Coley v Danae
[2020] WASCA 13
•31 JANUARY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: COLEY -v- DANAE [2020] WASCA 13
CORAM: QUINLAN CJ
MURPHY JA
MAZZA JA
HEARD: 15 APRIL, 28 AUGUST 2019
DELIVERED : 31 JANUARY 2020
FILE NO/S: CACV 24 of 2018
BETWEEN: MS COLEY
Appellant
AND
MR DANAE
Respondent
Catchwords:
Family law - Property Order - De facto relationship - Whether judge erred in identification of the properties of the parties to the de facto relationship - Whether trust assets the property of a party to the de facto relationship - Identity of trustee
Family law - Property Order - De facto relationship - Superannuation fund - Whether fund the property of a party to the de facto relationship or financial resource
Appeals - Where appellant appeals property settlement order - Property settlement orders executed - Whether approbation and reprobation
Appeals - Retrial ordered - Whether appellant required to provide restitution of sums paid pursuant to judgment set aside - Suspension of restitution order pending determination of retrial
Legislation:
Civil Judgments Enforcement Act 2004 (WA)
Family Court Act 1997 (WA)
Family Law Act 1975 (Cth)
Superannuation Industry (Supervision) Regulations 1994 (Cth)
Trustees Act 1962 (WA)
Result:
Appeal allowed
Order for retrial
Category: B
Representation:
Counsel:
| Appellant | : | Mr M R Berry SC |
| Respondent | : | Mr B W Ashdown & Ms T A Farmer |
Solicitors:
| Appellant | : | O'Sullivan Davies Lawyers |
| Respondent | : | Loukas Law |
Case(s) referred to in decision(s):
Applicant A169 of 2003 v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 8
BHP Steel (JLA) Pty Ltd v Khan [No 2] [2001] NSWCA 269
Brown v Churchill [2006] WASCA 17; (2006) 31 WAR 246
Coley and Danae [2018] FCWA 14
Commonwealth v Verwayen (1990) 170 CLR 394
Easterday v Western Australia [2005] WASCA 105; (2005) 30 WAR 122
Evans v Bartlam [1937] AC 473
Evans v Miller [2011] WASCA 89
G v O [2018] WASCA 211
Gludau v Gludau [No 2] [2013] FamCAFC 181; (2013) 50 Fam LR 470
Hall v Hall [2016] HCA 23; (2016) 257 CLR 490
Heydon v NRMA Ltd [No 2] [2001] NSWCA 445; (2001) 53 NSWLR 600
Hume v Walton [No 2] [2005] NSWCA 458
In the Marriage of Coulter (1989) 96 FLR 375
In the Marriage of Crapp [No 2] (1979) 35 FLR 153
In the Marriage of Goodwin (1990) 101 FLR 386
In the Marriage of Gould (1993) 115 FLR 371
In the Marriage of Harris (1991) 104 FLR 458
In the Marriage of Wunderwald (1992) 106 FLR 138
Karabotsos v Plastex Industries Pty Ltd [1981] VR 675
Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366
Lackovic v Insurance Commission of Western Australia (2006) 31 WAR 460
Lissenden v CAV Bosch Ltd [1940] AC 412
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
Marshall v Metropolitan Redevelopment Authority [2015] WASC 226
Norbis v Norbis (1986) 161 CLR 513
Perrin v Perrin [No 2] [2018] FamCAFC 122
Re Crunden and Meux's Contract [1909] 1 Ch 690
Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449
Sterling Realty Ltd v Manning [1964] NZLR 1017
Strahan v Strahan [2009] FamCAFC 166; (2009) 241 FLR 1
Taylor v Federal Commissioner of Taxation (1971) 19 CLR 444
TCN Channel 9 Pty Ltd v Antoniadis [No 2] [1999] NSWCA 104; (1999) 48 NSWLR 381
Table of Contents
Overview
Statutory context
The ABC Family Trust – Grounds 2, 4 and 5
Non-contentious facts and evidence concerning the ABC Family Trust
Who was the trustee of the ABC Family Trust after 2015?
The learned trial judge's conclusion in relation to the ABC Family Trust
Disposition – Ground 2 and Contention 1
Disposition – Grounds 4 and 5
The Kangaroo Superannuation Fund – Grounds 1 and 6
Evidence and Finding in Relation to the Kangaroo Superannuation Fund
Disposition – Grounds 1 and 6
Indirect Contributions to the Danae Family Superannuation Fund – Ground 3
Approbation and Reprobation (Contention 2) and Orders on Appeal (Contention 3)
Approbation and Reprobation (Contention 2)
Restitution (Contention 3)
Suspension of orders for restitution
Conclusion and Orders
JUDGMENT OF THE COURT:
In accordance with s 243 of the Family Court Act 1997 (WA) the names and identifying details of all persons associated with, or concerned in, the proceedings have been changed.
Overview
This is an appeal from the Family Court of Western Australia. As with the proceedings before that court, it has a number of unsatisfactory features.
The appellant[1] and the respondent were de facto partners. Save for a short period of time in 2004, they maintained a relationship between 2003 and 2012.
[1] Who was the applicant in the Family Court proceedings.
The appellant appeals from the final property orders made by the Court in respect of the property of the parties, pursuant to s 205ZG of the Family Court Act 1997 (WA) (the Final Property Orders).[2]
[2] The Family Court Act 1997 (WA), s 205ZG has substantially the same effect as s 79 of the Family Law Act 1975 (Cth) in relation to the division of property between parties to a marriage.
Those orders, dated 2 February 2018, gave effect to the learned trial judge's determination that the overall distribution of the property of the parties should be 47.5% to the appellant and 52.5% to the respondent. The learned trial judge found that the net property of the parties, at the time of the judgment, was $5,736,024.
The appeal, essentially, concerns the manner in which the learned trial judge dealt with certain assets. Those were assets that, while not held in the name of either party, were nevertheless alleged to be 'the property of de facto partners' (within the meaning of s 205ZG(1)) or, alternatively, 'financial resources' within the meaning of s 205ZD(3)(b).[3]
[3] The Family Court Act 1997 (WA) s 205ZD has substantially the same effect as s 75 of the Family Law Act 1975 (Cth).
There are two assets, in particular, that fall to be considered in the appeal:
(a)a superannuation fund valued at $638,911 (the Kangaroo Superannuation Fund or the Fund). The learned trial judge found that the Kangaroo Superannuation Fund was 'property' of the appellant and therefore part of the total 'property' within the meaning of s 205ZG; and
(b)a family trust with net assets valued at $3,948,138 (the ABC Family Trust or the Trust). The learned trial judge found that 50% of the value of the ABC Family Trust (i.e. $1,974,069) was 'property' of the respondent and therefore part of the total 'property' within the meaning of s 205ZG.
The appellant contends, by ground 1, that the Kangaroo Superannuation Fund should not have been included as part of the property of the de facto partners (thereby reducing the pool of 'property' to be altered by $638,911). On the other hand, the appellant contends, by ground 2, that 100% of the value of the ABC Family Trust ought to have been included as property of the respondent (thereby increasing the pool of 'property' to be altered by $1,974,069).
The other grounds of appeal (grounds 3 to 6) are concerned with the exercise of the learned trial judge's discretionary judgment in fixing the overall distribution of the property. Those grounds all allege a failure to take into account materially relevant considerations under s 205ZD(3) of the Family Court Act 1997 (WA).
The respondent, in addition to resisting the grounds of appeal, filed a notice of contention which, inter alia, seeks to rely upon further evidence not adduced at trial. The further evidence includes a Deed of Variation and Rectification of the ABC Family Trust executed by the respondent on 8 November 2016. That Deed was critical to a proper understanding of the control of the Trust. It was not disclosed in the respondent's discovery prior to trial.
Given its relative size, it will not come as a surprise that much of the hearing of the appeal was concerned with the judges' treatment of the ABC Family Trust and the contention that the learned trial judge erred in including only 50% of the value of that trust as the respondent's 'property'.
As will been seen, in all of the circumstances, we are satisfied that the learned trial judge did err in characterising 50% of the value of the ABC Family Trust as 'property' of the respondent for the purposes of s 205ZG. In reality, as the case was presented, the dispute as to the treatment of the Trust as 'property' for the purposes of s 205ZG was an all or nothing proposition: either it was entirely the property of the respondent for those purposes or none of it was.
There was, in truth, no principled basis upon which, in the manner of King Solomon, the ABC Family Trust could be cut in half and 50% of its value characterised as the respondent's 'property'. In closing submissions at trial, the respondent, perhaps for strategic reasons, conceded that 50% of the value of the Trust was his 'property'.[4] The legal basis for that concession, however, was not properly identified and the only basis identified by the learned trial judge (see [65] below) was erroneous.
[4] Trial ts 15 (17 July 2017).
As will also be apparent, much of the responsibility for that error rests squarely with the parties. In this regard, the manner in which the case was presented at trial tended to divert attention from a proper analysis of the true ownership and control of the ABC Family Trust. In addition, as the evidence sought to be adduced by the respondent on appeal revealed (and which the appellant sought to rely upon for the purposes of the appropriate orders if the appeal is allowed), the respondent failed to disclose significant documentation that would have been relevant to the determination of the critical issues in the trial.
Given the lack of focus on critical issues at trial, and the potential relevance of the documents produced by the respondent after the trial, it would be impossible for this Court to substitute its own conclusion as to the 'just and equitable' alteration of the parties' property interests for that of the learned trial judge. In all of the circumstances, regrettably, it is necessary for there to be an order for a retrial, deplorable as that result always is.[5] In this context, the appeal raises a number of issues as to the appropriate orders pending the retrial, given that the orders made by the learned trial judge have already been carried into effect.
[5] Brown v Churchill [2006] WASCA 17; (2006) 31 WAR 246[39] (Pullin JA); G v O [2018] WASCA 211; (2018) 53 WAR 393 [98] (Mitchell, Beech & Pritchard JJA).
To put the issues in the appeal in context, it is necessary to briefly set out the statutory context and the structure of the learned trial judge's reasons.
Statutory context
As noted at the outset, the principal provision for the purposes of the proceedings below was s 205ZG of the Family Court Act 1997 (WA). Section 205ZG relevantly provides:
205ZG Alteration of property interests - FLA s. 79
(1)In proceedings with respect to the property of de facto partners, or either of them, the court may make such order as it considers appropriate altering the interests of the parties in the property, including an order for a settlement of property in substitution for any interest in the property and including an order requiring either or both of the partners to make, for the benefit of either or both of the partners or a child of the de facto relationship, such settlement or transfer of property as the court determines.
(2)An order made under subsection (1) in proceedings with respect to the property of de facto partners, or either of them may, after the death of a partner to the proceedings, be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(3)The court must not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
(4)In considering what order (if any) should be made under this section in proceedings with respect to any property of de facto partners, or either of them, the court must take into account -
(a)the financial contribution made directly or indirectly by or on behalf of a de facto partner to the de facto relationship or a child of the de facto relationship to the acquisition, conservation or improvement of any of the property of the de facto partners, or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the de facto partners or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a de facto partner or a child of the de facto relationship to the acquisition, conservation or improvement of any of the property of the de facto partners or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the de facto partners or either of them; and
(c)the contribution made by a de facto partner to the welfare of the family constituted by the de facto partners and any children of the de facto partners, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either de facto partner; and
(e)the matters referred to in section 205ZD(3) so far as they are relevant; and
(f)any other order made under this Act affecting a de facto partner or a child of the de facto relationship; and
(g)any child support under the Child Support (Assessment) Act that a de facto partner has provided, is to provide, or might be liable to provide in the future, for a child of the de facto relationship.
As is apparent from s 205ZG(4)(e), in determining what order, if any, should be made under s 205ZG the court must have regard to any relevant matters referred to in s 205ZD(3). Those matters, which are also relevant to maintenance orders, include those in s 205ZD(3)(b), which provides:
(3)The matters to be taken into account are:
…
(b)the income, property and financial resources of each of the de facto partners and the physical and mental capacity of each of them for appropriate gainful employment.
