responding to the Application in a Proceeding also seeks interlocutory relief.
The matter was listed urgently at the request of the wife in circumstances where orders were sought that a single expert be instructed to value the assets held by the G Family Trust. The case of the wife was that the trust and its assets are significant financial resources available to the husband. Given the final hearing of this matter has been allocated for three weeks before Harper J commencing on Monday 21 August 2023 and His Honour was otherwise not available to deal with the Application until mid-July, and given the expected timeframe for the preparation of the report that was sought, the matter was listed before me.
There were a significant number of additional interlocutory orders sought by each of the parties. Fortunately a vast number of those matters in contest were resolved by consent. In addition, further matters that were not part of the competing interlocutory applications were also able to be resolved by consent. Noting the parties were represented by competent and experienced counsel, and following submissions made in support of the consent terms, the orders as sought by the parties were made.
There were two issues left for determination at the urgent interim hearing and they were:
(a)Whether the husband should be permitted to inspect and photocopy documents produced under subpoenaed by Westpac Banking Corporation for the purposes of the trial (sought by the husband); and
(b)Whether the wife to be permitted to value the assets of G Family Trust (sought by the wife).
The wife relied upon:
(a)Application in a Proceeding filed 2 May 2023;
(b)Affidavit of Ms Song filed 21 April 2023 paragraphs 4-86;
(c)Case outline document marked as Exhibit 1;
(d)Exhibit 2, which was page 28 of the 2018 affidavit of the father where at line item 42 he deposed to "G Family Trust" as a financial resource under the heading "Financial Resources."
(e)Exhibit 3, a single page of the father's 2018 financial statement where at part L under "Financial Resources" he included the entry "G Family Trust Pty Ltd".
The husband relied upon:
(a)Response to Application in a Proceeding filed 5 May 2023;
(b)Affidavit of Mr Chang filed 5 May 2023; and
(c)Outline of case document (interim hearing) which was Exhibit 4.
The second, third and fourth respondent relied upon their Outline of Case Document filed 10 May 2023. They sought the application of the husband to inspect and photocopy documents produced under subpoenaed by Westpac for the purposes of the trial be dismissed.
APPLICATION OF THE HUSBAND REGARDING SUBPOENA TO WESTPAC
Orders were made by a Senior Judicial Registrar on 21 November 2022 in response to three Notices of Objection filed by the first respondent wife on 13 September 2022, Ms NN, a non‑party objector filed 16 September 2022, and filed by the second and third respondents on 27 September 2022.
The Senior Judicial Registrar made an order that the lawyers for each of the parties may inspect and copy, and each of the parties may inspect in the presence of their lawyers but not copy or retain a copy of the documents produced to the court in response to the subpoena issued to the proper officer subpoenas Westpac Banking Corporation on 2 September 2022, being the documents contained in subpoenaed pack S68.
The Senior Judicial Registrar ordered that a sealed copy of those orders be served on the solicitors for the non-party objector, Ms NN.
The issue of the objections was listed for hearing on 11 November 2022. Written submissions were filed by the first respondent on 28 September 2022 and oral submissions were made by her counsel at the hearing of the matter. Written submissions were filed by the second and third respondents on 28 September 2022 and oral submissions were made by their counsel at the hearing. Written submissions were filed for the non-party objector Ms NN on 10 November 2022 and oral submissions were made by her counsel at the hearing. Written submissions were filed for the applicant on 10 November 2022 and oral submissions were made by his counsel at the hearing. A tender bundle was filed by the applicant.
The Senior Judicial Registrar gave oral reasons recorded on Auscript but summarised those reasons by way of notations to his orders. These reasons were summarised as follows:
(i)The documents sought by the Westpac subpoena have met the not high bar of apparent relevance to issues between the parties in the proceedings and will likely bear upon the cross examination or credit of witnesses expected to be called in the proceedings;
(ii)The non-party objector [Ms NN] is not currently a party but she has provided an affidavit that was filed by the second third and fourth respondent's on 8 December 2021 that the documents produced in response to the Westpac subpoena will materially assist the applicant to examine the credit or to cross‑examine [Ms NN];
(iii)The relationship between [Ms NN] and the respondents, and the dealings between [Ms NN] and persons or entities relevant to the proceedings, are relevant to issues in dispute between the parties in these proceedings and to the credit of the respondent's and [Ms NN]. The interests of the parties and of justice in these proceedings must prevail over the competing interests of [Ms NN's] privacy, to the extent that she is properly seen to be a stranger to these proceedings. Order 2 herein provide a means of limiting access to the information produced to the court in response to the Westpac subpoena the persons concerned and entities not currently parties to the proceedings, including [Ms NN];
(iv)the issue of the Westpac subpoena was not an abuse of process, and is not fishing, where the subpoena seeks document relevant to specific transactions at issue in the proceedings.
