Coventry & Coventry & Smith
[2004] FamCA 249
•24 March 2004
[2004] FamCA 249
JFCOVENT
FAMILY LAW ACT 1975
IN THE FULL COURT
OF THE FAMILY COURT OF AUSTRALIA
AT SYDNEY
Appeal No. EA44 of 2003
File No. SYF3688 of 2001IN THE MATTER OF:
ANTHONY WARREN GARDINER COVENTRY
Appellant/Husband
- and -
RUTH COVENTRY
Appellant/Other Party
- and -
SHARON ANNE SMITH
Respondent/Wife
REASONS FOR JUDGMENT
BEFORE: Ellis ACJ, Holden and Brown JJ.
HEARD: 8th day of September 2003
JUDGMENT: 24th day of March 2004APPEARANCES: Mr Broun QC with Mr Ladopoulos of counsel, instructed by Watson McNamara Watt, Solicitors, 156 Beardy Street,
Armidale NSW 2350, appeared on behalf of the appellant husband and on behalf of the appellant other party.Mr Kirk SC with Mr Houston of counsel, instructed by
Abbott Pardy & Jenkins, Solicitors, 97 – 101 Faulkner Street, Armidale NSW 2350, appeared on behalf of the respondent wife.
Catchwords: FAMILY LAW – APPEALS – Property – Equity – Construction of trust deed – Existence of residual third party interests in the Trust – Scope of trustees powers to amend trust deed – Variation of trust deed and improper purpose – s.106B Family Law Act 1975 – Assessment of contributions - Appeal by the husband and his mother against the trial Judge’s interpretation of certain provisions of the E J MacLean Settlement No 1 – Whether the husband’s interest in the E J MacLean Settlement No 1 was vested or contingent - Whether distributions of the Trust capital could be made to other named beneficiaries in addition to the principal beneficiary - Whether the trial Judge erred in setting aside a deed of variation of trust pursuant to s.106B of the Family Law Act 1975 was valid – Whether the husband’s mother possessed any “moral”, residual or equitable interest in the E J MacLean Settlement No 1 – Whether the existence of such “moral”, residual or equitable interests was a contribution that ought to be considered in the husband’s favour pursuant to s.75(2)(o) – Whether the trial Judge erred in assessing the parties’ contributions – Whether an adjustment pursuant to s.79(4) on the basis of relevant s.75(2) factors was appropriate in the circumstances.
Construction of the trust deed – Whether the trust deed distinguished between and thus created a separate trust of capital (“the Trust Fund”) and trust of income – Whether the husband’s interest in the Trust Fund was vested or contingent - Whether at the distribution date the husband was the sole eligible beneficiary of the Trust Fund – Application of the Rule in Phipps v Ackers - Significance of the husband taking his interest in the Trust Fund in default of appointment.
Held: On its proper construction, the trust deed, in the circumstances, created in the husband’s favour a vested interest in the Trust Fund which is subject to being divested on the occurrence of a condition subsequent, namely the death of the husband prior to the distribution date. Thus, a contrary intention not having been expressed in the deed, upon the death of the husband’s father, the husband’s interest in the Trust Fund vested, subject to being divested if he died prior to the distribution date.
An alternate view is that the husband, as a taker in default of appointment, acquired a vested interest that was subject to divestment in the event that an appointment pursuant to Clause 3(a) of the deed was made. (It was common ground that, prior to the death of the husband’s father, no such appointment had been made).
Phipps v Ackers (1842) 9 Cl & F 583; 8 ER 539
Collins v Equity Trustees [1997] 2 VR 166
Doe dem Willis v Martin (1790) 4 Term Rep 39; 100 ER 882
Heron v Stokes (1842) 2 Dr & War 89
Commissioner of Succession Duties (SA) v Isbister (1941) 64 CLR 375
Commissioner of Stamp Duties (NSW) v Sprague (1960) 101 CLR 184
Neill v Public Trustee [1978] 2 NSWLR 65
Permanent Trustee Co of New South Wales Ltd v D’Apice (1968) 118 CLR 105Construction of the trust deed – Scope of the trustee’s power to amend or resettle the trusts of the E J MacLean Settlement No 1 - Whether the trustee’s actions were within power – Whether the provisions of the trust deed permitted revocation of the husband’s power of appointment – Whether the trust deed permitted amendment of the distribution date – Whether the trustee’s actions were motivated by improper purpose.
Held: The trustee lacked power to revoke the husband’s power of appointment, though the distribution date could be altered. The trustee’s actions were beyond power and were vitiated by improper purpose.
Hutchins v Hutchins (1867) 10 LR Eq. 453
Kearns v Hill (1990) 21 NSWLR 107
Davidson v Davidson (No 1) (1991) FLC 92-197
Whether the husband’s mother possessed any residual interest in assets of the E J MacLean Settlement No 1 – Whether trial Judge ought to have taken into account irregularly executed and unregistered share transfers in assessing the husband’s father’s intentions as to the distribution of assets of the E J MacLean Settlement No 1 – Whether the husband’s mother’s contributions to the acquisition of assets of the E J MacLean Settlement No 1 were a factor that ought to be considered in the husband’s favour pursuant to s.75(2)(o).
Held: The trial Judge did not err in rejecting the contention that the husband’s mother possessed certain unquantifiable “moral”, residual or equitable interests in the assets of the E J MacLean Settlement No 1. It was not appropriate to take into consideration the husband’s mother’s purported residual interests in the assets of the E J MacLean Settlement No 1 pursuant to s.75(2)(o).
Baumgartner v Baumgartner (1987) 164 CLR 137
Muschinski v Dodds [1986] 160 CLR 583Application and scope of s.106B Family Law Act 1975 – Whether relocation of s.106B to Part XIII Family Law Act 1975 by the Family Law Amendment Act 2000 indicated a legislative intention that s.106B be relevant only to enforcement – Principles of statutory interpretation – Family Law Amendment Act 1983 – whether s.106B could be used to enlarge the pool of assets available for distribution.
Held: Amendments to then s.85 Family Law Act 1975 by Family Law Amendment Act 1983 modified its application from “proceedings under this Part” to “proceedings under this Act”. Relocation of s.85 to Part XIII Enforcement and reinsertion as s.106B did not limit its application to enforcement only. Section 106B applicable where the relevant deed of variation was executed so as to move assets from the reach of an order of the Family Court of Australia.
Acts Interpretation Act 1901 (Cth)
Family Law Act 1975 (Cth)
Family Law Amendment Act 1983 (Cth)
Family Law Amendment Act 2000 (Cth)
Trade Practices Commission v Ansett Transport Industries (Operations) Pty Ltd; Ansett Transport Industries Ltd; Shellbank Holdings Pty Ltd; Sixty Martin Place Pty Ltd; and Avis Rent-a-Car System Pty Ltd [1978] 20 ALR 31Whether the trial Judge erred in assessing contributions – Whether proper consideration was given to the disparity of assets at the date of marriage – Significant financial contribution by the husband – Large pool of assets – Wife’s contributions as homemaker and parent.
Held: No appellable error by the trial Judge demonstrated in her assessment of the respective contributions of the parties.
Norbis v Norbis (1986) 161 CLR 513
CDJ v VAJ [1998] 197 CLR 172
De Winter and De Winter (1979) FLC 90-605
Mallet v Mallet (1984) 156 CLR 605
Figgins and Figgins (2002) FLC 93-122
Webster v Webster (1998) FLC 92-832
Whether an adjustment in the wife’s favour pursuant to s.79(4) in respect of relevant s.75(2) factors was appropriate – Whether the words “the order” referred to in s.79(2) means the order derived from a consideration of the respective contributions of the parties.
Held: The words “the order” appearing in s.75(2) refers to the order made pursuant to s.79, having regard to all the matters referred in the section from paragraphs (a) to (g), although the Court is restrained from making an order unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Russell v Russell (1999) FLC 92-877
JEL and DDF (2001) FLC 93-075
Phillips and Phillips (2002) FLC 93-104
Appeal dismissed.
Written submissions to be filed in relation to the costs of the appeal.
INTRODUCTION
1.This is an appeal by the husband and Mrs R Coventry (“the appellants”) against certain paragraphs of the order made by Moore J. on 23 April 2003.
2.At the commencement of the hearing of the appeal, senior counsel for the appellants abandoned Grounds 19, 21 and 22 contained in the Amended Notice of Appeal. As a consequence, the appeal of the husband was limited to an appeal against paragraphs 5, 6.1, 6.2, 6.3, 10 and 11 of the order of the trial Judge. The effect of her order was that the net value of the assets of the parties, found by her Honour to be $28,064,396, excluding superannuation, was divided as to 15 per cent to the wife and as to 85 per cent to the husband. In addition, the husband was ordered to pay to the wife a weekly sum by way of spousal maintenance for a limited period.
3.Mrs R Coventry appeals against paragraphs 5, 6.1, 6.2 and 6.3 of the order of the trial Judge.
4.The actual order of her Honour is as follows:-
“1.The child G born 23 December 1992 live with her mother and her mother be permitted to relocate with her to the Pretty Beach area of the Central Coast of New South Wales.
2.The child have contact with her father at all reasonable times agreed and failing agreement as follows:
(a) during school term:
(i)on any long weekend involving a public holiday on the Friday or the Monday by travelling to Armidale by air; and
(ii)on alternate weekends, in addition to any long weekend referred to in (i), from Friday after school until 6pm Sunday provided her father exercise that contact in the area between the environs of Newcastle and Port Stephens to the north and the environs of metropolitan Sydney to the south;
(b) during school holidays:
(i)for all of the June/July and September/October school holidays each year; and
(ii)for one half of the Easter school holiday period each year provided that include the period from Good Friday to Easter Monday each alternate year commencing 2003; and
(iii)for one half of the Christmas school holiday period each year, to be the first half during 2003 and alternate years thereafter;
(c) at all times:
(i) by telephone at reasonable times and by email and letter.
3,The father provide to the mother seven (7) days notice in writing in advance of his intention to exercise contact pursuant to order 2(a)(i) and (ii).
4.Each party have responsibility for the day to day care, welfare and development of the child while in the care of that parent.
5.The husband pay to the wife the total sum of $3,877,000 as follows:
(i)$1,500,000 on or before one (1) month from the date of these orders; and
(ii)$2,377,000 on or before four (4) months from the date of these orders.
6.By way of implementation of Order 5 hereof:
6.1 It is declared that:
(i)the purported Deed of Variation dated 13 November 2000 executed by the second respondent is invalid in that:
(a)the purported variation (in clause 1) in respect of clause 10 of the E J MacLean Settlement No 1 Trust Deed of 26 April 1974 is beyond power;
(b)the purported variations (in clauses 2 and 3) in respect of clauses 1(b) and 4(b) of the Trust Deed are invalid, the exercise of power being vitiated by improper purpose and/or irrelevant consideration.