As in many cases under s 205ZG (and its counterpart under the Family Law Act 1975 (Cth)), the learned trial judge in the present case approached the application of these provisions by way of a three step methodology. That methodology was entirely appropriate and no criticism is made of the learned trial judge in that regard. The methodology is, of course, ultimately directed to determining what is just and equitable in the circumstances of the particular case.
That methodology, in broad terms, was as follows.
First, her Honour identified what constituted the existing property interests of the parties.[6] That is, her Honour determined what constituted 'the property of de facto partners' within the meaning of s 205ZG(1). The identification of the 'property' for the purposes of the section as a whole was an essential first step, as no adjustment with respect to the 'property' can be made without knowing what that property is.
[6] Coley and Danae [2018] FCWA 14 [112] - [201] (Reasons).
It was in the context of this step that her Honour considered various entities associated with the respondent and members of his family (including his mother and his sister). Those entities included the ABC Family Trust, a trust established by the respondent's mother (Penny Fir) on 23 December 1996. An important feature of the manner in which the case was run below was that the appellant alleged that the various entities associated with the respondent's family (including the ABC Family Trust) were a 'false front' and that all of the entities and their assets were, in truth, owned by the respondent.[7] The learned trial judge rejected that contention.[8]
[7] Reasons [4], [112] - [114]. See generally the discussion of the concepts of 'sham', 'false front' and 'puppet' in In the Marriage of Gould(1993) 115 FLR 371, 382 - 384 (Fogarty J, Nicholson CJ & Finn J agreeing).
[8] Reasons [161].
The second step in the process, once the 'property of the de facto partners' had been identified, was for her Honour to make an assessment of the 'contribution' of each partner to the de facto relationship, including the 'acquisition, conservation or improvement of any of the property of the de facto partners'.[9] The statutory basis for this step was s 205ZG(4)(a) and (b).
[9] Reasons [204] - [282].
This step may be undertaken, in the trial judge's discretion, either on an 'asset by asset' or a 'global' basis.[10] In the present case, the learned trial judge adopted a global approach and concluded that the relative contributions of the parties to the total property was 40% to the appellant and 60% to the respondent.[11]
[10] Norbis v Norbis (1986) 161 CLR 513.
[11] Reasons [281].
The third and final step undertaken by the learned trial judge was to 'adjust' the division or alteration of property interests by reference to matters other than the parties' contributions. Those matters include the relevant matters referred to in s 205ZD(3), including the 'financial resources' of each of the parties.[12]
[12] Reasons [283] - [301].
Having regard to those matters, the learned trial judge considered that an adjustment in favour of the appellant of 7.5% was appropriate,[13] thus producing the overall distribution of the property of the parties of 47.5% to the appellant and 52.5% to the respondent.
[13] Reasons [302].
It will be apparent from this brief overview of this methodology that the conclusions reached by the court at each step of the process will have significant effects upon the assessment of the subsequent steps.
For example, if a certain asset is not characterised as 'property' for the purposes of s 205ZG(1) (because, the relevant party does not exercise relevant control over the asset[14]), the asset may, nevertheless, constitute a 'financial resource' from which a party may be expected to derive benefit in future. As the present case demonstrates, issues of this kind may be particularly relevant in relation to discretionary trusts for which a party is a nominated beneficiary.
[14] See generally, [80] - [81] below.
We will turn to the specific issues in that regard later. For present purposes, it suffices to note that whether or not a particular asset is identified as 'property' for the purposes of s 205ZG(1) may have an impact upon whether it will later be regarded as a 'financial resource'.
Similarly, whether a particular asset is included within the 'property' of the parties may have a significant impact upon the assessment of the contribution made by each party to the property as a whole. This is particularly so where, as in the present case, the court assesses the parties' contributions on a global basis. So, for example, in the present case, if the entire value of the assets of the ABC Family Trust was characterised as the respondent's 'property', logically, the greater would be the respondent's percentage 'contribution' to the property as a whole (albeit that there may not be a linear relationship between the two).
With this brief overview, we turn to the grounds of appeal. We commence, first, with the grounds concerning the ABC Family Trust (grounds 2, 4 and 5), that being the matter of most significance in the appeal.
The ABC Family Trust – Grounds 2, 4 and 5
Grounds 2, 4 and 5 provide:
Appeal ground 2
The learned trial judge erred in law and fact by concluding that the respondent's interest in the [ABC] Family Trust should be quantified at 50% of its value, namely $1,974,069, at reasons [200] line item 117 (and see line items 87 – 105), instead of 100% of its value, namely $3,948,138, and thereby materially undervalued the respondent's property available for alteration.
…
Appeal Ground 4
The learned trial judge erred in law by failing to take into account a materially relevant consideration in assessing the s 205ZD(3) adjustment factors at reasons [283] – [302], namely the [ABC] Family Trust as a financial resource of the respondent or a factor which the justice of the case required to be taken into account (in the event appeal ground 2 is unsuccessful).
Appeal Ground 5
The learned trial judge erred in law by failing to take into account a materially relevant consideration in assessing the s 205ZD(3) adjustment factors at reasons [283] - [302], namely the indirect contributions of the appellant to the [ABC] Family Trust (in the event that appeal ground 2 is unsuccessful).
As can be seen, grounds 4 and 5 are in the alternative to ground 2. That is, the appellant contends that, in the event that the learned trial judge did not err in characterising 50% of the value of the ABC Family Trust as property of the respondent, the existence of the Trust ought nevertheless to have affected the 'adjustment' of the property interests (i.e. the percentage contributions determined as part of step two above and the percentage adjustment determined as part of step three above).
Non-contentious facts and evidence concerning the ABC Family Trust
Evidence in relation to the ABC Family Trust was given by Mrs Fir and the respondent.
Mrs Fir died on 20 November 2015, and her evidence was in the form of an amended affidavit previously sworn on 24 September 2015[15] and affirmed on commission on 9 October 2015.[16]
[15] GAB 1 - 65.
[16] GAB 360 - 377.
The respondent gave evidence by affidavit and was cross-examined.
A number of documents relating to the ABC Family Trust were also tendered in evidence including, but not limited to, the ABC Family Trust Deed dated 23 December 1996 (the 1996 Deed),[17] ABC Family Trust amending Deed dated 21 December 2004 (the 2004 Deed)[18] and Mrs Fir's last will, dated 14 October 2015.[19]
[17] GAB 13 - 42.
[18] GAB 43 - 49.
[19] GAB 287 - 298 (Exhibit 7).
The following matters concerning the ABC Family Trust, drawn from the learned trial judge's reasons, are uncontroversial.
The ABC Family Trust was established on 23 December 1996 by the 1996 Deed. Under the 1996 Deed, Mrs Fir and the respondent were appointed as joint trustees. In addition, Mrs Fir was the appointor and guardian of the Trust.
The initial assets of the ABC Family Trust were shares and investments held by Mrs Fir, worth approximately $460,000, that Mrs Fir had transferred to the Trust.[20] In 2006, Mrs Fir transferred $482,577, comprising her shareholding and cash, from the ABC Family Trust to the Danae Superannuation Fund, of which Mrs Fir was then a joint trustee with the respondent.[21] At the time of trial, a significant asset of the ABC Family Trust consisted of shares in another company, Antwerp Holdings Pty Ltd (Antwerp). Antwerp was the holder of assets derived from the income from the respondent's landscaping business.[22] The value of the Trust's interest in Antwerp was found by the learned trial judge to be $2,789,000.[23]
[20] Reasons [40].
[21] Reasons [65], [66] and [122].
[22] Reasons [117].
[23] Reasons [194].
The Primary Beneficiaries of the Trust (as defined) were the respondent and his sister, Ms Danae (sometimes referred to as 'Melissa' in the evidence). Mrs Fir was a residuary beneficiary. The beneficiaries also included the children and remoter issue of the Primary Beneficiaries.[24] While each of these persons was defined in the 1996 Deed as a 'beneficiary', the ABC Family Trust is nevertheless a discretionary trust. None of the defined 'beneficiaries' have any vested beneficial interest in the assets owned by the Trust; they are, rather, members of the class of objects of the powers of the trustee under cl 6 of the 1996 Deed.[25] There was no finding or suggestion that the appellant herself was a beneficiary under the ABC Family Trust.
[24] Reasons [39]; GAB 13 - 42. The evidence revealed that there were at least two additional living beneficiaries within this class: Ms Danae's son and her daughter (Trial ts 39 (13 July 2017)).
[25] See Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366 [125] (Gummow & Hayne JJ) (Kennon v Spry). The respondent's submissions to the contrary, based upon Taylor v Federal Commissioner of Taxation (1971) 19 CLR 444 (Taylor) must be rejected. The trust considered in Taylor concerned a specific beneficiary who, upon attaining the age of 21 years, would become absolutely entitled to the accumulated and future income of the trust estate. There is no comparable interest in any of the 'beneficiaries' of the ABC Family Trust.
On 21 December 2004, the ABC Family Trust was varied by the 2004 Deed. The 2004 Deed amended the definition of the appointor and the guardian of the Trust, so as to appoint Mrs Fir and the respondent as joint appointors and guardians during their lifetimes. Upon the death or legal incapacity of either Mrs Fir or the respondent, Ms Danae was to act jointly with the surviving appointor.[26]
[26] GAB 42 - 49; Reasons [56].
As noted above, Mrs Fir died on 20 November 2015. In accordance with both the definition of appointor in the 2004 Deed and consistently with Mrs Fir's last will, upon her death both the respondent and Ms Danae became joint appointors of the ABC Family Trust. The learned trial judge made findings to that effect.[27]
[27] Reasons [102], [243].
After that time, of course, both the respondent and Ms Danae remained the Primary Beneficiaries of the ABC Family Trust. As beneficiary of a discretionary trust, however, the assets of the Trust would not, for that reason alone, be regarded as the respondent's property.[28] A finding that the assets of the Trust were wholly or partly the property of the respondent would require, at the very least, a consideration of whether the respondent was the sole trustee of the Trust and whether, under the Trust instrument, the respondent was a beneficiary to whom the trustee could appoint the entirety of the Trust assets (for the reasons set out below).
[28] Although the expectation that the trustee's discretion will be exercised in his favour may well amount to a 'financial resource' (see Hall v Hall [2016] HCA 23; (2016) 257 CLR 490 [54] (French CJ, Gageler, Keane & Nettle JJ).
Unfortunately, it is at this point that the analysis in the proceedings below broke down.
Who was the trustee of the ABC Family Trust after 2015?
The only reference to the trusteeship of the ABC Family Trust after Mrs Fir's death made by the learned trial judge appears at Reasons, [243]. In that paragraph, her Honour records that on 20 November 2015, Mrs Fir died and that the respondent became 'the joint appointor and sole trustee of the [ABC Family Trust]'.[29]
[29] Reasons [243].
It is not clear from the Reasons as a whole, however, whether her Honour was, in this passage, referring merely to the historical position (as at Mrs Fir's death) or was making a finding as to the identity of the trustee as at the date of the trial.
Certainly, the conclusion that the respondent became the sole trustee upon Mrs Fir's death is consistent with the 1996 Deed itself appointing Mrs Fir and the respondent as joint trustees, and with the general rule that on the death of a joint trustee, the office of trustee remains in the surviving trustee and does not devolve upon the trustee's legal representative.[30] It was also reflected in certain contemporary documentation.[31]
[30] See Trustees Act 1962 (WA) s 45; Re Crunden and Meux's Contract [1909] 1 Ch 690, 695 (Parker J); Heydon JD and Leeming MJ, Jacob's Law of Trusts in Australia (8th ed) [15-75]; Tucker L, Le Poidevin N and Brightwell J, Lewin on Trusts (19th ed) [13-001].
[31] See respondent's affidavit affirmed 1 June 2016, Attachment 'D' (GAB 131).