The husband set out the orders made by the Senior Judicial Registrar in his evidence.[1] No party referred in evidence or made reference in submissions to the notations that had been made by Senior Judicial Registrar at the time of making the orders. I am not privy to the written submissions or the oral submissions that were made by the parties. What is, however, clear from notation III was that the order limiting access to the information produced was made after notices of objection to the subpoena had been filed, listed for hearing and determined after oral, and later, written submissions were made.
[1] Husband’s affidavit filed 5 May 2023, paragraphs 211- 212.
The husband gave evidence that "my Response to Application in a Proceeding in this affidavit will be served on [Ms NN] in advance of this hearing on 10 May 2023 to provide her with an opportunity to be heard in relation to this procedural matter”.[2] The husband in support of his Application instructed that notice of the Application had been given to Ms NN "by email" but no evidence in relation to this when this occurred, to which email address and whether it included service on the lawyers who had appeared at the objection hearing.
[2] Husband’s affidavit filed 5 May 2023 paragraph 216.
The substance of the reason given as to why the husband needed photocopy access to the documents, contrary to the restrictions placed on the access to those documents by the Senior Judicial Registrar was in effect for his convenience in preparation for trial in not having to inspect the documents in the presence of his solicitor.
It was contended by senior counsel for the husband that rather than this application being in effect, as characterised by the wife's counsel, a review of the decision of the Senior Judicial Registrar out of time, that it was a further application. During oral submissions I canvassed with senior counsel for the husband as to whether further restrictions could be placed on any access by his client, such as restraints on copying and obligations to destroy the documents at the conclusion of the proceedings.
At the time of this exchange I was unaware of the notations made by the Senior Judicial Registrar and was unaware that there had been written and oral submissions specifically in relation to, it appears, limiting the access to the Westpac subpoena.
A determination was made after hearing and after the Senior Judicial Registrar had the benefit of written submissions and oral submissions from all parties. Orders and detailed notations, after having the benefit of the evidence and submissions, were made by him. Those orders were not subject to review by any party.
While I may have some sympathy in relation the practicalities advanced, the convenience of the husband and practicality in preparation for trial is not a matter that persuades me to vary the orders made by the Senior Judicial Registrar. There is no other basis upon which I consider I should vary the orders made.
The application is dismissed.
APPLICATION OF THE WIFE TO VALUE THE ASSETS OF THE G FAMILY TRUST
The application of the wife is for a single expert to be appointed to value the assets of G Family Trust.
The application that was ultimately pressed was set out at paragraphs 3 to 6, 8; and 10-12 of the filed Application. In effect the Application sought a single expert valuer prepare written valuation report of three real properties owned by the trust, and that the single expert, Ms GG of HH Valuers, value the further trust assets as at 30 June 2022 and 30 June 2017 including, where the single expert considers it necessary, and the thirteen named entities held by the trust.
At the commencement of the hearing, counsel for the wife sought the costs of the single expert valuer to be shared between the parties (rather than paid by the husband as initially sought at order 7 of the Application in a Proceeding filed). At the conclusion of submissions counsel for the wife sought the costs of a single expert valuer be paid by the wife, at first instance.
It was submitted by the wife that it is a fundamental step in the determination of any application under s 79 of the Family Law Act 1975 (Cth) (“the Act”) that there be a full valuation of the assets, liabilities, superannuation, and financial resources of the parties to the marriage.
In this case it is not in contest that the husband is a discretionary beneficiary under the family trust and that the family trust is a financial resource of the husband. It is not the wife's case that the relevant trust assets are assets of the husband.
The husband raised by letter dated 7 November 2022 that the wife was invited to particularise in points of claim or plead any claim that the trust assets are capable of alteration under s 79 of the Act.[3] It is the husband's evidence that the wife had not responded. It is not however, as I apprehend it, the wife's case that the interest of the husband is more than a financial resource, or that there is any application to deal with the trust assets.