(ii)the husband -
(a)has the right, pursuant to clause 10 of the Trust Deed, to remove the trustee (namely the second respondent) and appoint another person/entity as trustee;
(b)has the right to request the appointee to vary the Trust Deed to restore the terms of the Trust Deed to that which existed immediately prior to 13 November 2000;
(c)has the right to request that the appointee determine an immediate distribution date pursuant to clause 1(b)(iii) of the Trust Deed and distribute the Trust Fund to himself as the principal beneficiary pursuant to clause 3(b)(i).
6.2The Deed of Variation of the E.J. MacLean Settlement No 1 Trust Deed, dated 13 November 2000 and executed by the second respondent, Mrs Ruth Coventry, be set aside pursuant to s 106B of the Family Law Act.
6.3If the payment of the final instalment under Order 5 hereof is not made within one month of the time set for compliance, the husband forthwith execute a Deed removing Mrs Ruth Coventry as trustee of the E.J. MacLean Settlement No 1 and appoint in her stead a trustee to be determined by further orders of this Court upon such terms and conditions as are further determined by orders of this Court.
6.4By consent of Mrs Ruth Coventry, pending compliance with order 5 in full or pending her replacement as trustee under order 6.3 hereof, Mrs Ruth Coventry take no steps to administer the E.J. MacLean Settlement No 1 in any way so as to prejudice compliance with these orders.
6.5The husband not exercise and an injunction be granted restraining him from exercising the powers vested in him pursuant to clause 10 of the Trust Deed unless and until there has been compliance in full with Order 5 hereof.
6.6For the purpose of implementing these orders the trustee of the E.J. MacLean Settlement No 1 give consideration to and, if thought appropriate, take such steps as may be necessary to make distributions of capital and/or income to the husband provided any such distributions made shall be made to the trust account of the solicitors for the husband (Watson McNamara & Watt) to be held in his name but shall not be distributed to him pending payment of the sums due to the wife under these orders or by any further order of this Court.
7.In addition to the payment referred to in Order 5, the wife is entitled to retain:
(a)all furniture, furnishings, motor vehicles and other chattels currently in her possession;
(b)all monies standing to her credit in any bank accounts and any other funds under her control.
8.Subject to these orders, the husband is entitled to retain:
(a)his interest under the E.J. MacLean Settlement No 1;
(b)all realty presently registered in his name;
(c)all money standing to his credit in any bank accounts in his name;
(d)all furniture, furnishings, motor vehicles and other chattels currently in his possession;
(e)the 17,713 “B2” class preference shares held by him in Lynoch Pty Limited;
(f)his interest in a CML life policy.
9.The property listed hereunder be charged as security for the sum payable pursuant to order 5 and any interest payable by order 10 pending payment in full and the husband will forthwith upon the request of the wife execute such documents as may be reasonably required by the wife, including mortgage documents, consent caveats and/or such other security documents she may seek, in registrable form:
(a)the real property at 43 Rowlands Road, Armidale, New South Wales;
(b)the real property known as ‘Eversleigh’ at Armidale, New South Wales;
(c)the CML insurance policy.
10.If the sums referred to in order 5 are not paid in the time specified, in addition to any other remedy the wife may have, the sum owing from time to time shall from the date when payment was to be made attract interest calculated and payable on monthly rests at the rate prescribed from time to time in the Family Law Rules.
11.Pending payment of the sum referred to in Order 5 in full, the husband pay to the wife the sum of $1,200 per week by way of spousal maintenance provided that upon payment of the final instalment due under Order 5, the husband shall be entitled to a credit against any interest payable of an amount equivalent to the total spouse maintenance paid from the date the wife received the first instalment of $1,500,000 and if the amount payable to the wife by way of interest is less than the spousal maintenance paid, she not be obliged to refund the difference.
12.The exhibits tendered in Court are to be returned at the expiration of one month from this day to the party tendering same on the condition they be returned to the Court if required.
13.In relation to documents produced to the Court on subpoena the solicitor for the party who caused the subpoena to issue uplift those documents no later than seven days from this day and forthwith take all steps necessary to return the documents to the person or corporation entitled to them.
14.The matter is to be removed from the list of cases awaiting final hearing.
IT IS NOTED that each party will retain his/her entitlement to superannuation funds of which that party is presently a member.”
5.In the Amended Notice of Appeal, the husband set out the order which he sought as follows:-
“1. That the Appeal be allowed.
2. …
3. That in lieu of Order 5, an order be made as follows:
5.The husband pay to the wife the sum of $1,500,000.00 on or before one (1) month from the date of these orders.
4. That Orders 6.1, 6.2 and 6.3, be discharged.
5.That Order 11 be varied to substitute the figure of $600 per week rather than the figure of $1,200 per week specified in the Order.”
6.Mrs R Coventry set out in that Amended Notice the order which she sought as follows:-
“6. That the Appeal be allowed.
7. That in lieu of Order 5, an order be made as follows:
5.The husband pay to the wife the sum of $1,500,000.00 on or before one (1) month from the date of these orders.
8. That Orders 6.1, 6.2 and 6.3, be discharged.”
BACKGROUND
7.The relevant background, as it emerges from the judgment of the trial Judge, is as follows:-
8.As the date of the hearing before the trial Judge, the wife was aged 42 years and the husband 43 years. They commenced to live together in mid-1986 and, following a short separation in the early part of their relationship, married on 31 March 1991. They finally separated on 12 October 2000. Their daughter, G, was born on
23 December 1992.
9.The trial Judge made the following findings as to the circumstances of the parties prior to their marriage:-
“6.Ms Smith, now 42, grew up in Newcastle where members of her family still live. She left school at the age of 17 and obtained employment as a travel consultant. She resumed her education in 1979 and moved to Armidale in 1980 to pursue her enrolment at the University of New England, though she withdrew before the year was out and returned to work in Newcastle. In 1984 she went to live in Armidale again with the intention of resuming her studies and while there she met Mr Coventry in late 1985.
7.Mr Coventry, now 43, was born in Armidale where his father operated a number of grazing properties, through certain entities he established over time, until his death in June 1995. Mr Coventry is the youngest of four children and the only son. He graduated from the University of New England with a degree in Financial Administration after completing a private school education, and his general education thereafter included some time spent in Italy observing the processes of the woollen mills who used the fine wool the properties produced. In 1983 he began work on the properties as a station hand, with his father firmly in control of business, and it was in those circumstances that he met Ms Smith in late 1985. He later qualified as a wool classer and still later took on management responsibilities within the grazing business.”
10.In considering the relevant background, the trial Judge noted the history of provision made for the husband by his father, Mr F S Coventry, during his lifetime which she summarised as follows at the commencement of her reasons:-
“9.Until the late 1940’s Mr FS Coventry operated, in partnership with his brother, certain grazing properties in the Armidale district. After a dissolution of the partnership and distribution of the assets, he continued to operate properties on his own account or, it may be, in partnership with his wife. In 1957 Lynoch Pty Limited (Lynoch) was incorporated. Later, in 1974, he established Selin Pty Limited (Selin). At the same time, there were established four Trusts, known as the MacLean Settlements Nos. 1, 2, 3 and 4. The Trusts were identical save that each named one of the four Coventry children as the principal beneficiary. Mr Warren Coventry was (and is) the principal beneficiary of the MacLean Settlement No 1 and his three sisters, in turn, the principal beneficiary of the others. Other beneficiaries were described by reference to their relationship to the principal beneficiary, including spouses of the principal beneficiary. Mr FS Coventry and his wife were the trustees of those four Trusts and, following her husband’s death, Mrs Coventry became the sole trustee. Lynoch’s assets consist of a number of grazing properties, with an agreed gross value of over $30 million, in the Armidale district. Its directors are presently Mr Coventry (appointed in 1990) and his mother. All of its equity and voting shares are held by Selin. Selin’s assets are its shares in Lynoch. Selin’s shares are allotted between various classes to which various rights attach, but only the 100 C class shares have the right to vote and the full equity rights (since September 2000) are attached to the 52 J class shares held by the No 1 Trust of which Mr Coventry is the principal beneficiary. Since the death of Mr FS Coventry, the directors of Selin have been Mr Coventry and his mother.”
11.At the date of the commencement of the relationship, the wife was employed as a travel consultant in Armidale and the husband by Lynoch Pty Limited (“Lynoch”) as a station hand, living at ‘Laura’. In mid-1986, the wife left her employment and moved to ‘Laura’, receiving, for a time, unemployment benefits. Following the separation of the parties in late 1988, the wife returned to live in Armidale.
12.Her Honour then recorded:-
“11.Shortly afterwards she purchased a property in Brown Street for $31,500. To do so, she used $5,000 received from her father and she borrowed the balance. Around this time her father also gave her a car. Notwithstanding her departure from the property, she and Mr Coventry maintained their relationship. When they reconciled, he moved to town and lived with her at her Brown Street property and continued his employment in the district with Lynoch. She obtained work as a waitress and also did some part time work at a delicatessen. She put her money into the repayment of the loan and she contributed towards household expenses with Mr Coventry. She enrolled part time at TAFE to train as a travel consultant and at the end of 1989 she obtained full time work with a local travel agent while she completed her course. Over a period of two years she carried out renovations her Brown Street property which, from her description, were fairly substantial. In November 1990 she sold the property for $61,500, a relatively substantial gain over the time she held it.”
13.In early 1991, the parties acquired, in their joint names, a property at Donnelly Street, Armidale for $83,000, of which the wife contributed $32,800 from the proceeds of sale of the Brown Street property. Her Honour found that the balance of those proceeds of sale were spent on living costs.
14.In her consideration of the husband’s financial position at the date of commencement of cohabitation, her Honour said:-
“12.Mr Coventry’s financial position when they began living together has to be seen in the context of much earlier events. His evidence established that he was a beneficiary of three Trusts (and the No 1 Trust), all eventually wound up, and over the years he benefited financially from those entitlements. The extent of that can be seen from a short account of dealings related to those Trusts over time:
· DM Shand Trust
In 1963 the DM Shand Trust was established for his benefit. His mother was the trustee and it was to vest when he turned 25 or earlier at the trustee’s discretion. A grazing property and blocks of land were then acquired by the Trust. The grazing property was sold in the early 1980’s and the proceeds of $268,850 were advanced as an unsecured loan to Lynoch. By mid-1995 the amount standing to the credit of the Shand Trust with Lynoch was $285,662 and it retained some land. An arrangement was entered into about the monies lent to Lynoch. As Mr Coventry explained it, journal entries reflected Lynoch repaying that money to the Trust, the Trust paid him, he advanced some of the money ($237,500 overall) by way of an interest-free loan to his wife, and Lynoch borrowed that money from her at a rate of 10% interest. The remainder of the money (a total of $48,162) was advanced by him directly to Lynoch. As Mr Coventry put it, this arrangement was devised ‘to take advantage of the lower overall tax rate of my wife…’. The blocks of land retained after the sale of the grazing property were sold in the late 1990’s, Mr Coventry received the proceeds of those sales, and he applied the money towards reduction of the debt raised to acquire a property at Faulkner Street, Armidale, to which reference will be made shortly. The Trust was wound up at some point.