Other evidence given before the learned trial judge was, however, inconsistent with the proposition that the respondent was, by the time of trial, the sole trustee the ABC Family Trust.
In that regard, the respondent's supplementary affidavit sworn on 2 July 2017 deposed as follows:[32]
[ABC] Family Trust ('[ABC Trust]')
8.By deed of variation on 21 December 2004 ('the Deed'), [Penny] made me a joint appointor and Guardian of the [ABC Trust], and in the event of either of our incapacity or death, my sister [Melissa] was to be appointed in our place.
9.After [Penny]'s passing and consistent with the Deed, [Melissa] was appointed joint appointor of the [ABC Trust]. Annexed hereto and marked with the letter 'C' is a copy of the Deed of Variation.
10.[Melissa] is also joint Trustee of the [ABC Trust] pursuant to her power as the executrix of [Penny]'s estate.
11.[Melissa] and I manage the [ABC Trust] jointly. We are both the primary beneficiaries.
12.[Melissa] has indicated that she would like the trust to assist her purchase a house sometime in the future. I support [Melissa]'s request and intend to facilitate this purchase.
[32] GAB 215.
This evidence was the subject of oral evidence by the respondent at trial. In cross-examination, the respondent was asked:[33]
Well, because what you say - what he said to the ATO in that document - and I just confirm you were a joint, and remain a joint, trustee of the [ABC] Family Trust?---Yes.
[33] Trial ts 52 (11 July 2017).
The following day the issue was again taken up in cross-examination:[34]
What is the current position in relation to the [ABC] Family Trust? Who is the trustee of the trust? Are you and your sister the trustees of the trust, or - - -?---I would imagine, so, yes. If that's what's in my affidavit that would be correct.
Well, the current position is set out in your up-to-date affidavit, isn't it? That's the one that her Honour gave you leave to file. And pursuant to your mother's will, [Melissa] was appointed the joint - she was appointed a joint appointor?---Sounds right, yes.
And she is a joint trustee pursuant to her power as the executrix of [Penny]'s estate?---Correct.
And you say that you now manage the [ABC] - the trust jointly?---Correct.
[34] Trial ts 52 (12 July 2017).
On the face of it, this evidence of the respondent was something of a non sequitur. As the appellant submitted on appeal, the legal basis suggested for Ms Danae being a joint trustee was misconceived. That is, the fact that Ms Danae was the executrix of Mrs Fir's estate did not, of itself, have the consequence that she became joint trustee of the ABC Family Trust.[35]
[35] See [47] and footnote 29 above.
Adding to the confusion was the fact that the parties adduced, at trial, an affidavit sworn 30 June 2017 of a single expert witness, Sally Denver, providing a valuation report of the interests held by, inter alia, the respondent and the ABC Family Trust in a number of other entities, including Antwerp. The report did not provide a valuation of the assets of the ABC Family Trust itself, or the respondents 'interest' in it.[36]
[36] GAB 223.
In one of the appendices to that report, which dealt with the valuation of Antwerp, Ms Denver stated, in relation to 98 of the 100 shares in Antwerp:[37]
The Husband asserts that these shares were held non-beneficially by the late Ms [Fir], as trustee for the [ABC] Family Trust. The Husband and his sister, [Melissa Danae], are now the trustees of the [ABC] Family Trust. I am instructed, per a letter from Loukas Law dated 14 June 2017, that the [ABC] Family Trust continues to operate. I am not instructed to prepare a valuation of the [ABC] Family Trust. (emphasis added)
[37] GAB 233.
The basis for Ms Denver's evidence that the respondent and Ms Danae were both trustees of the ABC Family Trust was not revealed in the report. Nor, however, does it appear to have been challenged or otherwise addressed in the evidence.[38]
[38] Ms Denver was initially proposed to be called as a witness. Ultimately her evidence was accepted as unchallenged and she was not called (Trial ts 2 - 3 (17 July 2017)).
The trusteeship of the ABC Family Trust thereafter remained unresolved in the evidence before the learned trial judge. Nor, save for the ambiguous reference referred to at [45] above, did her Honour expressly deal with the identification of the trustee, and in particular whether the respondent remained the sole trustee having control of the Trust. More specifically, her Honour did not directly address the consequences as to the identification of the respondent's 'property' if, contrary the evidence referred to above, the respondent remained the sole trustee of the Trust. Nor did her Honour consider and make findings as to the powers of the trustee on the proper construction of the Trust instrument.
This may be explained by the fact that the principal focus of the appellant's case at trial was that (as with the other entities associated with the respondent's family) the ABC Family Trust was a 'false front' (i.e. it was not 'genuine or true, but something made in imitation of something else or made to appear to be something which it is not'[39]).
[39] In the Marriage of Gould(1993) 115 FLR 371, 383 (Fogarty J, Nicholson CJ & Finn J agreeing), citing Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449, 454 (Lockhart J).
The appellant, for example, opened the case on the following basis:[40]
The issue in this case is, is that the applicant says that the respondent has presented to the court a false front as to the ownership of the assets. His case is significant assets are not his but were either his mother’s or in an entity of hers and we say that that is not the truth and that those assets are his.
[40] Trial ts 48 (10 July 2017).
That opening explicitly presented that case, regardless of the identity of the trustee:[41]
The [ABC] Family Trust is the respondent, irrespective of who are trustees or appointors, and the superannuation fund is the respondent.
[41] Trial ts 51 (10 July 2017).
It must be acknowledged that the appellant did submit in closing that the respondent's evidence as to Ms Danae being a trustee of the ABC Family Trust was an 'incorrect statement of the law' and that the respondent 'remains the sole trustee'.[42] To that extent, it may be accepted that the appellant was not, as the respondent contended,[43] running a new case on appeal.
[42] Trial ts 26 - 27 (17 July 2017).
[43] Respondent's Amended Submissions [52] - [61] (WAB 35 - 36); Respondent's Substituted Outline of Submissions [24] - [38] (YAB 258 - 261).
Nevertheless, the 'false front' case remained the principal focus of the appellant's case at trial and was maintained until the end of the case.[44] With the benefit of hindsight, at least insofar as the ABC Family Trust was concerned, that focus tended to divert attention from the ultimate issues under s 205ZG as to the 'property' of the parties.
The learned trial judge's conclusion in relation to the ABC Family Trust
[44] Trial ts 62 (17 July 2017).
As noted above, in dealing with the identification of the existing property interests of the parties, the learned trial judge, in relation to the ABC Family Trust, did not make any express finding as to the legal ownership of the Trust (i.e. the trustee), or as to the powers of appointment of Trust property under the Trust instrument. Rather, her Honour, consistently with the focus of the appellant's case, dealt with whether the Trust was a 'false front'.[45] In the context of that argument, the learned trial judge concluded:[46]
Having considered the evidence and the submissions of both parties it has not been established to me on the balance of probabilities that the respondent is the owner of the entities referred to by the applicant or their assets. I find that they are owned in accordance with their legal ownership.
[45] Reasons [116] - [141].
[46] Reasons [180].
It is a fair inference from this finding that, having rejected the appellant's 'false front' case, the learned trial judge concluded that the respondent was not the beneficial owner of the assets of the ABC Family Trust, and that the assets of that Trust were held by the trustee or trustees of that Trust to be applied in accordance with the provisions of the Trust instrument.
The learned trial judge nevertheless attributed 50% of the value of the assets of the ABC Family Trust to the respondent. This was consistent with a concession made by the respondent in closing that 'it is reasonable and safe to say that, together with his sister, [Melissa], our client is entitled to one-half of the interest in the [ABC] Family Trust'. [47]
[47] Trial ts 15 (17 July 2017).
The only potentially discernible legal basis referred to in the learned trial judge's reasons for attributing 50% of the ABC Family Trust to the respondent, however, appears by way of implication from the following:[48]
In terms of Mrs [Fir]'s will dated 14 October 2015, Ms [Danae] was appointed her executor. Ms [Danae] was also appointed as appointor or guardian of the [ABC Family Trust]. Mrs [Fir]'s residuary estate is left equally to the respondent and Ms [Danae] and accordingly Ms [Danae] has an entitlement to share in the assets of the trust. (emphasis added)
[48] Reasons [149].
It appears to be implicit that, as the respondent and Ms Danae were equal residuary legatees under Mrs Fir's will, then, it followed that each had a 50% beneficial interest in the assets of the ABC Family Trust. It is this conclusion that the appellant challenges by ground 2.
Disposition - Ground 2 and Contention 1
The appellant submits that the learned trial judge erred in law in concluding that Ms Danae had an entitlement to 50% of the assets of the ABC Family Trust by reason of the fact that Mrs Fir's residuary estate was left equally to the respondent and Ms Danae.[49] There is, the appellant submits, no relevant legal or factual connection between Ms Danae's entitlements under the Trust and her entitlements under the residuary estate.
[49] Appellant's Submissions [17] (WAB 10).
In this submission, the appellant is correct. The identification of Ms Danae's, and the respondent's, entitlements under the Trust required an analysis of the legal effect of the 1996 Deed, and any variations to it. It could not be determined by their status under Mrs Fir's will. Accordingly, the judge's reasons disclose no proper basis for concluding that the respondent had a 50% interest in the assets of the ABC Family Trust. Nor, as discussed below, was there any other basis on the facts found, or on the materials before her Honour, to treat the respondent as having a 50% beneficial interest in the assets of the Trust. The acceptance of error in this regard does not, however, establish the corollary alleged in ground 2, namely that the respondent had a 100% interest in the assets of the Trust.
Once the learned trial judge had rejected the 'false front' case (i.e. by finding that the ABC Family Trust was 'owned in accordance with [its] legal ownership'), it nevertheless remained necessary for the learned trial judge to determine what that 'legal ownership' was; that is, who the trustee was.
More specifically, whether the assets of the ABC Family Trust (or part of them) were to be included within the 'property of the de facto partners, or either of them' for the purposes of s 205ZG of the Family Court Act 1997 (WA) was a matter which could not be determined without regard to the legal and equitable rights under the Trust, in light of the statutory meaning of that expression. As the High Court made clear in Kennon v Spry, the word 'property' is used in different ways in different statutory contexts.[50]
[50] Kennon v Spry [52] (French CJ), [89] (Gummow & Hayne JJ).
In Kennon v Spry, which concerned s 79 of the Family Law Act 1975 (Cth) (the equivalent provision to s 205ZG), it was held by a majority of the Court that assets held in a trust, in relation to which one party to the marriage (the husband) was the sole trustee and the other party to the marriage (the wife) was a beneficiary, could properly be characterised in the circumstances of that case as 'property of the parties to the marriage' within the meaning of s 79 of the Family Law Act 1975 (Cth), even though the husband had no power to apply the assets of the trust to or for himself.[51]
[51] As to which, see Kennon v Spy [115] ‑ [116], [124], [137] (Gummow & Hayne JJ), cf [71] (French CJ).
In reaching this conclusion in the circumstances of that case, the majority in Kennon v Spry referred to the husband's legal title as trustee of the assets of the trust and the absence of any equitable interest in the assets, the trustee's power to appoint the whole of the fund to the wife, the husband's fiduciary duty to consider whether and in what way the power should be exercised, and the wife's interest in the due administration of the trust.[52]
[52] Kennon v Spry [48], [62], [65] ‑ [67], [79], [81] (French CJ), [115] ‑ [116], [126] ‑ [127], [136] ‑ [137] (Gummow & Hayne JJ).
The circumstances of that case were that the discretionary trust was a creature of the husband, created before the marriage, which had been used to accumulate assets for the family, including the family home.[53] French CJ placed significance on the origin and nature of the assets of the trust. His Honour said:[54]
Where property is held under such a trust by a party to a marriage and the property has been acquired by or through the efforts of that party or his or her spouse, whether before or during the marriage, it does not, in my opinion, necessarily lose its character as 'property of the parties to the marriage' because the party has declared a trust of which he or she is trustee and can, under the terms of that trust, give the property away to other family or extended family members at his or her discretion.