[3] Exhibit MC9, page 428
The fact that the husband himself identified the G Family Trust as a financial resource is apparent from Exhibits 2 and 3.
Senior counsel for the husband accepted, and it was not in contest, that the husband is a discretionary object of the G Family Trust and as such, he has an equitable chose in action being the right to compel the trustees to consider whether or not to make a distribution to him and a right to the proper administration of the trust.
The contentions relied upon by the wife in support of the application for the valuation can be summarised as follows:
(a)The husband is the nominated general beneficiary of the trust;
(b)The husband received benefits from the trust by way of past cash distributions to a company which was his alter ego - G Australia Pty Ltd. It was contended that the husband was the sole shareholder and director of that company until he divested himself of the company, whereupon the owner changed the name of the company to LL Investments Pty Ltd ("LL Investments") and it became part of the G Family Trust "group of assets";
(c)The husband's legal fees for this litigation have been paid with funds sourced from the trust (the costs notice discloses the husband's costs to date are just over $1.4 million);
(d)That between 21 May 2018 and 4 February 2022 funds were paid to different entities for the benefit of the husband;[4]
(e)The husband caused the trust to advance to the parties during the course of their relationship $1 million to assist with the purchase of the former matrimonial home at Suburb C;[5]
(f)The husband occupies a property owned by the trust for which he contends he pays rent of $1,000 per week, but which the wife asserts there has been no disclosure of payments being made, accordingly this is arguably a distribution or benefit under the trust; and
(g)The husband is an employee of an entity owned by the trust.
[4] Wife’s Affidavit filed 21 April 2023, paragraph 76.
[5] Wife’s Affidavit filed 21 April 2023, paragraphs 66-72.
RESPONSE OF THE HUSBAND TO THE VALUATION OF THE G FAMILY TRUST
The husband, at paragraph 171 and following, set out his reasons for opposing the application to value each of the entities, trusts, and properties. His reasons can be summarised as follows:
(a)The husband holds no legal interest in the identified real properties;
(b)He holds no legal interest and is not an office holder in any of the entities;
(c)He is not the appointer nor trustee of the trust;[6]
(d)The assets which comprise three real properties and 13 companies are in the ownership and control of third parties,[7] and that the third parties have not been put on notice of the application nor afforded the opportunity to be heard;[8]
(e)He has never received a beneficial distribution from this trust;[9] and
(f)He does not have possession, custody, or control the financial documents of any entity or trust or property sought to be valued.
[6] Husband's Affidavit filed 5 May 2023, paragraph 171.4.
[7] Husband's Affidavit filed 5 May 2023, paragraph 169.
[8]Oral submission by senior counsel for the husband, noting also no evidence from the wife.
[9] Husband's Affidavit filed 5 May 2023, paragraphs 171.5 and 172.3.
The husband further addressed in his evidence the wife's contentions as follows:
(a)While he is one of several classes of beneficiaries of the trust he has never received a distribution as a beneficiary, or otherwise, from this trust;[10]
(b)In submissions his senior counsel properly acknowledged there were three distributions made to his benefit - being the 2008 distribution to LL Pty Ltd which at that time he controlled; the 2009 distribution by the husband's mother who was sole director of the corporate trustee to a company then controlled by the husband and the 2015 distribution to a corporation owned and controlled by the husband;
(c)In relation to legal fees, he entered into a loan agreement on 23 September 2018;[11]
(d)That the property at Y Street, Suburb AA is the property the husband rents "from the trust at a sum of $1000 per week";[12]
(e)That he is employed as an executive manager of CC2 Pty Ltd and copies of his employment contracts dated 16 May 2018 and 30 June 2021 were disclosed to the wife;[13] and
(f)The husband's senior counsel relied upon signed Heads of Agreement dated September 2015 in respect of the $1 million loan to purchase Suburb C,[14] signed by the wife, witnessed by the husband's mother and signed on behalf of CC1 Pty Ltd by the husband's step father, witnessed by the husband.
[10] Husband's Affidavit filed 5 May 2023, paragraphs 172.3 and 171.5.
[11] Husband's Affidavit filed 5 May 2023, paragraphs 172.1 and 172.2.
[12] Husband’s Affidavit filed 5 May 2023, paragraph 172.4.
[13] Husband’s Affidavit filed 5 May 2023, paragraph 172.5.
[14] Wife’s Affidavit filed 21 April 2023, pages 194-195.