· The Harmsworth Trust and the Buckley Trust
There were two further Trusts established for his benefit at an earlier time – the Harmsworth Trust and the Buckley Trust. By some means not apparent and no doubt irrelevant, those Trusts accrued credits in loan accounts with Selin and Lynoch. In 1997 the Trusts were wound up and the credits established with Selin and Lynoch were transferred to Mr Coventry as the beneficiary. He used these funds to discharge a bank loan, raised after separation to acquire a property at Rowlands Road, Armidale.
· The MacLean Settlement No 1
Finally, Mr Coventry had his interest as principal beneficiary in the MacLean Settlement No 1. He has received no distribution of capital or income from the Trust since its establishment. His interest in this Trust is at the centre of the controversy agitated here and issues related to it will be discussed in due course. But it can be observed here that while the course of all four Trusts moved in parallel over the years since their establishment in 1974, events in September 2000 saw the path of the other three Trusts diverge from that of his own.”
15.Thereafter, her Honour recorded the details of numerous real estate transactions by the parties and that, in June 1995, the husband’s father died. Her Honour further recorded:-
“19.It was while they were living at ‘Branga Park’ that Mr FS Coventry died. Probate was granted towards the end of that year. The executors of the Estate were Mrs Ruth Coventry, Mr Warren Coventry and one other. Documents filed in the Supreme Court reflect an Estate with a net value of about $3.37 million. By his Will, executed in April 1995, Mr FS Coventry made certain bequests of relatively small amounts of money away from his family. To his son he gave a grazing property known as ‘Eversleigh’, a life policy and half the shares he held in Lynoch and Selin. To his three daughters he gave 1/3 share of the sale proceeds of a property known as ‘Red Hill’ and 1/3 of the residue of his Estate. To his wife he gave the other half of the shares he held in Lynoch and Selin, 2/3 share of the sale proceeds of ‘Red Hill’, a property at Sapphire Beach, and 2/3 of the residue of his Estate. Of course the great bulk of the property built up during his lifetime was held by Lynoch whose equity and voting shares were held by Selin. The capacity to control Selin lay, after his death, with the 100 C class shares, the only shares thereafter entitled to vote, and the full equity shares at that time were the 52 J class shares held by Trust No 1 and the K, L and M class shares held as to 16 each by Trusts 2, 4, (sic) and 4 respectively.”
16.Her Honour found that:-
“21.… After his father’s death, Mr Warren Coventry took a significant interest in the group’s financial position and the companies’ finances, though major issues such as tax planning were then dealt with by him and his mother. On his recollection of it, both were involved in the long term decision making of the company. I accept this. I accept, therefore, that after his father’s death Mr Warren Coventry assumed the management of the properties in a practical sense, that he also became involved in the financial and administrative areas of operation, while his mother continued to undertake some bookkeeping tasks but also be involved with her son in issues such as tax planning and other long term financial decisions. She was (is), of course, a director of both companies.”
17.After G commenced her schooling in 1998, the parties agreed that the wife would return to work. Her Honour found:-
“27.After their daughter started school in 1998 it was agreed, at Mr Coventry’s suggestion, that Ms Smith would return to work. At her suggestion she was employed by Lynoch for payment and was involved in a range of activities: planting and landcare, stock work and weed control, and she was the company’s occupational health and safety officer and mediator for staff disputes. On Mr Coventry’s account of her activities, she also provided accommodation for employees of Lynoch at their home in Armidale. But he said she was paid a wage for all that she did, and the thrust of his evidence was to diminish the extent of her role in Lynoch. Probably there was some exaggeration in the detail she gave about the work undertaken (eg number of trees planted), but I accept she did work of the kind identified, that she contributed her earnings to the family’s living expenses, and that she continued at the same time to run their home and care for their daughter.
28.Indeed, picking up this last finding, I should say the evidence established to my satisfaction that Ms Smith was the one responsible throughout for running their household on the domestic front, attending to the chores necessary, with some limited assistance from a friend in return for accommodation while they lived at Uloola, and she was the parent primarily responsible for their daughter’s day to day supervision and care after her birth.”
18.Following the separation of the parties, the husband remained at the Faulkner Street, Armidale property for a short period before moving to live at ‘Branga Park’.
19.Her Honour went on to find:-
“30.He arranged to pay $1,220 per fortnight from his salary for the support of his wife and daughter. She also retained use of the BMW motor vehicle, acquired earlier in circumstances outlined by Ms Smith and, for a time, she had the use of a petrol account until he withdrew it. In November 2001 the vehicle, owned by Lynoch, was repossessed at the instigation of Mrs Ruth Coventry in circumstances aired in some detail at the hearing. Some weeks after the repossession, an amount of $25,000 was provided by Mr Coventry for the purchase a replacement vehicle.
31.In early 2001 Mr Coventry acquired a home at Rowlands Road, Armidale for $305,000. He initially borrowed all of the funds necessary from the bank. However, he later discharged that loan in these circumstances. As he explained it, Ms Smith continued to receive interest on the $237,500 advanced to Lynoch until August 2001. The interest, he said, was taxable in her hands and he had a mortgage to pay with no tax advantage to himself. So he demanded repayment from his wife, gave instructions for the appropriate journal entries to be made in the books of Lynoch to reflect that repayment, and demanded repayment from Lynoch. With the $237,500 in his hands, he used the money to reduce the mortgage on his Rowlands Road property. He has since discharged the whole of the debt from funds owed to him by Lynoch and the property is now unencumbered.
32.In April 2001 Uloola was sold for $390,000, giving the parties a net receipt of $377,105. At that time, by agreement, Ms Smith applied those funds towards the purchase in her name of a property at Mann Street, Armidale for $378,000. At the time, she borrowed $20,000 from a bank to buy furniture and pay for moving expenses. She retained this property for about a year and sold it in May 2002 for $387,000 in anticipation of moving to the Central Coast. After the usual adjustments she discharged loans she had taken out, not only to cover moving expenses and the purchase of furniture but also to pay legal fees related to these proceedings. She initially retained the balance but that has since been spent. This expenditure was the subject of submissions about the extent of the assets now to be distributed and I shall return to it later.
33.Since the sale of Mann Street, Ms Smith has rented a home in Armidale for herself and G. She has retained some of the furniture the parties’ acquired (see exhibit 10).”
20.Her Honour then turned to consider other aspects of relevant background, more related to the Coventry family arrangements over the years, recording:-
“35.Much has been said of the intentions of Mr FS Coventry and so it is relevant to consider what actions he took during his lifetime along with the documents that discussed or reflected that intention. I have already referred to the establishment of the Shand Trust and the Buckley and Harmsworth Trusts which benefited Mr Coventry and I have also referred to the incorporation, in 1957, of Lynoch which has held most of the grazing properties acquired thereafter. Developments since then reflect four seminal events:
· in1974 Selin was incorporated and the four discretionary Trusts created;
· in February 1995 there was some activity concerning the 52 C class (voting) shares in Selin held by the No 1 Trust;
· in September 2000, amongst other activity by Lynoch and Selin, there was a buy-back by Selin of the 16 K, 16 L, and 16 M class shares held by Settlements 2, 3, and 4 and transfers of the 16 C class shares held by each of these Trusts to Mrs Ruth Coventry; and
· in November 2000 Mrs Ruth Coventry, in her capacity as trustee of the No 1 Trust, executed a Deed of Variation to the Trust Deed.”
21.In the course of that consideration, her Honour made the following findings:-
· The four trusts referred to in paragraph 10 hereof were constructed as discretionary Trusts with the husband’s parents as trustees.
· Having regard to the provisions of Clause 10 of the Trust Deed of the E J MacLean Settlement No 1, subsequent to the death of his father, the power to remove and appoint trustees vested in the husband.
22.Her Honour went on to find:-
“57.Significantly for present purposes, other activity on that same day [February 1995] related to the C class shares of Selin. But if the intention was to transfer the 52 C class shares held by Mr and Mrs Coventry in trust for the No 1 Trust to Mr Warren Coventry and then have him transfer 2 C class shares to his mother, it was, to adopt the expression of Mr Broun, totally messed up. The minutes of the meeting of Mr and Mrs Coventry as trustees of the No 1 Trust record the Trust to have been created between the settlor, the trustees and, plainly an error, one of Mr Coventry’s sisters as the principal beneficiary of the No 1 Trust. The resolution of the trustees was (purportedly) to transfer 52 C class shares in Selin held by the No 1 Trust to their son, Mr Warren Coventry. The share transfer form is signed by those concerned in the wrong place. The transfer form for the 2 C class shares in Selin from Mr Coventry to his mother is also signed in the wrong place. These purported transfers were never registered in the records of the company. The transfer forms were never lodged for assessment of Stamp Duty. The original transfer forms cannot be found, as the search by Mr Mettam from their accountants’ firm attests.
…
60.All that notwithstanding, the annual returns for Selin for 1995 to 1999 reflect Mr Coventry as being the legal and beneficial owner of 50 C class shares. Mr Croft changed the statutory records of the company in 2000, supposedly to restore the position as it was prior to the February 1995 purported resolution of the trustees, apparently of his own motion and without instructions from anyone in the Coventry family. Mr Croft did not give any evidence at the hearing on this or any other matter in which he had a hand, but his activity is the subject of correspondence (see pages 321–322 and pages 326-331 exhibit book).
61.It is apparent, from various documents generated subsequent to February 1995, that advisers proceeded on the basis that the transfer of the 52 C class shares to Mr Coventry and the subsequent transfer of the 2 C class shares to his mother had been effected. An example is the letter from the Coventry group’s solicitors, Watson McNamara & Watt, dated 19 May 1995 to the group’s accountants, Roberts & Morrow, enclosing minutes of the meetings of 22 February 1995 of Lynoch and Selin and share transfer forms related to these purported transfers (see page 185 exhibit book). Another example is a document prepared just after the death of Mr FS Coventry and headed ‘Case for Opinion’, dated 26 July 1995, from Watson McNamara & Watt (see pages 162-164 exhibit book). Further examples are the Brief to Advise to Mr Conti of counsel in January 1996 and another document given to Mr Broun QC towards the end of 2000. But of course if Mr Croft’s actions had the result of correcting records in recognition of the imperfect arrangements of February 1995, all of the 52 shares would go back to her in her capacity as trustee. In other words, if the activity was ineffective to transfer 52 C class shares to Mr Warren Coventry in his own right, he could not then transfer 2 of them to his mother in her own right.
62.The activity of February 1995 has implications here and how the position is to be viewed now should be squarely stated. I propose to do so by accepting that presently the 52 C class shares are held by Mrs Ruth Coventry as trustee for the No 1 Trust; that is to say, the pre-February 1995 position has been restored in records and the purported transfers of February 1995 were ineffective, despite reflection to the contrary in documents generated subsequently, including the annual returns of the company for a number of years.”