For so long as Dr Spry retained the legal title to the Trust fund coupled with the power to appoint the whole of the fund to his wife and her equitable right, it remained, in my opinion, property of the parties to the marriage for the purposes of the power conferred on the Family Court by s 79. The assets would have been unarguably property of the marriage absent subjection to the Trust. (emphasis added)
[53] Kennon v Spry [107].
[54] Kennon v Spry [65], [66].
His Honour continued:[55]
An exercise of the power under s 79 requiring the application of the assets of the Trust in whole or in part in favour of Mrs Spry would, prior to the 1998 Instrument, have been consistent with the proper exercise of Dr Spry's powers as trustee and would have involved no breach by him of his duty to the other beneficiaries.
…
The characterisation of the assets of the Trust, coupled with Dr Spry's power to appoint them to his wife and her equitable right to due consideration, as property of the parties to the marriage is supported by particular factors. It is supported by his legal title to the assets, the origins of their greater part as property acquired during the marriage, the absence of any equitable interest in them in any other party, the absence of any obligation on his part to apply all or any of the assets to any beneficiary and the contingent character of the interests of those who might be entitled to take upon a default distribution at the distribution date. (emphasis added)
[55] Kennon v Spry [67], [70].
French CJ also considered the position of the other beneficiaries, and said:[56]
[I]t has long been accepted that in some circumstances the Family Court has power to make an order which will indirectly affect the position of a third party. That acceptance, which predated the enactment of Pt VIIIAA of the Family Law Act, is reflected in the judgment of Gibbs J in Ascot Investments Pty Ltd v Harper [(1981) 148 CLR 337 at 354] …
'Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it.'
… Giving full effect to the generality of the passage quoted from the judgment of Gibbs J, the case does not stand against the proposition that s 79 would apply in the circumstances of this case where the only property interests are those of the trustee who is a party to the marriage, and where no other beneficiary has any legal or equitable interest apart from a right to due consideration and administration. That, of course, is a right which is a relevant consideration informing the exercise of the Court's discretion as is any indirect effect upon a third party's rights[.] (emphasis added)
[56] Kennon v Spry [68].
His Honour, in this context, also contrasted the circumstances of that case with other discretionary trusts of a different character and origin:[57]
The preceding conclusion does not involve some general extension of s 79 which would require that it be hedged about with protective discretions of uncertain application to prevent its intrusion into trust arrangements affecting assets foreign or extraneous to those acquired by the parties to the marriage in their own right. So if the husband were trustee of a charitable trust or executor of the will of a friend or client the mere legal title to the assets of such trusts, because of their origins and character, could not be regarded as part of the husband's property as a party to the marriage within the meaning of the Family Law Act. Importantly, in such a trust there could be no power of appointment to his wife and no corresponding equitable right enjoyed by her. The question of a trust involving a combination of purposes and family and extraneous assets does not arise. (emphasis added)
[57] Kennon v Spry [69].
Gummow and Hayne JJ said:[58]
Reference was made earlier in these reasons to the comprehensive sense in which the term 'property' is defined in s 4(1) of the Act. And it will also be recalled that the 'property' which may be the subject of orders under s 79(1) of the Act is 'the property of the parties to the marriage or either of them' (emphasis added). The right of the wife with respect to the due administration of the Trust was included in her property for the purposes of the Act. The submissions by Mr Gleeson to this effect should be accepted. The submissions to the contrary by Mr Myers should not be accepted. And in considering what is the property of the parties to the marriage (as distinct from what might be identified as the property of the husband) it is important to recognise not only that the right of the wife was accompanied at least by the fiduciary duty of the husband to consider whether and in what way the power should be exercised, but also that, during the marriage, the power could have been exercised by appointing the whole of the Trust assets to the wife. Observing that the husband could not have conferred the same benefit on himself as he could on his wife denies only that he had property in the assets of the Trust, it does not deny that part of the property of the parties to the marriage, within the meaning of the Act, was his power to appoint the whole of the property to his wife and her right to a due administration of the Trust.
…
In the circumstances of the present case, it was open to the primary judge to formulate his orders, as he did, on the basis that the 'asset pool' … included the assets of the Trust ... To proceed on that basis properly reflected what was 'the property of the parties to the marriage or either of them' ... To proceed on the basis propounded by the husband would confine attention to what was his property.
…
The conclusion reached by the trial judge (erroneously) that the husband could have applied the whole or part of the Trust fund to or for his own benefit is inconclusive of the outcome. The jurisdiction being exercised by the Family Court was, as earlier indicated, jurisdiction over 'proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them' (emphasis added). What matters in this case is that once the 1998 Instrument and the 2002 Instrument were set aside by the s 106B orders, the property of the parties to the marriage or either of them was to be identified as including the right of the wife to due administration of the Trust, accompanied by the fiduciary duty of the husband, as trustee, to consider whether and in what way the power should be exercised. And because, during the marriage, the husband could have appointed the whole of the Trust fund to the wife, the potential enjoyment of the whole of that fund was 'property of the parties to the marriage or either of them'. Furthermore, because the relevant power permitted appointment of the whole of the Trust fund to the wife absolutely, the value of that property was the value of the assets of the Trust. In deciding what orders should be made under ss 79 and 80 of the Act, the value of that property was properly taken into account.
[58] Kennon v Spry [126], [130], [137].
Their Honours also said, with reference to the position of third party beneficiaries:[59]
If the husband wishes to satisfy his obligations to the wife under order 4 [the trial judge's order requiring payment of a lump sum from the husband to the wife] by recourse to the augmented assets of the Trust then it is open to him to approach the court for an appropriate order to assist him in doing so. By such an order the court would provide the machinery whereby the Trust was to be administered … and there was an application by the husband as trustee of a stipulated sum in favour of the wife in pro tanto discharge of his obligation to her under order 4. It would be for the court to determine whether, putting aside the interests of the children of the marriage for the reasons already given, it was just and equitable to make the order having regard to the interests of any third parties who may also fall within the defined class of 'beneficiaries'.
[59] Kennon v Spry [138].
In the circumstances of that case, it was the combination of one party having control of the trust as trustee and the other party being a beneficiary for the benefit of whom the entirety of the trust assets could have been applied during the marriage, which led to the result that the trust assets were 'property' for the purposes of s 79 of the Family Law Act 1975 (Cth). Such a result would, a fortiori, be expected to follow in those circumstances where the same party to the marriage (or, in the case of s 205ZG, the de facto relationship) had both control of the trust as trustee and was a beneficiary for the benefit of whom the entirety of the trust assets could be applied.
So much is implicit in the reasoning of Gummow and Hayne JJ, and is reflected in French CJ's conclusion, in Kennon v Spry in relation to the position that prevailed at a time when Dr Spry was also a beneficiary of the trust in that case:[60]
Prior to the 1983 Deed Dr Spry as sole trustee had the 'absolute discretion' to apply all or any part of the income and/or capital of the fund to himself as one of the 'beneficiaries'. On the basis of that power, and consistently with authority including the decisions of the Full Court referred to above, the assets of the Trust would properly have been regarded as his property as a party to the marriage for the purposes of s 79.
[60] Kennon v Spry, [58] (French CJ).
The Full Court decisions referred to by French CJ included cases where the relevant party was not a trustee but, as a matter of fact, had full control over the trustee entity.[61] It is not necessary for present purposes to examine those cases in this context, but it should be noted that there is an important difference between a situation of 'de facto control' and a 'false front'. A person may, in fact, be in control of a trust (by reason of the relevant facts and circumstances) without the trust being a 'counterfeit, a façade or a false front'.[62]
[61] For example, In the Marriage of Goodwin (1990) 101 FLR 386.
[62] In the Marriage of Gould(1993) 115 FLR 371, 383 (Fogarty J, Nicholson CJ & Finn J agreeing).
Accordingly, in order to conclude whether the assets of the Trust could properly have been characterised as the respondent's property for the purposes of s 205ZG, it was necessary in the present case for the learned trial judge to consider, at least, whether the respondent was both the sole trustee of the ABC Family Trust and a beneficiary for the benefit of whom the entirety of the trust assets could have been applied under the trust instrument.[63]
[63] In addition, before such a conclusion could be reached, it may also have been necessary to make further findings as to the origin and nature of the trust assets (see the remarks of French CJ in Kennon v Spry referred to in [73] and [76] above).
On the other hand, if (for example) the respondent did not have any control of the ABC Family Trust, none of the assets of the Trust would have amounted to his 'property ' for the purposes of s 205ZG. In this regard, applying the methodology adopted by the learned trial judge, those assets (or any portion of them) would not have been brought to account at the first step of that methodology.
In saying this, we recognise that, in Kennon v Spry, it was accepted that a spouse's equitable right, as a beneficiary of a discretionary trust, to due administration of the trust may (in a particular case), itself, constitute his or her 'property' for the purposes of s 79 of the Family Law Act 1975 (Cth),[64] and may accordingly also constitute 'property' under s 205ZG.
[64] Kennon v Spry [78] (French CJ), [126] (Gummow & Hayne JJ).
However, as French CJ observed, in effect, it is likely to be difficult to put any realistic value on such a right.[65] While his Honour did observe that 'a valuation might not be beyond the actuarial arts in relation to the right to due consideration',[66] that observation must be understood in the context of his Honour's overall conclusion that, without Dr Spry's legal title to the trust assets, the rights and powers under the trust were 'meaningless'.[67]
[65] Kennon v Spry [75] - [78].
[66] Kennon v Spry [78] (French CJ).
[67] Kennon v Spry [79] (French CJ).
Further, in and of itself, the right to due administration of a discretionary trust as 'property' is quite separate and distinct from the assets of the trust itself. The valuation of such a right, if it might be possible, is almost certainly not to be equated with the assets of the trust, or even a proportion of them. Such a valuation would be a matter for expert actuarial or valuation evidence in light of all of the facts.
There is, for example, no basis to suppose, in accordance with the conclusion of the learned trial judge in the present case, that the value of the respondent's right to due administration of the Trust would necessarily equate to 50% of the value of the trust assets, particularly given the existence of other potential beneficiaries. Moreover, the case was not presented before the learned trial judge on the basis that the 'property' of the respondent in the present case relevantly included the right to due administration. The focus was, at all times, on the trust assets themselves.
It is for these reasons that, in our view, in the absence of special circumstances of the kind considered in Kennon v Spry, the bare equitable right of a beneficiary under a discretionary trust will not ordinarily be included as 'property' for the purposes of s 205ZG of the Family Court Act 1997 (WA).
That is not, of course, to say that such a right is otherwise irrelevant to the application of that section. In particular, where a party to the de facto relationship is a mere beneficiary of a discretionary trust, the prospect of trust distributions to the beneficiary may be considered as a 'financial resource', the existence of which is a materially relevant consideration under s 205ZD(3) of the Family Court Act1997 (WA).
The decision of the High Court in Hall v Hall is pertinent in this regard.[68] That case concerned the application of s 75 of the Family Law Act 1975 (Cth) in relation to a spousal maintenance order. It nevertheless concerned the same expression ('property and financial resources') as that which appears in s 205ZD(3) of the Family Court Act 1997 (WA) (as it applies via s 205ZG(4)(e)).
[68] Hall v Hall [2016] HCA 23; (2016) 257 CLR 490.
In Hall v Hall, French CJ, Gageler, Keane and Nettle JJ held:[69]
The reference to 'financial resources' in the context of s 75(2)(b) has long been correctly interpreted by the Family Court to refer to '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'. The requirement that the financial resource be that 'of' a party no doubt implies that the source of financial support be one on which the party is capable of drawing. It must involve something more than an expectation of benevolence on the part of another. But it goes too far to suggest that the party must control the source of financial support. Thus, it has long correctly been recognised 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.
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. (emphasis added)
[69] Hall v Hall [2016] HCA 23; (2016) 257 CLR 490 [54] - [55] (French CJ, Gageler, Keane & Nettle JJ).