The three distributions acknowledged by the husband comprise entirely the evidence of the distributions from the trust to the husband as a beneficiary. His case is that the subsequent distributions identified by the wife were not distributions to the husband nor to a company he controlled as he ceased to be a director of LL Investments as at January 2016.
He further submitted that the legal fees are properly, and unsurprisingly, a loan arrangement with people who are prepared to assist the husband with the litigation – but equally are not distributions under the trust.
SHOULD THE TRUST BE VALUED?
It was submitted that the valuations sought are to provide a value of the assets of the trust in order to assess what the financial resource is, that the wife was seeking to value, that is the chose in action and that without a valuation of the assets of the trust, the court will not be apprised of the evidence.
It may not be necessary to value a trust where a parties' interest in the trust is a financial resource.[15] It was however submitted that the valuation evidence would assist the court in assessing the financial resources of the husband, as it is required to do. If there is evidence available of the value of a financial resource, that the wife seeks to put to the court, that may assist the court in the final determination, then there is merit in permitting that to occur. However, as observed by Harper J in Dovgan & Dovgan [2021] FamCA 306 ("Dovgan") at paragraph 300 "The difficulty of valuing a discretionary object's equitable chose in action is well known." And it is this difficulty that is the knub of the issue in determining this application.
[15] Shaw& Shaw (1989) FLC 92-030 at p.31.
The husband contended that the value of the trust asset, at best, bears the "most peripheral relationship to the value of the chose in action". He contends this by reference to the only evidence being the three distributions made to the companies of the husband. Senior counsel did however, accept that "valuation of the chose in action is in play" but the value of the assets of the trust is of peripheral relevance, if any relevance.
Senior counsel for the husband also raises that Exhibit 2 and 3 from 2018 were known some long time ago and that the delay in now seeking to value is relevant.
The wife submitted that with the factual contest as to the distributions made, what happened with the transfer of LL Investments and the 2017 signed loan agreement, that there is no other way to put the evidence of the value before the court. Indeed to refuse the application would "rob the court" of evidence of the financial resource that is the value of the trust.
The question of the trustee's co-operation with any valuation
The husband's senior counsel correctly observed that there was no evidence about the director's attitude to the application and that they had not been put on notice of the application.
The wife's case was that the court should find that in the context of this matter that the trust would likely co-operate with the exercise of the valuation. This was contended as the directors of the trustee company who have control of the trust are the husband's mother and step-father. This was described by the wife's counsel as the "nexus of control." The trust, the wife alleges has paid significant legal costs for the husband, and the husband's mother has signed the costs agreement with the husband's lawyers. The trustees have co-operated and they have assisted the husband with the litigation, and she contends it could be assumed they will continue to assist the husband.
I am not as optimistic as the wife's counsel in the respect of the likelihood of co-operation. It was put to her counsel that the directors may not be inclined to assist and co-operate, and as they had not been joined, there was no certainty in relation the production of relevant material, or for example, even obtaining their consent for the valuer's attendance at the real properties.
The wife's position was that the trust had not been joined and this was a potentially unnecessary additional expense at this time. Importantly, she contended that the valuations proposed could occur even without the co-operation, on the basis of material already available. It was said that "many of the documents necessary to value the trust are already produced under subpoena" and that if necessary, further subpoena would address that issue.
Valuation of Financial Resources
There is no doubt that "a nominated beneficiary of a discretionary trust, who has no control over the trustee but who has a reasonable expectation that the trustee's discretion will be exercised in his or her favour, has a financial resource to the extent of that expectation" as stated by the High Court in Hall & Hall [2016] 257 CLR 490 ("Hall"). Their honours at paragraph 55 said:
"whether a potential source of financial support amounts to a financial resource of a party turns in most cases on a factual inquiry as to whether or not support from that source could reasonably be expected to be forthcoming were the party to call on it."
But, should a valuation of the assets of the trust be permitted, for the court to be apprised of evidence of the alleged financial resource of the husband?