23.Her Honour then recorded that, in May 2000, a draft proposal was prepared for a buy back of the K, L and M class shares in Selin Pty Limited (“Selin”) from the Trusts of the husband’s sisters. She noted that the arrangement to achieve this end involved the co-operation in tandem of both Lynoch and Selin. She found:-
“91.Nonetheless, the essential steps appear to have been these. It involved the co-operation in tandem of both Lynoch and Selin. Lynoch bought back 146 F class shares held by Selin for $66,445 per share, payable as to approximately $2.8 million in cash and the issue of a total of 69,300 redeemable preference shares. A new T class redeemable preference shares was created in Lynoch. The T class shares have no voting rights, no dividend rights and are entitled to a return of capital on or before 20 September 2025 but subject to any arrangement for earlier repayment. Selin, thereby provided with cash, resolved to buy back the 16K, 16L, and 16M class shares held by the Trusts Nos. 2, 3 and 4. The price was $200,000 per share. This tends to suggest an unfair price for the sisters - if the agreed value at the hearing is any measure - though it may be some discount was applied. Yet the evidence does not allow a finding about that one way or the other. I should say that runs counter to a submission made by Mr Kirk in the context of addressing the parties’ contributions, and there will be no need to return to it later.
92.This entitled each of those Trusts to payment of $3.2 million or a total consideration of $9.6 million. Of that amount, $1 million cash was paid to each Trust for 5 shares in the parcel of 16 and they were each issued with 22,000 redeemable preference shares for the remaining 11 shares. At the same time the remaining 3,300 redeemable preference shares were issued to Mrs Ruth Coventry. These shares were then redeemed, the consideration being the issue of the 69,300 T class shares in Lynoch. Of those, 22,000 were issued directly to each of the three sisters, not to their three Trusts, and 3,300 went to Mrs Ruth Coventry. Other transfers were made in the course of this arrangement: the B2 preference shares held by the Trusts 2, 3 and 4 in Lynoch were transferred to Mrs Ruth Coventry and, more significantly, the 16 C class shares held by each of those Trusts in Selin were transferred to her for a consideration of $1.
93.Since this arrangement was put in place, Mrs Coventry has redeemed her 3,300 T class shares. The sisters have each also redeemed 1,000 of the T class shares (they now hold 21,000 T class shares in Lynoch each). Therefore the sisters have each been paid to date a total of $1.2 million and the balance owing to them, a remaining consideration of $6 million in total, is lodged in their individual holdings of T class shares in Lynoch with the rights referred to earlier.”
24.Further, her Honour noted that:-
“94.The note of attendance at the accountants’ office to inspect documents suggests advice from Mr Croft to the sisters to seek independent advice about this arrangement but he did not hear from any advisers for them. Like Mr Croft or any other adviser involved in this transaction, Mr Coventry’s sisters did not give any evidence here. As for the price of $200,000 per share, it was said that this figure was pre-determined by Mr Croft and the family. I should note there is reference as a footnote to a document setting out the proposal (page 198 exhibit book) stating that a previous valuation was used to obtain this value and a current valuation is being organised. But if a valuation exists, it did not find its way into the evidence. Indeed, the absence of documents generated behind this transaction is highlighted by the notes of that visit. In particular, there is no document underlying the means by which the sisters came to hold the T class shares in their own right as distinct from those shares being held by their respective Trusts. Advice was given on the occasion of the inspection that the Trusts had effectively vested in the course of the buy-back. That is the conclusion Mr Flynn has moved on and I think he was right to do so. The end result allows of no other construction.”
25.Her Honour then considered the arrangements in place to enable the husband’s sisters to receive the balance of the money. On that issue, she accepted the evidence of the husband’s mother which her Honour recorded as follows:-
“95.I come then to the question of arrangements in place for the sisters to receive the balance of the money. Of course they have their rights attaching to the T class shares in Lynoch as already noted. As for any other arrangement, Mr Croft advised during the inspection visit there was no agreement for the redemption of the T class shares and the only rights were those attaching to the shares. Yet Mrs Ruth Coventry’s evidence was to the contrary. She said there is an agreement about the time for redemption. On her account of it, they are to receive a further $2 million each by payment of $100,000 each twice a year for the next 10 years provided funds are available. This assumes some significance for Mr Flynn’s valuation exercise. Absent any other direct evidence about it, I think the finding should favour Mrs Coventry’s evidence. I shall discuss the implications of this finding later.”
26.Her Honour found that after the buy back, the only full equity shares in Selin were the 52 J class shares held by the husband’s mother as trustee for the No 1 Trust, 48 C class shares held by her on her own account and 52 C class shares held by her as trustee for the No 1 Trust. Thus, her Honour concluded the husband’s mother, at the date of the hearing, controlled Selin.
27.Her Honour then considered the evidence relating to the Deed of Variation of the Trust Deed relating to the E J MacLean Settlement No 1, executed by the husband’s mother on 13 November 2000. She found that the husband was involved in the decision to vary that Trust Deed.
28.Ultimately, her Honour concluded:-
“131.In conclusion, the weight of the evidence suggests, and I find, that Mrs Coventry was motivated to make the amendments she did to the Deed by considerations irrelevant to the proper execution of the Trust. This is also supported by the reference to ‘problems’ in the document ‘Marriage Termination Settlement’ prepared for conference with Mr Broun, including the specific question posed at (iii) whether there is any other procedure available (apart from relinquishing his position of appointor) to avoid the assets of the Trust from being included in his assets in property proceedings here. That was followed by the advice from Mr Broun to take the very action she did. Those actions were taken as a result of her own views and aspirations and not by what was provided for in the Trust Deed itself, at least as I construe it. Her aim, there can be no doubt about it, was to avoid the prospect of Ms Smith securing from these proceedings any payment of capital based on consideration of Mr Coventry’s position as appointor and his ability to secure the vesting of the Trust fund. He has, like his sisters had in the other Trusts, a special place as principal beneficiary of the No 1 Trust and her actions took from him his power over the conduct of its affairs.
132.It follows from what I have said already that with the former position restored, Mr Coventry is entitled to exercise the right vested in him to remove the trustee and appoint another. He also has the right to request that the appointee vary the Trust Deed to restore the terms of the Deed to that which existed prior to the execution of the Deed of Variation. He also has the right to have an immediate distribution date determined and distribute the fund, pursuant to clause 3(b)(i), to himself as principal beneficiary. Obviously, his sisters took these steps in September 2000, the terms of their Trusts being similar to his. It also follows that the property of the Trust ought to be considered his property here.”
29.Her Honour then considered the wife’s application made pursuant to s.106B of the Family Law Act 1975 (Cth)(“the Act”) to set aside the Deed of Variation. She found that the Deed was made to defeat an anticipated order, an order that would be arrived at having regard to the husband’s rights and entitlements in the E J MacLean Settlement No 1 and that her discretion should be exercised to set the Deed of Variation aside.
30.Having determined that the property held by the E J MacLean Settlement No 1 should be considered as the husband’s property, her Honour considered the evidence in relation to the net value of the assets of the trust which she found to be $25,609,324.
31.Her Honour found that the property of the parties and the value thereof at the date of the hearing as follows:-
“Presently with Mr Coventry
43 Rowlands Road, Armidale 305,000
Less Mortgage on Rowlands Road (59,342)
Sub-total: 245,658
Eversleigh, Armidale 1,750,000
Lynoch Pty Limited – 17,713 B2 class shares 35,425
E J McLean (sic) Settlement No. 1 25,609,324
Colonial Life Policy @ 1999 47,305
Furniture 15,000
Paid legal fees 29,684
Sub-total: 27,732,396
Presently with Ms Smith
Furniture (held by wife) 10,000
VW Passat motor vehicle 25,000
Paid legal fees 237,000
Added back from sale proceeds 60,000
Sub-total: 332,000
Superannuation entitlements
Mr Coventry - Lynoch Pty Limited Employees Super Fund No. 2 162,911
Ms Smith - Colonial Rollover Fund @ 30/6/02 67,770
Sub-total 230,680Total net assets: 28,295,076
Total net assets, excluding superannuation 28,064,396”
32.Adopting the global approach to the assessment of the relevant contributions of the parties within the meaning of paragraphs (a), (b) and (c) of s.79(4) of the Act, her Honour concluded:-
“184.… I assess the parties contributions as appropriately placed within the range advocated by their counsel and set their entitlements at 12.5% of the total net assets (excluding their superannuation entitlements which they will each retain) to Ms Smith and 87.5% to Mr Coventry. On that assessment, Ms Smith is entitled to be paid $3,508,049.
185.I should say that assessment adjusts for their respective contributions to superannuation and the disparity in their current entitlements.”
33.Thereafter, her Honour identified the matters referred to in s.75(2) of the Act which she regarded as relevant, concluding her consideration of those matters as follows:-
“192.… I assess the whole of these factors, including disparity, as calling for a further adjustment in her favour of 2.5% of the net assets (excluding their superannuation entitlements) or $701,609.”
34.Her Honour then considered the wife’s claim for spousal maintenance. After referring to the relevant sections of the Act and noting that, in light of the funds the wife was to receive by way of property settlement, there could be no argument that she will be able to adequately support herself, her Honour recorded:-
“198.That said, Ms Smith does not yet have the money that will see her in this position and the practicalities suggest that will take a while to achieve. As to that, without the benefit of any specific input on it at this stage, I think four months sufficient time to devise and secure whatever the means to be adopted to satisfy the order for payment. In the meantime, she requires support. What she has received from Mr Coventry in the past is $610 per week, but that is some way behind her reasonable needs, which I set at $1,200 per week. That figure gives her an increase on what has been paid to date, obviously insufficient, but allows some pruning of the weekly expenses of her household on those claimed in her financial statement. Of course, with no child support agreement or assessment, G’s costs are rolled up in that. There can be no question about Mr Coventry’s capacity to pay it.
199.Subject to that interim periodic payment, therefore, Ms Smith’s application for spousal maintenance will be dismissed.”
GROUNDS OF APPEAL
35.The grounds of appeal as amended relied upon are:-
“A. THE TRUST
1.The Trial Judge fell into error in the interpretation of the E J MacLean Settlement No. 1 by referring to extraneous material, and by placing emphasis on the perceived intentions of F S Coventry rather than the actual effect of the document.
2.If, contrary to Ground 1, the trial judge was not in error by referring to material indicating the intentions of the late F S Coventry in interpreting the relevant Trust Deed, then the Trial Judge fell into error by not having regard to the apparent intentions of the late F S Coventry that the husband should not have control of the assets of the trust manifested by the proposed share transactions as a result of which Mrs Ruth Coventry would have had a 50% controlling shareholding of Selin Pty Ltd and the husband only 50%.
3.The Trial Judge erred in not having regard to the potential impact of the said share transactions of 1995, should stamp duty be paid and the transfers registered at some later time.
4.The Trial Judge fell into error in holding that the Deed of Variation purporting to revoke the husband’s power of removal and appointment of the trustee was beyond the power of the trustee.
5.The Trial Judge fell into error in holding that on the proper construction of the Trust Deed, after the death of Mr F S Coventry, the assets of the Trust were not held subject to a discretion of the trustees to benefit other beneficiaries, and that the discretion to benefit other beneficiaries was at an end from June 1995.