To summarise these principles, as they applied to the present case, leaving aside the 'false front' case (i.e. accepting the learned trial judge's finding that the Trust was 'owned in accordance with [its] legal ownership' (see [62] above)), her Honour was required to consider two alternative ways in which the ABC Family Trust might potentially have been taken into account under s 205ZG (subject to a consideration of the evidence as a whole):
(a)if the respondent was the sole trustee or (possibly – see [81] above) had de facto control of the Trust, with power to apply the entirety of the assets of the Trust to or for his benefit, the entirety of the Trust assets may have been included as his 'property', subject (at least on the view of French CJ) to a consideration of the origin and assets of the Trust (see [73] and [76] above).[70] In that case, the right to due administration of other beneficiaries of the Trust (including Ms Danae) could be relevant to the exercise of the court's discretion under s 205ZG[71]; or
(b)if the respondent was not the sole trustee and did not have de facto control over the Trust, none of the assets of the Trust could have been included as his 'property'. In that case, a reasonable expectation of the respondent that he would benefit from the Trust would be a 'financial resource' relevant to the exercise of the court's discretion in accordance with s 205ZD(3)(b).
[70] The judge made certain findings (see [39] above) as to the nature and origin of the Trust assets in the context of the 'false front' case but not in the context of whether the Trust assets were the 'property' of the respondent for the purposes of s 205ZG, assuming that the ABC Family Trust was not a 'false front'.
[71] See Kennon v Spry [68] (French CJ); cf Kennon v Spry [136] - [138] (Gummow & Hayne JJ).
The learned trial judge made no such findings, and this Court is not in a position properly to make findings as to the occupier or occupiers of the office of trustee, or whether there was a reasonable expectation that the respondent would benefit from the discretion exercised by the trustee under the Trust, assuming he had no control over the trustee.
Ground 2 should therefore be upheld insofar as it alleges that the judge erred in finding that the respondent had a beneficial interest in 50% of the assets of the ABC Family Trust. Prima facie, the appeal should be allowed in that regard.
At this point, however, it is necessary to address one of the contentions in the respondent's notice of contention, namely that the learned trial judge's decision in relation to the ABC Family Trust can be upheld on the basis that the respondent was, in fact, the joint trustee of the Trust with Ms Danae and that Ms Danae was not the respondent's 'puppet' (contention 1).
In accordance with the conclusions we have reached above, of course, a finding that the respondent was a joint trustee without control of the Trust would compel the conclusion that none of the assets of the Trust were the respondent's property (not, as the learned trial judge found, 50%). The respondent's submissions, while recognising this apparent inconsistency,[72] sought to meet it with the contention that the valuation of the respondent's interest as being 50% of the net value of the Trust was best explained as the value of the respondent's chose in action as a beneficiary of the Trust (i.e. the right to due administration).[73]
[72] Respondent's Submissions on Notice of Contention [13] - [31] (WAB 53 - 55).
[73] See Respondent's Amended Submissions [69] - [80], [89] - [90] (WAB 37 - 39); Respondent's Submissions on Notice of Contention [36] - [37] (WAB 56).
That submission (and the respondent's concession in closing at trial) cannot be accepted. There are two immediate difficulties with it.
First, as noted earlier, the appellant did not run a case at trial that the 'property' of the respondent relevantly included the right to due administration. The focus was, at all times, on the trust assets themselves. Nor was the respondent's concession at trial articulated on that basis.
Secondly, the value (50%) is not one supported by the evidence. As we have noted earlier above, even if, in a particular case, the right to due administration is treated as 'property', the value of the right is not to be assumed to be equated with the assets of the trust, or even a proportion of them. That would be a matter for expert actuarial or valuation evidence in light of all of the facts. In the present case, for example, there were, at the time of trial, at least four persons who were defined beneficiaries under the ABC Family Trust.[74]
[74] These persons were the respondent, Ms Danae and Ms Danae two children.
The greater problem with contention 1, however, is the proposition that the respondent was, in fact, the joint trustee of the Trust with Ms Danae. The evidence at trial, in that regard (summarised at [47] - [55] above), was ambiguous and did not identify any legal basis for the conclusion that the respondent and Ms Danae were joint trustees.
Such a legal basis only emerged on appeal in the respondent's application to adduce additional evidence on this appeal. That evidence, which is contained in an affidavit of the respondent affirmed on 28 May 2018, includes a Deed of Variation and Rectification of the ABC Family Trust dated 8 November 2016 (the 2016 Deed).[75] The 2016 Deed, which was executed by the respondent and Ms Danae as Appointor of the Trust, appointed Ms Danae as an additional trustee of the Trust.[76]
[75] The application also seeks the admission of other documents in relation to the ABC Family Trust attached to the affidavit of the respondent affirmed on 28 May 2018.
[76] YAB 53 - 59.
The power of this Court to admit further evidence is ultimately to be exercised by reference to whether it is just, in all of the circumstances, to admit the evidence.[77]
[77] Lackovic v Insurance Commission of Western Australia (2006) 31 WAR 460 [114] (Buss JA; Steytler P agreeing), [9] (Pullin JA).
The 2016 Deed, if adduced at trial, would have been clear evidence in support of the respondent's case that he was not the sole trustee of the ABC Family Trust.
Ordinarily, an application to adduce additional evidence is made by an appellant seeking to disturb the result at trial, rather than by a respondent seeking to uphold a finding by evidence that it did not adduce at trial.
Here, the appellant made no application to adduce as evidence in the appeal the 2016 Deed, and, moreover, opposed the reception of the further evidence on the appeal. At the same time however, the appellant wished to rely upon that evidence for the purposes her submission as to the appropriate orders on the appeal pending any retrial.
In our view, it is not in the interests of justice to accede to the respondent's application to admit the further evidence on the appeal, including the 2016 Deed, for two reasons.
First, it is plainly not fresh evidence, and secondly, admitting the evidence would not, in any event, provide a complete answer to ground 2. On the contrary, the existence of the 2016 Deed raises more questions than it answers. In particular:
(a)there has been no reasonable explanation as to why the 2016 Deed was not adduced at trial;
(b)there has been no explanation as to the circumstances in which the 2016 Deed was prepared, or the purposes for having it prepared; and
(c)the 2016 Deed was not properly disclosed to the appellant prior to the trial. It was not, for example, contained in the disclosure schedule provided by the respondent's solicitors on 7 July 2017, shortly prior to the trial.[78]
[78] Appellant's affidavit affirmed 15 June 2018 (YAB 136 - 213).
As to the last matter (the non-disclosure of the 2016 Deed), the respondent referred to information provided to Ms Denver, the joint valuation expert, that referred to Ms Danae having been 'bought in as [a] trustee' of the Trust on 8 November 2016 (although there is no reference in that material to the 2016 Deed itself).[79] Those references, however, take the matter little further than the evidence referred to at [54] to [55] above. It could not realistically be suggested that they constituted proper disclosure of the 2016 Deed.
[79] Affidavit of RSI affirmed on 6 August 2018 (YAB 236). See generally, Affidavit of RSI affirmed on 6 August 2018 (YAB 214 - 253).
In light of these unanswered questions, there is a very real question as to the impact that the 2016 Deed would have had on the determination as to whether the ABC Family Trust was the 'property' of the respondent. In particular, its disclosure could have been expected to have had a significant impact upon the way in which the appellant ran her case. As senior counsel for the appellant put the position at the hearing of the appeal, the non-disclosure of the 2016 Deed:[80]
… was an egregious and major non-disclosure in this case, because it demonstrated, in fact, that [the respondent] did have complete control of the trust prior to trial and divested himself of it. And we’ve learnt about that since the appeal has been instituted. So if the trial judge had known that, there would have been a different trial run. There could have been application to set aside that deed; it would have been categoric evidence that he controlled the trust, essentially, as the trustee and joint appointor.
[80] Appeal ts 38. See also Appeal ts 143.
To this, it might be added that, depending upon how the evidence unfolded, the non-disclosure of the 2016 Deed might have proved fertile ground for cross-examination of the respondent in relation to the appellant's 'false front' case.
How these issues might be resolved is unknown. However, one thing is clear. None of them can be resolved by this Court. The resolution of the effect of the 2016 Deed would require proper disclosure, further evidence from the parties (and potentially others, such as Ms Danae) and further cross-examination.
For this reason, the proposed further evidence relied upon by the respondent cannot provide an answer to ground 2. The respondent's application to adduce additional evidence should be dismissed. Ground 2 should be upheld to the extent indicated and contention 1 in the notice of contention dismissed.
For the same reason, it is not open to this Court to attempt to re-exercise the discretion under s 205ZG of the Family Court Act 1997 (WA). The unresolved factual and legal questions concerning the ABC Family Trust (including any application that might be made to set aside the 2016 Deed) are such that this Court could not conclude that the Trust was the 'property' of the respondent.
In addition, even if such a conclusion were open, the re-exercise of the discretion would not, as the appellant initially submitted, involve simply applying the learned trial judge's findings as to the appellant's entitlement (i.e. 47.5%) to an adjusted amount of the 'property' available for alteration.[81] As noted at [29] above, and accepted by senior counsel at the hearing of the appeal,[82] if the entirety of the value of the ABC Family Trust were characterised as 'property' (so as to increase the 'pool' by $1,974,069) the appellant's contribution to the property as a whole would have been correspondingly reduced. By how much it would need to be reduced is a matter to be determined in light of all of the evidence.
[81] Appellant's Submissions [39] (WAB 21). At the hearing of the appeal, senior counsel for the appellant accepted that, if the appeal were to be allowed, the matter had to be remitted for a rehearing (Appeal ts 145).
[82] Appeal ts 56.
In addition, if the entirety of the value of the ABC Family Trust were characterised as 'property', the rights of the other beneficiaries of the Trust may come into sharper relief as matters relevant to the exercise of the court's discretion under s 205ZG, and would also involve questions of joinder.
In all the circumstances, the only appropriate manner of resolving the issues raised by ground 2 would be by way of a retrial.
Disposition - Grounds 4 and 5
In light of our conclusions that ground 2 should be upheld, it is not necessary to deal with grounds 4 and 5 in detail. Those grounds were expressed to be in the alternative to ground 2, in the event that the attribution of 50% of the value of the ABC Family Trust as property of the respondent was upheld.
In that regard, grounds 4 and 5 allege that the learned trial judge failed to take into account the remaining 50% of the ABC Family Trust as a 'financial resource' (ground 4) and failed to take into account indirect contributions made by the appellant to the ABC Family Trust (ground 5).
As to the first matter, there is a conceptual difficulty with treating 50% of the ABC Family Trust as 'property' and the remaining 50% of the ABC Family Trust as a 'financial resource'. As we have set out above (see in particular at [92]), in the circumstances of this case, either the ABC Family Trust was 'property' (in its entirety) or it was a 'financial resource'. There was no other possibility; it could not be both. If there was some proper basis for concluding that, in all of the circumstances, 50% of the value of the Trust was the respondent's property (perhaps on the basis that that was the value of his right to due administration), it is difficult to see how there could be any room for a further interest arising out of the Trust. Presumably, in that hypothetical case, the valuation of the respondent's right would reflect the net present value of all of his expected entitlements.
As for the matter of indirect contributions, again, the appellant submitted that the learned trial judge ought to have taken into account the fact that by 'freeing up the respondent to apply his income from [his] landscaping business for other purposes', the appellant indirectly contributed to the other assets, including (for the purposes of ground 5) the respondent's interests in the ABC Family Trust.
In the present case, the learned trial judge assessed the contributions of the parties to the property on a global basis, as she was entitled to do. In doing so, her Honour recognised that the contributions of the appellant, for example to a property in Suburb A that she and the respondent purchased together, benefited the respondent as it enabled him to retain income and apply it elsewhere.[83] Her Honour clearly took those matters into account in assessing the 'global' contribution of both parties,[84] the assessment of which her Honour recognised was 'not a mathematical exercise'.[85]
[83] Reasons [258].
[84] Reasons [278].
[85] Reasons [279].