The reference to "financial resources" in the context of s 75(2)(b) has long been interpreted by the Family Court to refer to "a source of financial support which a party can reasonably expect will be made available to him or her to supply a financial need or deficiency"
As articulated in paragraph 19 of the decision referred to in Hall:
"Consistent with authority, the "financial resources of each of the parties" are not confined to the present legal entitlements of the parties and extend to include "a source of financial support which a party can reasonably expect will be available to him or her to supply a financial need or deficiency"
In the decision of Dovgan, Harper J undertakes a detailed analysis of the relevant issues and concludes:
"In this way, it seems to me that there is sufficient reason given in the authorities discussed to conclude both that it cannot be said the discretionary object's equitable chose in action can have no value and that the value of the trust assets must bear, if only indirectly, on the value of that chose in action. To that extent, such equitable property is given substance and consequence by the value of the assets of the trust. The proposition can be tested by observing that if all the trust assets were properly and legally bestowed on one discretionary object, it is difficult to see that the equitable chose in action of the remaining discretionary objects could thereafter have any value. But until that happened, the chose in action would likely have value."[16]
[16] Dovgan & Dovgan [2021] FamCA 306 at paragraph 301.
In this case there is significant factual dispute about the existence, amount and nature of distributions allegedly made under the trust to the husband. In his evidence he says there have been none directly. His senior counsel properly acknowledged that there have been at least some distributions in 2008, 2009 and 2015.
The wife contends the evidence of distributions to the husband or entities he controls is much more substantial, in addition to the three distributions acknowledged, further alleged distributions from 2015 until 2018 ranging from $17,367.77 to $401,230 to LL Pty Ltd, being an entity that the wife asserts was solely owned and controlled by the husband, and to the distribution of $1,000,000 to purchase Suburb C property in 2015. Factually the husband contends, and it appears supported by the signed loan agreement dated 2015, that this was a loan with a different trust. The wife contends that document was created in 2017. These factual disputes are not something that I can determine or make findings on this application, where the evidence is untested and I must be cautious in the face of competing and untested evidence.
In the matter of Wheeler & Loggins [2023] FedCFamC1F 66 ("Wheeler & Loggins") His Honour Harper J decided against ordering the valuation of a third-party trust in circumstances where the trust could be argued to be a financial resource of the husband. The evidence against ordering a valuation of the third-party trust included; that the husband had not been subject of any distributions of the trust, and that the assets of the trust could not be said to be property "of" the husband. His Honour Harper J found that there was no direct basis to "establish objectively that the husband has a reasonable expectation that the relevant trustee's discretion will be exercised in his favour or would be forthcoming if he called for it."[17] It should also be noted that His Honour's refusal to order a valuation of a third party trust in this matter was qualified, His Honour concluding that:
"After the agreed valuation process is undertaken, if the single expert identifies the need to engage in valuation of further third-party assets, it is possible that the question may need to be revisited, and the result of this application should not be taken as precluding a further application in the event information of that nature comes to light."[18][44]
[17] Wheeler& Loggins [2023] FedCFamC1F 66 at paragraph 37.
[18] Wheeler & Loggins [2023] FedCFamC1F 66 at paragraph 44.
In my view, the present case can be distinguished from Wheeler & Loggins for two reasons.
Firstly, it is the wife's case that the husband has received distributions from the trust in the past, although this is disputed by the husband. There is evidence to suggest, and it was conceded by senior counsel for the husband, that the trust is a financial resource of the husband. The full court in Kelly & Kelly (No 2) (1981) 7 Fam LR 762, concluded there was ample material before the first instance judge to conclude that a third party trust was a financial resource of the husband, that material including the first instance judge's findings that the husband had obtained "indirect personal financial advantage" from the trust which included the payment of his insurance premiums and spousal maintenance from the funds of the trust.[19] Setting aside the contested issue of distributions, there is evidence set out above, such as the husband's employment through the trust, renting a home owned by the trust, and obtaining loans from the trust, that indicate that the husband has obtained "indirect personal financial advantage" through the trust.
[19] Kelly & Kelly (No 2) (1981) 7 Fam LR 762 at paragraph 52.
Secondly, the final hearing for this matter is just over three months away and the wife's evidence is that a valuation of the trust will take the single expert four to five weeks to complete. There will be no further opportunity for such a report to be ordered if necessary.
As I say above it is common ground that the husband is the beneficiary of the trust and that it is a financial resource of the husband. In deciding whether it is just and equitable to make orders adjusting the property of the parties includes a consideration of financial resources within the meaning of s75(2)(b) of the Act. On what basis that interest could be valued and is it required to be valued? That is can the value of the husband's chose in action be determined by the proposed valuation, or is a valuation of the underlying assets of the trust necessary?