6.The Trial Judge fell into error in not acknowledging and accepting the rights, legal equitable and moral, or (sic) Mrs Ruth Coventry in respect of the Trust.
7.If the Trial Judge was correct in rejecting submissions as to the legal equitable and moral claims of Mrs Ruth Coventry in respect of the Trust, then the Trial Judge fell into error in holding that she could see no place for the arguments about Mrs Ruth Coventry’s moral rights to the property underlying the Trust and the like.
8.The Trial Judge fell into error by not taking the circumstances of the contribution of Ruth Coventry to the building up of the assets during her lengthy marriage to the late F S Coventry into account as a relevant factor under s.75(2)(o).
9.The Trial Judge was in error in concluding as a matter of fact that the husband’s three sisters exercised rights under the Trusts numbers 2, 3 and 4, to replace the trustee and to distribute the assets of the trust to themselves.
10.The Trial Judge was in error in concluding that the circumstances: that the husband had not been the instigator of the Trust; that the Trust was an inheritance rather than a moral claim; and that it would cause offence to ordinary feelings of family respect and co-operation for him to have exercised any power to remove his mother; and the unlikelihood of him doing so; did not distinguish the case from other authorities dealing with discretionary trusts under the Family Law Act.
11.The Trial Judge was in error in holding that it would be possible for a trustee of the Trust to achieve the payment of a designated sum to the husband or the wife by the liquidation of assets of Lynoch Pty Ltd.
B. SECTION 106B
12.The Trial Judge was in error in holding that s.106B can be used to enlarge the pot.
13.The Trial Judge was in error as to a matter of fact in concluding that the Deed of Variation was made by or on behalf of or by direction of or in the interests of the husband.
C. VALUATION
14.The Trial Judge reached an erroneous conclusion as to the present value of the T Class redeemable shares in Lynoch.
15.The Trial Judge was in error in assessing the net value of the number one trust as $25,609.324.
D. CONTRIBUTIONS
16.The Trial Judge erred by failing to direct attention to the connection between the contributions made by each of the parties and the building up of the assets of the parties and by failing to apply any principle or provide reasons to justify the award in respect of contributions.
17.The Trial Judge’s assessment of the contributions made by the wife and the consequential award was outside the range of a reasonable exercise of discretion.
E. SECTION 75(2)
18.The Trial Judge erred by adding any additional adjustment under s.75(2) in light of the substantial provision made from a consideration of contributions.
F. FRESH EVIDENCE
19. Abandoned.
G. MAINTENANCE
20.The Trial Judge erred in that the amount and duration fixed for interim spousal maintenance is excessive.
H. PARENTING ORDERS
21. Abandoned.
22. Abandoned.”
Ground 1
36.At the commencement of his submissions in support of this ground, senior counsel for the appellants referred us to the Deed of Trust dated 26 April 1974 (the E J MacLean Settlement No 1).
37.The husband is described in that Deed as the Principal Beneficiary (Clause 1(c)).
38.Clause 2 is in the following terms:-
“The Settlor hereby declares and directs that the Trustees shall and the Trustees hereby declare that they will henceforth hold the said sum of Ten dollars and also any moneys property or investments which may from time to time be paid or transferred to the Trustees by the Settlor or by any other person or persons with the intention of augmenting or supplementing the property settled hereunder and the moneys and investments for the time being representing the same or any part thereof (all of which property is included in the term “the Trust Fund” that term as hereinafter used being intended to mean and include the constituents for the time being of that fund) and the income thereof upon such trusts and subject to such powers as are hereinafter declared concerning the same.”
39.In construing the provisions of the Deed, the distinction between “trusts” and “powers” in this clause is, in our view, of significance as is the distinction between “the Trust Fund” and “the income thereof.”
40.Clause 3 provides:-
“(a)The Trustees shall hold the Trust Fund upon trust for such one or more exclusively of the others or other of the Beneficiaries as are living at the distribution date and in such shares or proportions as the Trustees shall appoint before whichever is the earlier of the death of the said FREDERICK SPERRY COVENTRY and the distribution date and at such age or time respective ages or times and with such provision for their respective advancement maintenance education and benefit as the Trustees shall determine at the time of such appointment.
(b)In default of and subject to any appointment pursuant to sub-clause (a) of this clause
(i)the Trustees shall hold the Trust Fund upon trust for the Principal Beneficiary if and when he survives the distribution date, and
(ii)if the Principal Beneficiary dies before the distribution date the Trust Fund shall be held upon trust
(a)for such of the children of the Principal Beneficiary as are living at the distribution date and as attain the age of twenty-one years and if more than one in equal shares provided nevertheless that if any child of the Principal Beneficiary dies before the distribution date or is living at the distribution date but fails to attain the age of twenty-one years and in either case leaves a child or children living at the distribution date who has or have attained or shall attain the age of twenty-one years then that child or those children shall take by substitution and if more than one in equal shares the share of the Trust Fund which his her or their parent would have taken if he or she had been living at the distribution date and had attained the age of twenty-one years or in the event of there being no such child or grandchild of the Principal Beneficiary, then
(b)for such of the brothers and sisters of the Principal Beneficiary as are living at the distribution date and as attain the age of twenty-one years and if more than one in equal shares provided nevertheless that if any brother or sister of the Principal Beneficiary dies before the distribution date or is living at the distribution date but fails to attain the age of twenty-one years and in either case leaves a child or children living at the distribution date who has or have attained or shall attain the age of twenty-one years such child or children shall take by substitution and if more than one in equal shares the share of the Trust Fund which his or her parent would have taken if he or she had been living at the distribution date and had attained the age of twenty-one years or in the event of there being no such brother or sister and no such child, then
(c)for the person or persons (other than the Settlor) who in accordance with the laws of the State of New South Wales as they stand at the distribution date would have been entitled to the estate of the said Frederick Sperry Coventry if he had died intestate on the distribution date domiciled in the said State and if more than one in equal shares.”
41.In default of any appointment pursuant to Clause 3(a), Clause 3(b)(i) provides that the trustees hold the trust property for the Principal Beneficiary if and when he survives the distribution date.
42.It was common ground before us that no relevant appointment pursuant to Clause 3(a) was made prior to the death on 21 June 1995 of the husband’s father.
43.Thus, in our view, the primary trust is for the distribution of the Trust Fund to the Principal Beneficiary “if and when he survives the distribution date” with a gift over to certain other beneficiaries if the Principal Beneficiary fails to survive the distribution date.
44.Clause 4 provides for the distribution of income of the Trust Fund until the distribution date. Clause 4(a) empowers the trustees in their absolute discretion to distribute the income of the Trust Fund for the “maintenance education benefit or advancement of any one or more exclusively of the others or other of the Beneficiaries.” Clause 4(b) operates in default of any such distribution.
45.The expressions “the distribution date” and “the Beneficiaries” are defined in Clause 1 as follows:-
“1. For the purposes of this Deed
…
(b)“the distribution date” shall mean the first to occur of the following three dates, viz:-
(i) the 31st day of December, 2020, and
(ii)the date of the death of the last survivor of the lineal descendants born before and living at the date hereof of his late Majesty King George the Fifth and
(iii)the date (if any) not being earlier than the sixteenth anniversary of the birth of the Principal Beneficiary which the Trustees shall in their absolute discretion appoint as the distribution date of this settlement;
(c)“the Principal Beneficiary” shall mean ANTHONY WARREN GARDINER COVENTRY a son of the said Frederick Sperry Coventry;
(d) “the Beneficiaries” shall mean
(i) the Principal Beneficiary;
(ii)all the brothers and sisters (present and future) of the Principal Beneficiary;
(iii) all the children and grandchildren of the Principal Beneficiary;
(iv)all the children and grandchildren of the brothers and sisters (present and future) of the Principal Beneficiary;
(v)the spouse of the Principal Beneficiary and all the persons who shall at any time be or have been the spouse of the Principal Beneficiary;
(vi)all the persons who shall at any time be or have been the spouses of the brothers and sisters (present and future) of the Principal Beneficiary;
(vii)all the persons who shall at any time be or have been the spouses of the children or the grandchildren of the Principal Beneficiary, and
(viii)all the persons who shall at any time be or have been the spouses of the children or the grandchildren of the brothers and sisters (present and future) of the Principal Beneficiary;”
46.Clause 5 deals with the powers of the trustees. Those powers include a number which confirm an intention to benefit the Principal Beneficiary, namely Clauses 5(d), (e) and (g). Clause 5(m) includes a series of special administrative powers, being:-
(i)a power to apply the whole or any part of the capital of the Trust Fund for the maintenance, education and advancement or benefit of all or any of the beneficiaries;
(ii) a power to resettle all or any part of the Trust Fund;
(iii)a power to release or revoke any powers conferred on the trustees under the Deed in the following terms:-
“by deed to release and revoke any power or powers conferred on them under this Deed including (without restricting the generality of the foregoing) the power to make an appointment under the provisions of clause 3(a) above and on the execution of any deed pursuant to this clause the power to which such deed relates shall be absolutely and irrevocably determined”; and
(iv) a power to alter or vary the trusts in the following terms:-
“5. (m) …
(iv)from time to time and at any time prior to the distribution date to alter or vary all or any of the trusts herein declared concerning the Trust Fund or any part thereof or of the income or any part thereof to arise therefrom to such ends intents and purposes as the Trustees may in their absolute discretion from time to time think fit including (without limiting the generality of the foregoing) the provisions of Clause 8 provided that the power by this clause given shall not be exercised in such a manner as to result in the Settlor or any person who either is for the time being or has at any time been a trustee hereof having a more valuable interest hereunder than he had prior to such exercise and provided further that the said power shall not be exercised so as to infringe or result in an infringement of the rule against perpetuities.”
47.Clause 10 provides the husband’s father with a power to remove and appoint a new trustee or trustees. Upon the death of his father, that power vested in the husband.
48.Senior counsel, in his written outline of argument, after referring to the relevant clauses in the Trust Deed, recorded:-
“1.9The distribution date described in Clause 1(b), subject to the power of the Trustee to appoint an earlier distribution date, is fixed as 31 December 2020. By that date the husband will be 61 years old. He has, therefore, statistically the probability of being still alive. However, unless the Trustee moves the date forward, his interest remains contingent until 2020. In the event that prior to that date he dies and does not leave any surviving children, his sisters become the beneficiaries on the distribution date (Clause 3(b)(ii)).
…
1.15It is therefore submitted that on the face of it, the proper construction of that deed is that as from the date of the death of Frederick Sperry Coventry, the beneficiary on the distribution date is the husband, subject to the power of the Trustee, exercisable (an absolute discretion) to benefit the other beneficiaries, who are defined in Clause 1(d), namely his sisters, children and grandchildren of the principal beneficiary, children and grandchildren of his sisters, his spouse, and anyone who has been his spouse, spouses of the sisters of the principal beneficiary, etc. Further, the Trustee before the distribution date could re-settle the lot on a new Trust.