In those circumstances, in our view, there is no basis for concluding that the learned trial judge failed to have regard to the appellant's indirect contributions to the extent that they applied to the ABC Family Trust. The fact that a particular consideration is not expressly mentioned in the learned trial judge's reasons, particularly where the assessment is being undertaken on a global basis, does not mean that her Honour failed to take it into account.[86]
[86] Marshall v Metropolitan Redevelopment Authority [2015] WASC 226 [135] (Pritchard J); Applicant A169 of 2003 v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCAFC 8 [27] (Finn, Marshall & Mansfield JJ).
In any event, as the respondent submitted, the indirect contributions upon which the appellant sought to emphasise on appeal were not considerations that were expressly relied upon by the appellant in her case before the learned trial judge. In that regard, when a court is required to make a discretionary decision, to which many factors may be relevant, it is incumbent on parties who contend on appeal that attention was not drawn to particular matters, to demonstrate that the primary judge's attention was drawn to those matters, at least unless they are fundamental and obvious.[87]
[87] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 [120], [157] - [158] (Gummow A-CJ, Kirby, Hayne & Heydon JJ); Evans v Miller [2011] WASCA 89 [6] (Martin CJ, Murphy JA & Murray J).
We turn now to the other principal asset the subject of the appeal, the Kangaroo Superannuation Fund.
The Kangaroo Superannuation Fund - Grounds 1 and 6
The Kangaroo Superannuation Fund, the appellant's superannuation fund, was one of two of superannuation funds the subject of evidence in the proceedings. The other was the Danae Family Superannuation Fund, the respondent's superannuation fund, which was valued at $2,448,210.[88]
[88] Reasons [200], [288] (Reasons [288] records the respondent's superannuation as being valued at $2,448,209).
The two funds were, however, treated differently by the learned trial judge. The Kangaroo Superannuation Fund ($638,911) was treated as 'property' of the appellant for the purposes of s 205ZG,[89] whereas the Danae Family Superannuation Fund was not treated as 'property' of the respondent. That fund was, rather, treated as a 'financial resource' for the purposes of s 205ZD(3)(b).[90]
[89] Reasons [198], [200].
[90] Reasons [288]. It should be noted that, in this paragraph of the Reasons, the learned trial judge also identified the Kangaroo Superannuation Fund as a financial resource available to the appellant. It might be said, in that regard, that it was therefore taken into account twice (see [150] below).
Given the methodology adopted by the learned trial judge, the different treatment of the Kangaroo Superannuation Fund and the Danae Family Superannuation Fund therefore had the real capacity to affect the overall exercise of her Honour's discretion.
Grounds of appeal 1 and 6 challenge that approach. They provide:
Appeal ground 1
The learned trial judge erred in law and fact by treating the appellant's superannuation interests as property valued at $638,911, at reasons [198] and [200] line item 45, than as a financial resource, at reasons [285] - [288], and thereby materially overvalued the appellant's property available for alteration.
…
Appeal ground 6
The learned trial judge erred in law by failing to take into account materially relevant considerations in assessing the s 205ZD(3) adjustment factors at reasons [283] - [302], namely any conditions which must be met by the appellant to access her superannuation interests, including employment status, taxation liability, any other realisation costs and conditions of access, i.e. as pension or lump sum or both (in the event appeal ground 1 is unsuccessful).
As can be seen, the grounds are expressed in the alternative.
Evidence and Finding in Relation to the Kangaroo Superannuation Fund
The appellant's case at trial was that both parties' superannuation entitlements should be treated as a 'financial resource'.[91] The respondent opened his case on the basis that the Kangaroo Superannuation Fund should be treated as 'property', because '[the appellant] meets the condition of release and therefore she is entitled to take that'.[92]
[91] Applicant's Papers for the Judge [26] (BAB 86).
[92] Trial ts 40 (11 July 2017).
There was no direct evidence adduced at trial as to the terms of the instrument establishing the Kangaroo Superannuation Fund, nor of any conditions attaching to the realisation of, or access to, the Fund.
The evidence in relation to the appellant's entitlements under the Fund came from her evidence in cross-examination:[93]
You have a superannuation fund?---Yes.
Are you drawing down on that at the moment?---No.
You understand that you’re entitled to draw down on it?---Yes.
Yes. There’s no - the only reason you haven’t drawn down on it is because you haven’t needed to?---No.
No. Please answer - I’m confused about your answer?---I haven’t even looked into drawing down on it. I would like to leave the fund for the moment.
But the fact is that it’s available to you to draw down if you need it?---I’m vaguely aware of that. I must admit, I - I don’t know to the letter of the law.
All right. Well, you are - and I don’t want to be rude about this - but you are over 55 years of age?---Yes.
And that means that you meet a condition of release and you can draw on your fund as and when you see fit?---Yes.
[93] Trial ts 30 (11 July 2017).
The learned trial judge's finding in relation to the Kangaroo Superannuation Fund was simply that '[t]his item appears as an asset of the [appellant] as she can access her superannuation'.[94] This finding appears to be based on the fact that the appellant was, at the time of trial, 57 years of age and so (by implication) could access her superannuation entitlements. A similar finding in relation to the respondent's superannuation was not made, presumably, because the respondent, being 53 years age, could not access his superannuation.
Disposition - Grounds 1 and 6
[94] Reasons [198].
The treatment of superannuation entitlements for de facto partners in Western Australia remains a difficult and vexed issue. In relation to married couples who are separating, or de facto partners in other states, under Part VIIIB of the Family Law Act 1975 (Cth), the Family Court of Australia may make orders adjusting superannuation entitlements of the parties. In that context, superannuation interests are to be treated as 'property' for the purposes of the definitions of 'matrimonial causes' and 'de facto financial causes' under that Act.[95]
[95] Family Law Act 1975 (Cth) s 90XC.
In this way, in those jurisdictions, the court is able to take account of superannuation interests as 'property' and make orders affecting that 'property' under s 79 of the Family Law Act 1975 (Cth). Prior to the introduction of those provisions, superannuation entitlements were generally treated as a 'financial resource', rather than 'property'.[96]
[96] In the Marriage of Crapp [No 2] (1979) 35 FLR 153, 176 (Fogarty J); In the Marriage of Coulter (1989) 96 FLR 375, 377 - 380 (Strauss & Baker JJ).
Intergovernmental relations between the Commonwealth and Western Australia have not (yet) made orders of the kind contemplated in Part VIIIB of the Family Law Act 1975 (Cth) available in cases concerning de facto partners in Western Australia.[97]
[97] Although an end, in that regard, may be in sight (see Australian Master Family Law Guide (10th ed, 2019) ¶19-000).
In those circumstances, in such cases, it is necessary to give consideration to all of the relevant statutory provisions and private instruments, in light of all the facts and circumstances, in determining whether particular superannuation funds are to be treated as 'property' or a 'financial resource'.[98] The former approach may be appropriate, for example, where a party can put themselves in a position of obtaining their entitlements to the fund without suffering any detriment such as the loss of the opportunity to continue their career.[99]
[98] In the Marriage of Harris (1991) 104 FLR 458, 469 (Ellis, Strauss & Lindenmayer JJ).
[99] In the Marriage of Wunderwald (1992) 106 FLR 138, 141 - 142 (Nicholson CJ, Strauss & Cohen JJ).
At the hearing of the appeal, the respondent referred to a number of provisions of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (the Regulations) in support of the learned trial judge's finding. The Regulations prescribe standards for the operation of regulated superannuation funds under the s 31 of the Superannuation Industry (Supervision) Act 1993 (Cth). The standards include 'conditions of release' and 'cashing restrictions' in relation to the release of superannuation benefits.[100]
[100] Regulations, Schedule 1.
According to the Regulations, the appellant, having attained her 'preservation age' of 55 years, would be entitled to access various kinds of defined benefits.[101] The appellant remained, however, subject to 'cashing restrictions' until the age of 65 years, unless she retired.[102] These provisions therefore supported the notion that the appellant had, at trial, some entitlements to access benefits under the Fund, although the extent of those entitlements was not explored at trial, or on appeal.
[101] Regulations, Schedule 1, Item 110 (referring to a transition to retirement income stream, a non-commutable allocated, annuity, a non-commutable allocated pension, a non-commutable annuity and a non-commutable pension).
[102] Regulations, Schedule 1, Item 101, Item 106.
What is also clear, however, is that until the appellant retires or attains the age of 65 years, there remain restrictions in relation to her access to the Kangaroo Superannuation Fund. Significantly, while the appellant was not employed at the time of trial, she had recently undertaken retraining, including as a phlebotomist (although she was not yet qualified).[103] There was no suggestion that the appellant had retired or had ever, in fact, accessed her superannuation.
[103] Reasons [286] - [287].
In those circumstances, there is merit in the appellant's submission that there was an insufficient basis in the evidence to conclude that the Kangaroo Superannuation Fund should be treated as 'property'. The appellant's evidence that she was 'vaguely aware' that she could draw on the Fund if she wanted to did not address the extent to which, as the authorities recognise, she might suffer a detriment if she did so.
As the analysis in relation to ground 2 demonstrates, whether or not a particular entitlement is characterised as 'property', or alternatively, as a 'financial resource', the methodology adopted by the learned trial judge is such that the entitlement will ultimately be taken into account in determining what is 'just and equitable' in the circumstances. In that regard, it may be that in some cases, depending upon the circumstances and the manner in which the discretion is exercised, the distinction between 'property' and a 'financial resource' is a 'distinction without a difference'.[104]
[104] In the Marriage of Wunderwald (1992) 106 FLR 138, 142 (Nicholson CJ, Strauss & Cohen JJ).
Echoes of this notion were reflected in the respondent's submissions on appeal, to the effect that, if the Kangaroo Superannuation Fund had not been included as 'property' the outcome would 'not result in a variation to the trial judge's orders'.[105] This submission was made on the basis that the exclusion of the Fund would result in a proportionate decrease in the appellant's contribution '(assuming there is no other alteration to the overall level of contribution)'.[106]
[105] Respondent's Amended Submissions [51] (WAB 35).
[106] Respondent's Amended Submissions [47] (WAB 34).
The answer to this submission lies in this last-mentioned assumption. There is, in our view, no basis to assume that the exclusion of the Kangaroo Superannuation Fund as property would not have resulted in an overall change to the distribution between the parties. Indeed, in the present case, in our view, the inclusion of the Kangaroo Superannuation Fund as 'property' in the first step of the methodology applied by the learned trial judge was apt to skew the overall result in favour of the respondent.
This is for five reasons.
First, of the overall net assets of the parties of $5,736,024, the amount attributed to assets held by the appellant was $1,222,567 (i.e. approximately 21%). Despite this, and applying a global approach to the contributions of the parties, the learned trial judge arrived at a global contribution by the appellant to the property 'pool' of 40%. The learned trial judge's assessment of the contribution of the appellant was therefore clearly greater than that which could be said to be attributable to assets 'in her name' (and considerably so).
Secondly, of the $1,222,567 of assets attributed to the appellant, the Kangaroo Superannuation Fund (at $638,911) accounted for more than half of those assets (52%). Her assets were otherwise relatively small. This too serves to illustrate the relative significance of including the Fund as 'property' at the first step of the methodology.
Thirdly (and relatedly), as noted above, the respondent's superannuation fund was valued at $2,448,210 but was not included in the 'property of the de facto partners'. Rather, it was treated as a 'financial resource'. The learned trial judge was not in error in treating the respondent's superannuation entitlements as a 'financial resource'. Nevertheless, the fact that they were treated differently to the appellant's superannuation did tend to overstate the appellant's 'property' and understate the respondent's 'property' as a whole (at the first step in the methodology).
Fourthly, while the Danae Family Superannuation Fund was brought to account in relation to the 'adjustment' factors under s 205ZD(3) (i.e. step three of the methodology), those adjustment factors, being 7.5% of the overall distribution, clearly had a less significant impact upon the overall exercise of discretion than the assessment of 'contribution' (at step two).