Valuation of a chose in action
I was not taken to any authority where a chose in action arising from the future potential distributions of the husband has been ascribed a value. However I note the remarks of French CJ in Kennon & Spry (2008) 238 CLR 366 that the valuation of the right to due consideration may be within the remit of the "actuarial arts."[20] Whether or not a value is even possible to be ascribed to the chose in action is simply something I do not have any evidence before me about. I accept that, even if a value can be ascribed, it cannot be transferred. Indeed the valuation may be limited to an opinion in relation to the underlying assets of the trust and may not result in anything more. However, despite that uncertainty and my reservations I cannot find that no value could be attributed to the husband's interests under the G Family Trust.
[20] Kennon & Spry (2008) 238 CLR 366 at paragraph 78.
Interlocutory orders
This application was a contested interlocutory application. The authorities, such as Marvel & Marvel [2010] 43 Fam LR 348, are clear that I must be cautious in making any findings of fact on matters of contest at this interlocutory stage. An example of such contest in this matter between the parties as to whether the husband has received any distributions, as he deposed, he's received distributions to an entity he controlled in 2008, 2009 and 2015 and nothing more, or significant and ongoing distributions and benefits from the trust as alleged by the wife. While I was not taken to it, the decision of Wilson J in Woodcock & Woodcock [2021] FedCFamC1F 88, comprehensively addresses the balancing need for caution in interlocutory proceedings and the impact of refusing such an application to determine the value of potential interests held by a party to proceedings.
Service of the Trustees
The trustees were not served and not parties to the Application. The trustees are not parties to the proceedings. As referred to above the trustees may not assist with the valuation. This matter was subject of some discussion with counsel for the wife who had contemplated the issue of joinder and of co-operation. The wife's case is that the valuation could be achieved through the material provided and possible further subpoena, or through for example "drive by" valuations, and that co-operation is in effect not essential If this transpires not to be so, the issues lie squarely with the wife, as the looming hearing date is known to all and indeed cited as a reason to list this application with urgency.
Senior counsel for the husband contended that the failure to give notice to the trustees of the application was fatal to the application. He referred to the decision of Harper J in Wheeler & Loggins from paragraphs 39 to 41. His Honour identified practical considerations which militated against ordering the valuation of the disputed items, including co-operation of third party owners, provision of sensitive information, accessing parcels of land and the cost of the valuations.
These are practical considerations and, in my view, no one of them is fatal, but should be taken into account. I am satisfied that it is appropriate to give notice to the trustees of the orders with liberty to apply. If an application is made, as in the decision of Woodcock, consideration can be given to matters raised including the practicalities. Importantly, the wife's case was that the evidence could be obtained on the basis of the material already available, if necessary and that the confidentiality of the information and the expert evidence is governed by the relevant non-disclosure obligations of the parties to these proceedings.
CONCLUSION
Whether or not the value of the chose in action can be ascertained by a valuation of the trust assets as proposed is not clear to me, and may be unlikely. In any event, it must be the case of the wife that either it can, or that the value of the assets of the trust will assist the Court in the determination of what are the financial resources of the husband and that is a relevant factor to be taken into account.
Ultimately it is a matter for the wife as to how she will run her case. It is her case that the husband's chose in action has significance to the overall determination of the matter and is a significant financial resource of the husband. She should not, at an interlocutory stage, be prevented from obtaining such evidence.
The wife seeks to value the trust assets in order to put evidence before the court as to the value of the chose in action, or the value of the underlying trust assets, in other words, the value of any potential future financial resource of the husband. This may be relevant in the determination of the matter.
The lack of notice to the trustee can be addressed by the order proposed by the wife in oral submissions, that a copy of these orders be sent to the trustee and that they have liberty to apply to have the matter re-listed to hear from them in relation to the form of order
There is no prejudice to the husband in the wife undertaking the valuation. First, she is to meet the costs at the first instance as conceded, and if it is a futile exercise, she will bear the burden of her costs and that of the expert. If it is an expensive frolic, there may be further costs consequences for her.
I have considered the relevant rules in relation to a single expert at rule 7.04 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 and on balance for the reasons set out above, make the orders as indicated.
I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Ex Tempore Reasons for Judgment of the Honourable Justice Curran.
Associate:
Dated: 17 May 2023
SCHEDULE OF PARTIES
SYC 4261 of 2018 Respondents
Fourth Respondent:
E PTY LTD
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