1.16The Trial Judge has held that the proper interpretation of the deed is that as from the date of the death of Frederick Sperry Coventry, the only beneficiary who could benefit under this deed was the husband. She has therefore inferentially held that Clause 5(m)(i) ceased to have any operation on the death of Frederick Sperry Coventry. It is respectfully submitted that that interpretation cannot be correct and that Clause 3 is clearly limited to the position on the distribution date and that Clause 5(m)(i) is general in terms and not so limited. The only limitation to Clause 5(m)(i) is that on the distribution date the principal beneficiary is the only beneficiary who can take.”
49.In support of that submission, he referred us to the following findings of the trial Judge:-
“78.I interpolate here the observation that this supports the finding I shall record later about the effect of clauses 3(a) and (b), rendering Mr Coventry upon the death of his father the sole beneficiary of the No 1 Trust, though this is not an interpretation embraced by Mr Coventry or his mother here.
…
119. …
· Clause 3 (a), it can be noted, provides for the Trust Fund to be held exclusively for one or more of the beneficiaries living at the distribution date ‘and in such shares or proportions as the trustees shall appoint before whichever is the earlier of the death of [Mr FS Coventry] and the distribution date…’.
· No such appointment was made prior to Mr Coventry’s death and therefore, in default of appointment, clause 3(b) provides for the trustee to hold the Trust Fund for Mr Warren Coventry as the principal beneficiary ‘if and when he survives the distribution date’ (and to others if he does not). Of course if he controls the Trust through the power to remove and appoint the trustee, he can determine the distribution date. In particular, the obligation to hold the fund exclusively for him, on that basis, commenced on the date of Mr FS Coventry’s death and it was not thereafter held subject to the discretion of the trustees to give it to other beneficiaries. I think this plain from the very terms of clause 3(b)(ii) in that it nominates who is to benefit if the principal beneficiary dies prior to the distribution date. Accordingly, the discretion to benefit other named beneficiaries was at an end from June 1995 and Mr Coventry has only to survive the distribution date which he can determine at any time by steps available to him. As I also see it, in as much as clause 5(m)(i), dealing with powers of maintenance and advancement, might be thought to be inconsistent with this earlier provision, it is in general terms whereas clause 3(b) is more specific and therefore must prevail.
· Clause 5, which records the trustee’s powers, includes a number of provisions that bolster the construction to the effect that there was an intention to benefit the principal beneficiary as discussed – see paragraphs (d), (e) and (g).
· As for clause 5(m), prefaced by notwithstanding anything hereinbefore contained [ie. contained in clause 5 on my reading of it], this includes a number of special administrative powers, referred to earlier. The power in (iv) specifically provides for the power to alter or vary, prior to the distribution date, ‘all or any of the trusts herein declared concerning the Trust Fund …or of the income …to arise therefrom’. Being expressed to apply to ‘the trusts herein declared concerning the Trust Fund’, as Mr Sheahan pointed out, this is language apt to pick up the trusts of capital and income declared by clauses 2, 3 and 4. But it is not apt to pick up the machinery and administrative provisions in clauses 5-11.
· This is supported by the fact that clause 2, in itself declaring the trust, distinguishes between the trusts and powers thereafter defined, clauses 3 and 4 go on to define the trusts as to capital and income, and clauses 5 and following define the powers.
· Moreover, as Mr Sheahan’s opinion pointed out, one might expect the power to remove and appoint trustees to be unaffected by the power to vary the Trust Deed which confers a wide power of variation of the trusts. Otherwise, the powers of the trustees would be both wide and largely uncontrolled and in any dispute between the principal beneficiary and trustee, there would be the prospect of what Mr Sheahan called ‘an unseemly race’ to execute powers of removal and variation. It is more sensible, therefore, to construe clause 10 as a power insulated from variation, thereby affording a balancing mechanism in favour of the principal beneficiary against the powers of a trustee after the death of Mr FS Coventry.
· Furthermore, as Mr Sheahan noted, it would be odd if the power of variation in clause 5(m)(iv) were to extend to enable the trustees to widen the exoneration clause (clause 6), or to vary clause 10 so that a beneficiary might become a trustee.
· This construction is supported by the explicit reference in clause 5(m)(iv) to the investment provisions of clause 8 which would be unnecessary if clause 5(m)(iv) extended to powers as well as trusts.”
50.During the course of his oral submissions, senior counsel amplified the material contained in his written outline and conceded that:-
“If he [the husband] is the only person who can benefit out of this trust from here on then, of course, it is appropriate to bring them [the assets of the trust] to account to full value or very near to full value subject only to what residual rights Mrs Coventry may have, and her right in effect to maintain the management of them [the assets of the trust], as we see it.”
51.Senior counsel for the wife submitted that the husband’s interest in the Trust Fund of the E J MacLean Settlement No 1 was vested, rather than contingent until 2020 as submitted by senior counsel for the appellants. In the course of that submission, he referred us to Chapter 7, paragraph [7300], of Ford HAJ & Lee WA, Principles of the Law of Trusts and, in particular, to the following passage [footnotes omitted]:-
“Where there is a gift to X “if” or “when” or “as soon as” X attains a specified age or fulfils some other condition (such as surviving a life beneficiary, as in Collins v The Equity Trustees Executors and Agency Co Ltd [1997] 2 VR 166), with a gift over to Y on failure to fulfil the condition, the interest under the first gift is a vested interest subject to being divested if the condition is not fulfilled. Thus, a gift “to the eldest son of X living at my death if he attains 25 years, but if he dies under 25, to Y” gives the eldest son under 25 an interest which is vested subject to be divested if he dies under 25. The condition affecting the eldest son is from his viewpoint a condition subsequent rather than a condition precedent. The rule which is now known as the rule in Phipps v Ackers (1842) 9 Cl & F 583; 8 ER 539 was extended from gifts of realty to gifts of personalty: Re Heath [1936] Ch 259.”
52.In Collins v Equity Trustees [1997] 2 VR 166, Batt J. at 169 referred to what is known as the rule in Phipps v Ackers (supra) as follows:-
“… The rule is no longer limited to realty or to circumstances which justified it historically, but is now a general rule of construction though it will yield to a sufficiently indicated contrary intention. It is stated in Theobald on Wills, 15th ed., p. 580 in the following terms (omitting footnotes):
This rule applies where there is a gift to A “if” or “when” or “as soon as” he attains a specified age (or fulfils some other condition), with a gift over to B on failure to attain that age (or fulfil that other condition). Under the rule A’s interest is not contingent upon attaining the specified age, but is a vested interest, which arises at the date the gift becomes effective, subject to being divested if he dies under that age.
The rule only applies if there is an express gift over to B which spells out the conditions upon which it will take place and includes amongst those conditions the counterparts (though not necessarily identical counterparts) of the conditions applicable to the prior gift to A. The presence of such an express gift over to B alters the construction of the prior gift to A and converts what would otherwise be a contingent interest into a vested interest liable to be divested and so achieves early vesting.
See also Halsbury’s Laws of England, 4th Ed., vol. 50, para. 599 and Kotsar v. Shattock [1981] V.R. 13 at 14-15. As appears from the opinion of the judges delivered by Tindal C.J. in Phipps v. Ackers at Cl. & Fin. 592, the rule is based on the principle that the subsequent gift over in the event of the first donee’s dying under the specified age or failing to satisfy the other condition sufficiently shows the meaning of the testator to have been that the first donee should take whatever interest the party claiming under the gift over is not entitled to, which of course gives the first donee the immediate interest, subject only to the chance of it being divested on a future contingency. In this class of case, then, the words of contingency are treated as governing the gift over but not the first gift: Megarry and Wade, The Law of Real Property, 5th ed., (1984), p. 244.”
53.Further, in our judgment, the words “if and when he shall survive the distribution date” in Clause 3(b)(i), followed by a gift over to certain other beneficiaries, “if the Principal Beneficiary dies before the distribution date” in Clause 3(b)(ii), created in the husband’s favour a vested interest in the Trust Fund, which is subject to being divested on the occurrence of a condition subsequent, namely, the death of the husband prior to the distribution date. Having regard to the provisions of the Trust Deed to which we have earlier referred, in our view, a contrary intention not having being expressed therein, upon the death of his father, the husband’s interest in the Trust Fund of the E J MacLean Settlement No 1 vested, subject to being divested if he died prior to the distribution date.
54.An alternate view which concurs with that conclusion is that, pursuant to the provisions of Clauses 3(a) and 3(b) the husband, as a taker in default of appointment, acquired a vested interest that was subject to divestment in the event that an appointment pursuant to Clause 3(a) was made. It was common ground before us that, prior to the death of the husband’s father, no such appointment had been made.
55.In the absence of a contrary intention, a taker in default of appointment has a vest interest, subject to his or her interest being divested by an exercise of the power of appointment. The learned authors of Principles of the Law of Trusts at [5110] write:-
“A settlor or testator who creates a power of appointment, whether unlimited, limited or hybrid, may direct that in default of exercise of the power the property subject to the power is to be dealt with in a certain way. A person to whom the donor of the power makes a gift in default of appointment does not on that account have an interest which is merely contingent on there being failure to appoint. That person’s interest is considered to be vested from the outset but it is liable to be divested by a proper exercise of the power …”
and again at [5140]:-
“Under a direct gift in default of appointment in the absence of a contrary intention the takers in default take a vested interest from the date of operation of the instrument subject to being divested by an exercise of the power …”
56.The learned author of Principles of Equity and Trust (2nd ed.) at 291 addresses this issue as follows:-
“Takers under an express gift in default of appointment will hold an interest which is defeasible upon the exercise of the power. If the power is exercised, takers in default will lose any interest they might have had; takers in default are considered to have an interest which is vested from the outset but capable of becoming divested. An express gift over in default may be fixed or discretionary in nature. Once it is established that the trustee has not exercised the primary power, the interests of the takers in default will automatically vest.”
57.See also Doe dem Willis v Martin (1790) 4 Term Rep 39; 100 ER 882; and Heron v Stokes (1842) 2 Dr & War 89 where at 115 the Court held that:-
“It is the clear and settled law of the land that a gift in default of appointment gives vested interests to all the objects of the power, subject to be divested by its exercise.”
and Commissioner of Succession Duties (SA) v Isbister (1941) 64 CLR 375 at 380 per Williams J; Commissioner of Stamp Duties (NSW) v Sprague (1960) 101 CLR 184 at 194 per Dixon CJ; and Neill v Public Trustee [1978] 2 NSWLR 65 at 73 per Glass JA.
58.Further, we note that whilst the gift to the husband pursuant to Clause 3(b)(i) is subject to the qualification “if and when he survives the distribution date”, we are of the view that because the husband’s interest was vested, the words “if and when he survives the distribution date” operate to create a condition subsequent: see Permanent Trustee Co of New South Wales Ltd v D’Apice (1968) 118 CLR 105 at 110 per Kitto J. In this context, the gift over to other beneficiaries in the event of the husband’s death prior to the distribution date does not, in our view, materially affect our conclusion that his interest in the Trust Fund was a vested, rather than a contingent interest.