Finally, in arriving at that 'adjustment' percentage, the learned trial judge also referred to the appellant's superannuation entitlements. Arguably, therefore, the Kangaroo Superannuation Fund was taken into account both as 'property' and as a 'financial resource' available to the appellant.
For these reasons, we are satisfied that, in the circumstances of the present case:
(a)the learned trial judge erred by including the Kangaroo Superannuation Fund as the appellant's 'property'; and
(b)it cannot be concluded that, in the absence of that error, there would have been no change to the overall exercise of the learned trial judge's discretion.
The effect that the parties' superannuation entitlements would have on the exercise of the ultimate discretion is a matter to be determined in light of all of the circumstances upon a retrial.
Ground 1 should be upheld.
Indirect Contributions to the Danae Family Superannuation Fund - Ground 3
Ground 3 alleges that the learned trial judge erred in failing to take into account the indirect contributions the appellant was said to have made to the Danae Family Superannuation Fund.[107] The submissions made in support of that ground were identical to the submissions made in support of ground 5, in relation to the respondent's interests in the ABC Family Trust.[108]
[107] Appellant's Submissions [24].
[108] Appellant's Submissions [35].
Unlike the ABC Family Trust, however, no part of the Danae Family Superannuation Fund was included as part of the respondent's 'property'. The learned trial judge's global assessment of the contributions of the parties to the 'property' (referred to at [121] above) did not apply to the Danae Family Superannuation Fund. The learned trial judge did not otherwise refer to the appellant's indirect contributions to the respondent's superannuation entitlements.
In light of the way in which the parties ran the case below, and our conclusions in relation to grounds 1 and 2, it is not necessary to reach a concluded view in relation to whether the learned trial judge erred in failing to take into account such contributions.[109] It is sufficient to note that, in the event that the appellant did make indirect contributions to the Danae Family Superannuation Fund, those contributions would be relevant to the exercise of the court's discretion under s 205ZG.[110]
[109] As to which, the observations at [123] above applies equally to this ground.
[110] Perrin v Perrin [No 2] [2018] FamCAFC 122 [44] - [47] (Alstergren DCJ & Aldridge J), [89] - [94] (Murphy J).
The impact of those matters is a matter to be determined in light of all of the circumstances upon retrial.
Approbation and Reprobation (Contention 2) and Orders on Appeal (Contention 3)
It follows from our conclusions in relation to grounds 1 and 2 that the learned trial judge erred in relation to the treatment of both the ABC Family Trust and the Kangaroo Superannuation Fund in a manner that was likely to have affected the exercise of her Honour's discretion in altering the property interests of the parties. As also set out above, the circumstances are such that this Court could not re-exercise the discretion under s 205ZG.
In the ordinary course, the appropriate orders in the circumstances would be that the appeal be allowed, the orders of the learned trial judge be set aside and an order for a retrial.
In the present case, this is potentially complicated by the fact that the orders made by the learned trial judge were carried into effect. In this regard, it appears uncontentious that, following the making of the Final Property Orders, and in discharge of those orders:
(a)on 27 February 2018, the respondent paid $1,159,100.78 to the National Australia Bank to discharge a joint home loan in the name of the appellant and the respondent (the Suburb A Debt) (50% of which debt was attributable to the appellant, namely $579,550.39);[111]
(b)on 6 July 2018, the respondent paid $1,500,000 to the appellant;[112] and
(c)on 17 July 2018, the respondent paid $29,987.16 to the appellant.[113]
[111] Respondent's Submissions on Notice of Contention [38] (WAB 57). Paragraph 2 of the Final Property Orders required the respondent to discharge the entirety of the Suburb A Debt within 30 days of the orders.
[112] Respondent's Submissions on Notice of Contention [38] (WAB 57). Paragraph 3 of the Final Property Orders required the respondent to pay to the appellant such amount as to ensure that the appellant received 47.5% of the asset pool (being $1,500,548.50) within 60 days of the orders.
[113] This sum included an allowance for interest. Respondent's Submissions on Notice of Contention [38] (WAB 57).
The respondent has, accordingly, paid a total of $2,109,537.55 for the benefit of the appellant as a consequence of the Final Property Orders.
In light of this, the respondent submits on appeal that:
(a)the appellant, by accepting the benefits of the payments under the Final Property Orders, together with other conduct (including having opposed a stay of those orders), is now prohibited from having the Final Property Orders set aside on the appeal. The respondent relies upon the doctrine of approbation and reprobation and the doctrine of election (contention 2); and
(b)in the alternative, if the appeal is allowed it should be conditioned upon the repayment by the appellant to the respondent of the $2,109,537.55 together with interest. The respondent relies upon a general right to restitution following a successful appeal (contention 3).
By contrast, the appellant maintained that, if there be an order for a retrial, she should not be required to repay to the respondent the sums paid by him pursuant to the Final Property Orders. The legal basis for this submission initially proved somewhat elusive. The appellant initially submitted that the Final Property Orders could be amended by simply deleting the word 'final', so that the orders made by the learned trial judge became, in effect, interim property orders.[114] The appellant also relied upon Gludau v Gludau,[115] a decision of the Full Court of the Family Court of Australia, as authority for the proposition that restitution need not be ordered in a case remitted for retrial.
[114] As to which see Strahan v Strahan [2009] FamCAFC 166; (2009) 241 FLR 1.
[115] Gludau v Gludau [No 2] [2013] FamCAFC 181; (2013) 50 Fam LR 470.
Alternatively, following the Court's invitation for submissions as to the issue, the respondent (quite properly) accepted that the Court would have the power to stay, or more accurately suspend,[116] an order for restitution in the event of a retrial.[117] In accepting that proposition, the respondent nevertheless resisted such a stay.
[116] The enforcement of a judgment may be suspended 'if there are special circumstances that justify doing so'. See Civil Judgments Enforcement Act 2004 (WA) s 15(3).
[117] Appeal ts 108.
Dealing with each of these issues in turn.
Approbation and reprobation (Contention 2)
We do not accept the respondent's contention that the appellant is prevented from exercising her right to appeal the decision of the learned trial judge by reason of having accepted the benefit of the Final Property Orders.
The respondent relied upon the general principles enunciated by Brennan J in Commonwealth v Verwayen:[118]
Election consists in a choice between rights which the person making the election knows he possesses and which are alternative and inconsistent rights: Evans v Bartlam [1937] 2 All ER 646, at pp 652, 653; Tropical Traders Ltd v Goonan[1964] HCA 20; (1964) 111 CLR 41 at p 55; Kammins Ballroom Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850 at p 883. A doctrine closely related to election, and sometimes treated as a species of election, is the doctrine of approbation and reprobation. This doctrine precludes a person who has exercised a right from exercising another right which is alternative to and inconsistent with the right he exercised as, e.g., where a person 'having accepted a benefit given him by a judgment, cannot allege the invalidity of the judgment which conferred the benefit': Evans v Bartlam, per Lord Russell of Killowen at p 652.
[118] Commonwealth v Verwayen (1990) 170 CLR 394, 421.
In this context, the respondent placed particular reliance on the quoted passage from Evans v Bartlam,[119] which he submitted supported a finding of approbation and reprobation in circumstances in which an appellant, seeking to appeal the quantum of an award of damages, also enforces payment of the existing award.
[119] Evans v Bartlam [1937] AC 473, 483 (Lord Russell of Killowen). See Respondent's Submissions on Notice of Contention [50], [61], [62], [65] (WAB 59 - 61).
Properly understood, in our view, Evans v Bartlam is not authority for that proposition. The remarks of Lord Russell were not made in the context of an appeal by a successful plaintiff, but rather were made in the context of a submission that a judgment debtor who asked for, and obtained, time to pay the judgment and who subsequently sought to have the judgment set aside was seeking to approbate and reprobate. The House of Lords rejected that submission.
The full context of the passage in Lord Russell's judgment relied upon by the respondent was his Lordship's bewilderment at the suggestion of approbation and reprobation in that case. The quoted passage was an example of the opposite circumstances. It was therefore, clearly, obiter dicta and in any event was not concerned with circumstances in which a party sought to exercise rights of appeal while taking the benefit of the judgment below.
In that regard, as the respondent recognised, there are a number of authorities to the effect that an appellant who accepts payment in satisfaction of sums awarded at trial is not precluded from exercising their right of appeal, seeking further relief: Lissenden v CAV Bosch Ltd,[120] Sterling Realty Ltd v Manning[121] and Karabotsos v Plastex Industries Pty Ltd.[122] In each of those cases the appellant had been awarded a sum by way of statutory entitlement or other forms of damages in circumstances in which the appellant sought to increase that sum on appeal.
[120] Lissenden v CAV Bosch Ltd [1940] AC 412 (Lissenden).
[121] Sterling Realty Ltd v Manning [1964] NZLR 1017 (Sterling Realty).
[122] Karabotsos v Plastex Industries Pty Ltd [1981] VR 675 (Karabotsos).
In each case, the court held that the right of appeal and the right to receive payment of the judgment debt then enjoyed by the appellant were not alternative or mutually exclusive rights.[123] While there may be exceptional circumstances in which an appellant has so conducted themselves (such as by making restitution impossible) as to prevent an appeal from being prosecuted, the mere receipt of money under the judgment is not sufficient.[124]
[123] See Sterling Realty, 1019 (Richmond J); Karabotsos, 689 (McGarvie J).
[124] Sterling Realty Ltd v Manning, 1019 (Richmond J).
In our view the same is true of the circumstances in the present case.
The appellant's appeal in this case was prosecuted on the basis that, while the property interests of the parties were adjusted in her favour by the Final Property Orders, she nevertheless maintained that the court's discretion, properly exercised, ought to have resulted in a greater alteration in her favour. Her primary case, on appeal, was that this Court should re-exercise the discretion to order additional sums be paid to her. For the reasons we have explained, that is not possible and a retrial would be necessary.
Nevertheless, in all of the circumstances, it could not be said that the appellant was doing anything inequitable or inconsistent by pursuing the appeal and accepting the sums payable to her under the Final Property Orders. In particular, the circumstances do not support any express or implied representation by the appellant that she would not prosecute the appeal and nor was accepting payment then owing under the judgment an unequivocal act able to support an inference that she was accepting or electing inconsistent rights.
The fact that, as a consequence of the manner in which the appeal has been determined, the only appropriate order is for a retrial does not, in our view, take this case out of the principle reflected in Lissenden and the cases which follow it. Indeed, as McGarvie J recognised in Karabotsos, while Mr Lissenden had in his notice of appeal sought to retain what he had and to obtain more, he had, in the alternative, sought a new trial.[125]
[125] Karabotsos, 689 (McGarvie J).
For these reasons, we reject the contention that the appellant is precluded from exercising her right of appeal on the basis of the doctrine of approbation and reprobation (or the doctrine of election). Contention 2 in the notice of contention should be dismissed.
Restitution (Contention 3)
The respondent alternatively contends that, should the appeal be allowed and the Final Property Orders set aside, there should be an order for restitution of the amounts paid by the respondent (i.e. $2,109,537.55 together with interest).
In this regard, the respondent identifies a number of authorities for the proposition that, following a successful appeal and the setting aside of orders below, restitution follows as a matter of course and is not a matter of discretion. There is certainly a large body of authority to that effect including, in this state, Easterday v Western Australia.[126]
[126] Easterday v Western Australia [2005] WASCA 105; (2005) 30 WAR 122 [38] (Steytler J). See also TCN Channel 9 Pty Ltd v Antoniadis [No 2] [1999] NSWCA 104; (1999) 48 NSWLR 381 [4] (Handley, Beazley & Stein JJA); BHP Steel (JLA) Pty Ltd v Khan [No 2] [2001] NSWCA 269 [5] (Giles & Hodgson JJA); Heydon v NRMA Ltd [No 2] [2001] NSWCA 445; (2001) 53 NSWLR 600 [12] - [14] (Mason P).
Gludau v Gludau was cited by the appellant as being to the contrary effect. In that case, the Court concluded that the 'restitution principle' identified in the authorities did not apply where the court has set aside the order and ordered remittal to the court below for a rehearing.[127] In those circumstances, Murphy J stated:
… this court has not made any decision as to which party is entitled, relevantly, to the cash sum or any part of the cash sum; that is a matter to be determined by the lower court upon the rehearing. Put another way, as a result of this court's order, neither party has any more or less entitlement to the sum than the other: each makes a legitimate claim to it and the question of respective entitlement is yet to be determined by the lower court.
[127] Gludau v Gludau [No 2] [38] (Murphy J, May & Hogan JJ agreeing).
This reasoning may have its attractions, and the result in Gludau v Gludauappears to accord with the just determination of the proceedings themselves. Nevertheless, in our view, the reasoning in that case was not in accordance with the weight of authority, which is to the effect that the right to an order for restitution arises because the legal basis for the payment (i.e. the court order) has been removed. Based upon that rationale, the right to restitution arises regardless of the means by which the judgment is discharged[128] and the reason for the reversal is irrelevant to the right to restitution.[129]
[128] Heydon v NRMA Ltd [No 2] [2001] NSWCA 445; (2001) 53 NSWLR 600 [12] - [14] (Mason P).
[129] See Mason & Carter's Restitution Law in Australia (3rd ed 2016) [706] - [707].
It should be noted that, in Gludau v Gludau, no cases involving a remitter were referred to by counsel and '[counsel] informed the court that he had been unable to find any authority in which the [restitutionary] principle had been applied, or discussed, in circumstances where remitter has been ordered'.[130]
[130] Gludau v Gludau [No 2] [33] (Murphy J, May & Hogan JJ agreeing).
As it happened, there were a number of such authorities that could have been referred to.
In BHP Steel (JLA) Pty Ltd v Khan [No 2], for example, in remitting a matter for retrial on the assessment of damages where the respondent had been paid $250,000 prior to the appeal, Giles & Hodgson JJA said:[131]
The respondent submitted that the present case was outside this entitlement because the new trial was limited to an assessment of damages. He submitted that he had a present and unchallengeable right to damages, with only the amount to be ascertained.
On the reasoning in the cases to which I have referred, this does not matter. Until an amount is ascertained, the respondent has no existing right to retain the $250,000. Depending on the amount ascertained, he may never have a right to the full $250,000, but that is beside the point. He does not now have a right to any of the $250,000.
Nor does authority support the distinction. In Caldwell v Hill the orders left the entitlement to damages untouched but required a new trial as to damages. It was held that there should be restitution with interest of the monies paid under the compulsion of the judgment which was set aside. Mason P, with whom the other members of the Court agreed, said (at [56]) -
'I do not think that TCN Channel 9 Pty Ltd v Antoniadis (No 2)[1999] NSWCA 104; (1999) 48 NSWLR 381 can be distinguished merely because the new trial there ordered extended to liability as well as damages. If this were a case in which it was clear that the appellants would recover at least the sum paid to them under the judgment to be set aside it might be in order to decline or defer restitution, but damages are at large at the present stage of this tortured litigation.'
So also in the present case damages are at large, and it cannot be said that the respondent will recover at least $250,000. We prefer to leave for another day whether and how, if that could be said, the reasoning in the cases to which we have referred can be overcome.
[131] BHP Steel (JLA) Pty Ltd v Khan [No 2] [6] - [9] (Giles & Hodgson JJA).
We, too, would prefer to leave to another day whether there are circumstances in which the restitutionary principle might not apply to a judgment that is set aside in circumstances in which there is to be a retrial, including in the unusual circumstances of this case in which it would be the successful appellant that is required to give restitution.
That is because there is an alternative course available in the present case that is consistent with authority.
Suspension of orders for restitution
In our view, the proper jurisprudential basis for preserving the status quo pending a retrial in a case such as the present rests with the power of the Court to stay the execution of the order for restitution.
Before turning to that power, it is necessary to briefly address one further submission made by the appellant as a mechanism for preserving the status quo. That is the submission that the Final Property Orders made by the learned trial judge could be amended by simply deleting the word 'final', so that the orders made by the learned trial judge become, in effect, interim property orders.
Without in any way doubting the power of the courts to make interim property settlements under the Family Court Act 1997 (WA),[132] it would not be an appropriate order for this Court, on appeal, to purport to convert the orders made by the learned trial judge into interim orders. An order for an interim property settlement is, itself, an exercise of the court's discretion under s 205ZG of the Family Court Act 1997 (WA). In circumstances in which, as we have found, it is not possible to exercise the discretion based on the material before this Court, it would be an unjustified fiction to purport to do so on an interim basis.
[132] See Strahan v Strahan [2009] FamCAFC 166; (2009) 241 FLR 1.
We return then to the proper basis upon which the preservation of the status quo might be considered: a stay of execution of any order for restitution.
Such a stay was ordered in Hume v Walton [No 2],[133] in which Tobias and McColl JJA ordered a retrial of a personal injuries claim on the question of damages only, in circumstances in which the plaintiff had already received part payment of the judgment set aside on appeal. Their Honours recognised that the claimant was entitled to restitution of the moneys paid under the judgment set aside, but, nevertheless, after referring to TCN Channel 9 Pty Ltd v Antoniadis [No 2][134] concluded:[135]
In our view this is a case in which it is appropriate notwithstanding the claimant’s entitlement to restitution, that enforcement of the restitution order be stayed pending disposition of the new trial ordered whether by settlement or judgment. Unlike Antoniadis, the new trial is limited to damages. It might be inferred that the claimant accepted the opponent would, in due course, recover a sum in the order of that it agreed to pay pending appeal. In addition the rehearing of the remitted action will take place very soon. If a stay is not granted, it is probable that the opponent will be deprived of the opportunity to pursue that entitlement.
[133] Hume v Walton [No 2] [2005] NSWCA 458.
[134] TCN Channel 9 Pty Ltd v Antoniadis [No 2][1999] NSWCA 104; (1999) 48 NSWLR 381.
[135] Hume v Walton [No 2] [2005] NSWCA 458 [20] (Tobias & McColl JJA).
Similarly, at the hearing of this appeal, the appellant sought an order that, if a restitution order was to be made, the order should be stayed pending the outcome of the retrial.[136] The respondent, in the event that a stay was granted, proposed a more detailed set of orders whereby the order for restitution would be partially stayed pending an application for an interim partial property settlement.[137] The parties put submissions at the hearing of the appeal in support of their respective positions.
[136] Appeal ts 146.
[137] Appeal ts 137 - 138.
While the submissions used the language of a 'stay', the correct nomenclature is, of course, a 'suspension' of the order, in accordance with s 15 of the Civil Judgments Enforcement Act 2004 (WA). As with a stay, it is necessary that there be 'special circumstances' justifying a suspension.
In all of the circumstances of the present case, we are satisfied that there are such special circumstances and that, while there should be an order for restitution, it should be stayed pending determination of the retrial or a further order of the Family Court of Western Australia.
Our reasons for so concluding are as follows.
First, the order for restitution in the present case is to be made against the successful applicant. That, of itself, is a particularly unusual circumstance, in relation to which there is no precedent.[138] The appellant's success on appeal at least makes it strongly arguable that she will obtain an order for alteration of property at least as favourable as that which was ordered by the learned trial judge. If that were not so she would be ill-advised to proceed with the retrial.
[138] Both Lissenden and Sterling Realty were decisions in relation to a preliminary issue and in Karabotsos the appellant's damages were increased on appeal, so the issue of the position pending a retrial did not arise.
Secondly, there is no doubt, based on the unchallenged findings of the learned trial judge in relation to the other issues determined by her Honour, that the appellant's application under s 205ZG of the Family Court Act 1997 (WA) was always going to result in an alteration of property in the appellant's favour. It is only the extent of the alteration that was in issue. The respondent did not contend otherwise.
In the proceedings before the learned trial judge, for example, the respondent proposed that a payment to the appellant of $1,800,000 (including the discharge of the Suburb A Debt) would reflect an appropriate alteration of their property interests.
Thirdly, the clearly disparate asset position of the parties prior to the trial (see [146] to [147] above) was such that, without being suspended, an order for restitution would inevitably cause the appellant hardship. Leaving aside the amount allocated in her assets for paid legal fees ($276,000) and the value of the Kangaroo Superannuation Fund ($638,911), the appellant had very little in the way of assets. Her residual assets amounted to $307,656.[139] Those assets were significantly less than even the appellant's share of the Suburb A Debt.
[139] Reasons [200].
Indeed, given that, of the total sums paid by the respondent for the appellant's benefit, $579,550.39 was attributable to paying off the Suburb A Debt, in the absence of any further evidence it may be confidently inferred that the appellant would be unable to meet the obligation to provide full restitution pending the retrial. That would mean, as Tobias and McColl JJA observed in Hume v Walton [No 2], that if a stay is not granted, it is probable that the appellant would be deprived of the opportunity to pursue the retrial.[140]
[140] Hume v Walton [No 2] [20] (Tobias & McColl JJA).
Finally, in our view, the necessity for a retrial in the present case was, largely, brought about by the respondent's conduct of the proceedings below, and in particular, his failure to disclose the 2016 Deed. While we would not allow the application to adduce the evidence of the Deed on the appeal, the fact of its non-disclosure may nevertheless be taken into account for these purposes. As we have said at [107] above, the existence of that deed raises a number of outstanding questions, and had it been properly disclosed, and its impact assessed at first instance, the need for a retrial (and indeed the appeal itself) may have been avoided.
In expressing these conclusions, we recognise that there is a prospect that, depending upon the outcome of the retrial, the exercise of the Court's discretion might be less favourable to the appellant.[141] Nor, of course, given the potentially changed circumstances, would the respondent be bound by the position he took at the first trial. In this regard, particularly in relation to the ABC Family Trust, there is the potential that the Court might conclude that none of the assets of the Trust are the respondent's 'property'.[142] How such a conclusion might be reflected in the overall exercise of the Court's discretion would remain to be seen. It is sufficient to note that it cannot be assumed that the outcome would be the same, or more favourable, from the appellant's perspective on the retrial.
[141] A risk referred to by the Court at the conclusion of the first day of the hearing of the appeal (Appeal ts 103).
[142] See [92] above.
Nevertheless, the risk that that might occur is better addressed by the Family Court of Western Australia upon the remitter, in light of the likely time to trial and the circumstances then prevailing before that court. In this regard, the respondent's submission that there should be some form of interim adjustment made pending the retrial is a matter best left to the Family Court of Western Australia. It would be unhelpful, in our view, to bind the Family Court of Western Australia to a particular course in that regard.
If the respondent has concerns that funds to which he may become entitled might be dissipated prior to the retrial, those are matters than can be properly addressed, in light of all of the available material, before the Family Court of Western Australia. For this reason, we would order that the order for restitution should be stayed pending the retrial or further order of the Family Court of Western Australia. Such an order affords the Family Court of Western Australia the greatest latitude in determining what is in the interests of justice.
Finally, while not a matter justifying a stay of the restitution orders, preserving the status quo between the parties might have the added benefit of providing better conditions within which the parties might endeavour to settle their disputes without the added financial and emotional cost of a retrial.
Conclusion and Orders
For the above reasons, there should be orders that:
(a)the respondent's application to adduce additional evidence be dismissed;
(b)the appeal be allowed;
(c)the orders made by the Family Court of Western Australia on 2 February 2018 be set aside;
(d)the matter is remitted to the Family Court of Western Australia for retrial before a different judge;
(e)the appellant do pay to the respondent the sum of $2,109,537.55, together with interest by way of restitution;
(f)the enforcement of the order for restitution be suspended pursuant to s 15 of the Civil Judgments Enforcement Act 2004 (WA) pending the determination of the retrial or further order of the Family Court of Western Australia.
We would hear the parties in relation to the final orders, including as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JS
Research Associate to the Honourable Chief Justice Quinlan31 JANUARY 2020
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