166.The written response on behalf of the wife was:-
“15.2 …
(i)There was on the evidence of Mr Flynn no requirement to wind up Lynoch (AB2, p.230.45) to extract the entitlement of the Wife;
(ii)The sum payable to the Wife under order 5 (AB1.1, p.11) was $3,877,000. The bank account of Lynoch at 30 June 2002 revealed a balance of $3.869M (AB1.1, p.64) and of course there was over $6M in livestock;
(iii)There are substantial franking credits available with Mr Flynn (AB2, p.242.45) informing the Trial Judge such amounted to $11.5M at 30 June 2001 so that any dividend could be fully franked;
(iv)Reading this part of the Husband’s Outline, one might be surprised at the omission of any reference to Ex. 4 (Exhibit Book, p.387) an extract from the opinion of Mr Broun Q.C. which reads:
“The franking credits available in Lynoch Pty Limited may be extremely useful in enabling settlement moneys to be paid to the Wife if a settlement is reached. Until then, the franking credits are merely something relevant to the value of the company and hence ultimately to the value of the trust”.
This demonstrates that the Husband already had advice from Mr Broun that if he reached a settlement with his Wife he could use the franking credits from Lynoch to pay monies to the Wife;
(v)Mr Flynn did recommend that a scheme similar to that used to pay out the three sisters could be used and that it was most tax effective (AB2, p.231.15). Indeed, he said it was “effectively tax free”;
(vi)The approach taken by the Trial Judge in relation to realisation costs and tax (Reasons, paragraphs 155-160 – AB1.1, p.67) is consistent with the principles in Rosati (1998) FLC 92-804 and a just result bearing in mind the uncertainties of how the monies for the Wife would be raised and distributed;
(vii)Also the Trial Judge relevantly noted that the amount the Wife was to receive “will represent a relatively small portion of total assets” (Reasons, paragraph 157 – AB1.1, p.67);
(viii)There was evidence that the costs of implementing the sisters’ scheme was of the order of $100,000”
167.In addition, senior counsel for the wife referred us to the following evidence of Mr Jansen:-
“And Mr Flynn tells Her (sic) Honour, that to take $7,000,000 out of this trust you wouldn’t wind up the structure because it would be extreme, my word rather than Mr Flynn’s might I say?---Yes.
You agree with that don’t you?---Yes, I do.
…
In a case such as this were, let us assume for present purposes, $6,000,000 was to come out of the trust and there is about 30,000,000 there, you advice would surely be to clients in the position of Mrs Coventry and Mr Coventry to cooperate because the harder they make it the less there would be left at the end?---Well there’s a lot in that question that you’ve asked me.
Take your time?---As I understand it the trust doesn’t have any assets of itself other than shares in Sellan (sic).
The J class?---So you need to work your way through the chain as it were and secondly you would need to see what assets one could realise to generate the capital that you would need. And it depends on the cooperation of the parties, whether they wanted to do that or not. I mean if there is a dispute obviously it would be very difficult.
The commercial reality dictates that if Her (sic) Honour were to make an order such as that a lack of cooperation on the part of Mrs Coventry and Mr Coventry might well mean that there would be significantly less there for them at the end than there would be if they had cooperated. I am looking for your commercial experience on that?---Well there’d be legal costs I assume in litigating the matter, I don’t know who would pay those legal costs, whether it would be a cost to the company and trust or whether it is a cost to the individuals. Then it comes down to the form in which the Court would direct it to take place, whether it’s a liquidation, a partial liquidation or a dividend. So I’m looking at it from a commercial perspective as to how that money might come out."
168.Having regard to the evidence, we think it clear that there are numerous options open to the husband as to how he might draw upon funds from the E J MacLean Settlement No 1 without incurring significant expense. In our view, the appellants have not demonstrated error on the part of the trial Judge in reaching her conclusion that the net value of the relevant trust was $25,609,324.
Grounds 16 and 17
169.In our view, it is appropriate to consider these two grounds together.
170.In the written outline of argument in support of Ground 16, senior counsel for the appellants recorded:-
“1.Section 79(4)(c), in common with s.79(4)(a) and (b), is directed to the contributions to the assets which are sought to be made the subject of an order for the alteration of property interests. The contribution to the welfare of the family frees the other party to make more direct contributions to the building up of the assets and supports the other party while doing so.”
171.Having regard to the following words appearing in ss.79(4)(a) and (b), namely “whether or not that last-mentioned property, has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them” and the contents of paragraphs (c), we do not accept the submission that those paragraphs of ss.79(4) are directed only to contributions to assets which are sought to be made the subject of an order; see Fisher v Fisher (No 2) (1986) FLC 91-767 at 75,597.
172.The trial Judge commenced her evaluation of the contributions of the parties by recording:-
“169.The approach to be taken to assessing the parties' entitlements was not the subject of specific submissions by counsel, though it was implicit in what each said that due regard is to be had to the source of the assets now to be distributed. As has been said in authorities, no particular approach is prescribed and either the ‘asset by asset’ or ‘global’ approach might be adopted while suggesting, at the same time, that the particular case might point more readily in the direction of one or the other. Here, I propose to adopt the global approach, which I think fits the shape of counsels’ submissions, subject to the caveat mentioned.”
173.Thereafter, in considering the contention made on her behalf that the wife had made a contribution to the increase in the value of the assets of Lynoch generated since the parties commenced to live together in 1983 and whilst each was performing the roles they undertook within the relationship, her Honour concluded:-
“175.… I do accept, therefore, that there has been growth in the net value of the assets of Lynoch over time and that increase has undoubtedly occurred during a period when each party has been fulfilling the roles they undertook within their marriage.”
174.Her Honour went on to say:-
“176.Throughout the years since their relationship began, Mr Coventry remained employed within the Coventry enterprise and he took on more responsibility as time progressed and circumstances changed, with the support of his wife. The picture painted of their circumstances is of living within the budget his earnings (and hers at times) provided, with the additional benefit of access to funds from his entitlements for capital outlays from time to time.
…
179.When one looks to the composition of the assets as they now exist, it is plain that the overwhelming bulk of those assets have been derived through Mr Coventry’s place within his family of origin, either directly from his inheritance from his father’s Estate or from his succession to the assets of the No 1 Trust as principal beneficiary of that Trust on his father’s death or from funds made available over the years to him from his interest in Trusts established at an earlier time. Certainly, on any view of it, he has made contributions of enormous significance to what there is now available for distribution. Over the 16 plus years since their relationship began, however, Ms Smith has had a very important role in that relationship, including the parenting role she has taken on with their daughter and in the support given to her husband in many ways while he pursued his involvement with family interests and while his assets have grown in value. Nonetheless, the weighing of their respective contributions overall favours him substantially. About that, there is no argument.”
175.We note that no cogent submissions were made to support the assertion in Ground 16 that the trial Judge failed to apply any principle or provide reasons to justify the award in respect of contribution.
176.Senior counsel for the appellants initially submitted in support of Ground 17 that, had the parties separated prior to June 1995, there were no significant assets to be divided. He noted that on the death of his father, the husband inherited the property ‘Eversleigh’ which the trial Judge found to be valued, at the date of the hearing, in the sum of $1,750,000.
177.The trial Judge made findings as to the contributions of the wife within the meaning of paragraphs (a), (b) and (c) of s.79(4) at paragraphs 171 to 173 of her reasons. Her Honour also made findings as to the relevant contributions of the husband at paragraphs 176 to 177 and further recorded that each had made direct and indirect contributions to their respective superannuation entitlements. Those findings have not been challenged before us.
178.Senior counsel for the appellants submitted that the trial Judge had concluded that the net value of the assets of the parties at the date of hearing, excluding the net value of the assets of the E J MacLean Settlement No 1, was $2,455,072. Thus, he submitted that, if the wife were to receive 50 per cent of the value of the non-trust assets, she would have received $1,227,536. Accordingly, he submitted that the consequence of the trial Judge including the whole of the net value of the assets of the trust was that the wife received an additional $2,280,513 in circumstances where there were limited contributions made in relation to trust assets subsequent to the death of the husband’s father in 1995.
179.In those circumstances, he submitted that an assessment of the relevant contributions of the wife of 12.5 per cent of the total net value of the assets (excluding superannuation entitlements) was extraordinary having regard to her contribution.
180.Senior counsel for the appellants referred us to articles by Professor Parkinson and Brereton SC which he annexed to his Outline of Argument in support of his submission that her Honour’s assessment of the contributions of the wife could only have been reached by adopting what Professor Parkinson described as the “balancing approach”, rather than by making a true assessment of the respective contributions of the parties. On a reading of her Honour’s reasons as a whole, we are of the opinion that she identified the relevant contributions of both the husband and the wife and properly weighed and assessed them.
181.In addition, in support of Ground 17, he asserted that the contributions of the wife should have been assessed as being “somewhere less than $1,000,000 or about $1,000,000 … a bit less than half of the assets standing in the names of the parties, having regard to the fact that the bulk of them were inherited.”
182.Senior counsel for the wife referred to the findings of the trial Judge as to the respective contributions of the parties and then to her findings in paragraph 179 of her reasons which we have recorded at paragraph 174 hereof.
183.He then referred to the following finding of her Honour:-
“175.Mr Kirk made submissions about the growth of the assets of Lynoch over time, the suggestion being that the increase in value has been generated since the parties began living together in 1983 while the parties were each performing the roles they undertook within the relationship. It was contended, therefore, that Ms Smith has made a contribution to that increased value by the role she had. There seems to me, however, to be some difficulty in accepting this submission as put, at least without some qualification. Mr Kirk drew attention to the net book value of Lynoch’s assets in 1983 (when Mr Coventry started work for Lynoch) and in 1984, some 18 months prior to the parties beginning to live together. That reflected values in the range of $1.3 and $1.5 million. He also pointed to the book values in 1996, after Mr Coventry became more heavily involved following his father’s death, and to the values in succeeding years to 2001 – ranging from $10.965 in 1996 to $19.569 in 2001 (see page 86 Mr Flynn’s report) on a net asset basis. But the difficulty in all of this, so it seems to me, is in trying to compare book values in earlier years (1996 to 2000) - when there had been no revaluation of the realty - with the 2001 year when there was a revaluation of it. Without the benefit of a valuation of the net assets of Lynoch in 1995, which I did not have, I could not confidently chart the course of any increase in net value from 1996 to 2001. That said, Mr Coventry’s evidence was to the effect that there had been increase in property value over the years and I accept that to be so; it is just that I cannot quantify it along the lines Mr Kirk urged. What can be said more confidently, however, is that the quantum of the increase can be seen from the 2001 value (after revaluation) to the agreed value of the assets of Lynoch here (see pages 49 and 86 of Mr Flynn’s report). I do accept, therefore, that there has been growth in the net value of the assets of Lynoch over time and that increase has undoubtedly occurred during a period when each party has been fulfilling the roles they undertook within their marriage.”
184.He went on in his written summary of argument to submit:-
“17.2…
(ii)Throughout cohabitation, the Husband worked for Lynoch at relatively low wages going through a range of activities from stockman to wool classer to station manager. As to the Husband’s contention that by so doing he was not “giving up of earning capacity”. He had academic qualifications for a professional career, which he did consider (AB2, p.68.30) but in the end “settled for a relatively meagre salary from Lynoch”, such that he and the Wife “struggled financially” but was content to do that as he would eventually own and control the business (AB2, p.69.01-15);
(iii)It will be noted that the salary the Husband received from Lynoch in the years since his father’s death was a meagre $5,000 p.a. The most recent financial accounts (2001) revealed that the Lynoch had made a profit of $2.2M in that year (AB2, p.70.40). The Husband conceded that he had maximised the profit and capital of Lynoch to the detriment “of yourself and your Wife” (AB2, p.70.25);”
185.He also referred to the evidence which established that for the year ending 30 June 1996, Lynoch made a loss of $14,000 which he contrasted with its net profit of $2,200,000 for the year ending 30 June 2001.
186.Accordingly, he submitted that the trial Judge’s assessment is within the range of a reasonable exercise of discretion.
187.We note the observation of the trial Judge that the assessment of the contributions of the parties in the instant case falls outside what might be termed the usual run of cases and thus some regard might be had to that line of cases where the property pool has been quite substantial. Subject to the caveats which her Honour recorded, her Honour identified Figgins and Figgins (2002) FLC 93-122 and Webster v Webster (1998) FLC 92-832 as the most pertinent of those cases. Her Honour clearly had regard to the apportionments in relation to both contributions and relevant s.75(2) matters in what she regarded as comparable cases before coming to her own assessments.
188.In considering the submission of counsel, we are mindful of the following observations of Brennan J. (as he then was) in Norbis v Norbis (1986) 161 CLR 513 at 539:-
“The difficulties in the way of developing guidelines beset an appellate review of the exercise of a discretion under s. 79. Unless the primary judge reveals an error in his reasoning, the Full Court can intervene only if the order made is not just and equitable. How does the Full Court arrive at that conclusion? In Bellenden (formerly Satterthwaite) v. Satterthwaite [[1948] 1 All E.R. 343, at p. 345], Asquith L.J. stated the rationale of an appellate court’s approach:
“It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere.”
The “generous ambit within which reasonable disagreement is possible” is wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellate interference.”
189.We are also mindful of the following observations of Kirby J. in CDJ v VAJ [1998] 197 CLR 172 at 230:-
“186.A number of general propositions may be stated:
1.Neither this Court, nor the Full Court in relation to appeals to it, has authority to disturb a decision under appeal simply because the appellate judges, faced with the same material, would have reached a conclusion different from that under appeal. To approach the appellate function in such a way would contravene established authority. It would involve one level of the judicial hierarchy, without lawful warrant, intruding into the decisions of another [Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343 at 345 cited in G v G (Minors: Custody Appeal) [1985] FLR 894 at 898, 903]. To authorise appellate disturbance, where the decision under appeal is discretionary or involves quasi-discretionary evaluation, it is necessary for those mounting the challenge to demonstrate that, in reaching the orders the subject of the appeal, the court below has acted on a wrong principle or (although the precise error of principle cannot be identified) has reached a conclusion which is plainly wrong [House v R (1936) 55 CLR 499 at 504-505]. Obviously, what is “plainly wrong” will vary in the eyes of different beholders. It is not necessary for an appellant to demonstrate the kind of unreasonableness that must be shown to authorise judicial intervention in the decision of an administrator otherwise acting within power [So called Wednesbury unreasonableness: Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. See discussion in Re F (A Minor) (Wardship: Appeal) [1976] Fam 238 and in G v G (Minors: Custody Appeal) [1985] FLR 894 at 900]. The reference to “plainly wrong” is designed to remind the appellate court of the need to approach an appeal with much caution in a case where an error of principle cannot be clearly identified.
2.Such reasons for appellate restraint are of general application. However, they have particular relevance to appeals within, and from, the Family Court of Australia. This is because of the functions and purposes of that Court and the difficult and evaluative decisions which it often has to make. The peculiar nature of decisions relating to the intensely personal questions of the division of the property of parties to a failed marriage and the welfare of their children makes it essential that those who decide appeals respect the onerous responsibilities of those whose decisions they review. They need to recognise that it is of the very nature of such decisions, including those relating to the residence of children, that any two decision-makers may, with complete integrity and upon the same material, often come to differing conclusions [Lea and Lea (1981) FLC 91-115 at 76,877; (1981) 7 Fam LR 553 at 555-556; G v G (Minors: Custody Appeal) [1985] FLR 894 at 897-898]. This is an inescapable feature of the nature of this jurisdiction [In Re K (Infants) [1965] AC 201 at 218-219; Abdo and Abdo (1989) FLC 92-013; (1989) 12 Fam LR 861 at 870].”
190.As was noted by Gibbs J. (as he then was) in De Winter and De Winter (1979) FLC 90-605 at 78,092, “… the discretion confided to the Family Court to make orders affecting interests in property under sec. 79 of the Family Law Act is extraordinarily wide.” See also Mallet v Mallet (1984) 156 CLR 605 at 608.
191.Accordingly, the limited nature of the appellate process must be recognised, as the authorities to which we have referred in the three preceding paragraphs demonstrate.
192.In the instant case, in our judgment, the trial Judge was not mistaken as to the law or as to the facts. She did not take into account an irrelevant circumstance or fail to take into account a relevant circumstance, nor did she attach inappropriate weight to any factor. The approach which she adopted to the assessment of the respective contributions of the parties was open to her.
193.Opinions would no doubt vary as to what would be an appropriate assessment of the respective contributions of the parties and, had any of us been the trial Judge, our assessment may have been more favourable to the husband, particularly in light of his substantial financial contributions. However, her Honour recognised and carried out her obligation to identify and assess the respective contributions of the parties, an obligation which involved the exercise of her discretion. Given the width of that discretion, we are not persuaded that her Honour’s assessment was outside the range of a reasonable exercise of that discretion.
194.We are not persuaded that Grounds 16 or 17 have been established.
Ground 18
195.In the course of his submissions in support of this ground, senior counsel for the husband referred us to the provisions of s.79(2) of the Act. He submitted that that section is, in effect, a warning for judicial restraint and that the phrase “the order” appearing in the subsection means the order derived from a consideration of the respective contributions of the parties. We do not accept that submission.
196.In our view, the phrase refers to the order made pursuant to the provisions of s.79, namely an order altering the interests of parties in property, having regard to all the matters referred to in the section from paragraph (a) to paragraph (g), although the Court is restrained from making an order under the section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. See Russell v Russell (1999) FLC 92-877 at 86,439 (paragraph 80), JEL and DDF (2001) FLC 93-075 at 88,332 (paragraphs 141 and 142) and Phillips and Phillips (2002) FLC 93-104 at 88,985 (paragraph 66).
197.Senior counsel then referred to the conclusion of her Honour based on the respective contributions of the parties, namely that the wife should receive 12.5 per cent of the total net assets of the parties as found by her (excluding their superannuation entitlements), namely $3,508,049. He then submitted that, having regard to that sum, the trial Judge erred by adding a further 2½ per cent, $701,609, to the wife’s contribution based award.
198.In the written outline of argument, senior counsel submitted:-
“18.3 The s.75(2) factors that the Judge considered were particularly:
(a)The remaining disparity of the financial position. The Judge in that regard has proceeded on the basis that everything left in the Trust after the wife had received more than the net assets of the parties and further funds had been drawn from the Trust, remained the husband’s property even though, for him to get his hands on them, would have involved further realisation and tax consequences, which were not taken into account and would involve, it is submitted, unconscionable conduct;
(b)The fact that the wife had a child who was going to be primarily her responsibility, by reason of the Residence and Contact Orders the Trial Judge made, for approximately another 8 years.
18.4It is submitted that a lady with $3,508,049 is not in such a financial position as would call for the taking away of further assets from the Trust and giving them to her to recognise a disparity of their financial position. It is further submitted that having the care and responsibility of a child who will be in receipt of child support, is again not such a responsibility as to significantly deplete the significance of her being a woman in the richest percentage of the community.
18.5The proposition that there was a call for a s.75(2) adjustment is submitted to be untenable.”
199.He further submitted that if an adjustment under s.75(2) was, in the circumstances of the case, called for, then, consistent with the approach adopted by Ellis J. in Figgins and Figgins (supra), it is somewhat artificial to approach the assessment of that adjustment on a percentage basis.
200.The final submission in the written outline of argument in support of this ground was:-
“18.8The Trial Judge has proceeded as if a further adjustment of property interests under s.75(2) is something that should occur in every case. The Trial Judge has not directed attention specifically to the question of whether there should be any adjustment under s.75(2) in view of the benefits that the wife had already received out of consideration of contributions.”
201.On an overall reading of her Honour’s consideration of the s.75(2) matters, we are not persuaded that her Honour proceeded on the basis that an adjustment to the contribution based award was “something that occurred in every case.” Her Honour noted certain of the matters referred to in s.75(2) in paragraph 186 of her reasons and thereafter concluded that an adjustment was called for, in the circumstances of this case, having regard to the disparity in the wealth of the parties and their respective future earning capacities. Further, in addressing the relevant matters referred to in s.75(2), her Honour recorded that:-
“186.… Orders made reflecting the assessment of their contributions will mean, however, that Mr Coventry will retain assets substantially greater in value than Ms Smith and consequently with a substantially greater earning capacity.”
202.We are not satisfied that, in coming to her conclusion, the trial Judge failed to take into account the benefits that the wife had already as a consequence of the contribution based award.
203.We do not accept the submission that the wife, having received in recognition of her relevant contributions, total benefits in the sum of $3,508,049, there is “no call to add a further 2½% which amounts to $701,609.” Her Honour, in considering what order (if any) should be made under s.79, was not only entitled but was obliged to take into account the matters referred in s.75(2), so far as they were relevant. In our view, notwithstanding the quantum of the contribution-based award, it has not been established that, in so doing, her Honour erred in the appellate sense.
204.Her Honour concluded her consideration of the s.75(2) matters as follows:-
“192.For my part, I assess the whole of these factors, including disparity, as calling for a further adjustment in her favour of 2.5% of the net assets (excluding their superannuation entitlements) or $701,609.”
205.Thus, her Honour assessed the adjustment, not only on a percentage basis, but also on a monetary basis.
206.We are thus of the view that there is no substance in this ground.
Ground 20
207.Senior counsel submitted that this ground would only be an issue if the total amount of spousal maintenance paid by the husband exceeded the total amount of interest payable pursuant to paragraph 11 of the order of the trial Judge. He further submitted that the provision of maintenance in the sum of $1200 per week must be much in excess of the wife’s reasonable needs judged by the previous standards of living.
208.It was common ground before us that, by the date of the hearing of the appeal, the husband had paid to the wife the sum of $1,500,000 referred to in paragraph 5(i) of her Honour’s order. Interest is thus accruing on the sum of $2,377,000 which was due to be paid on 23 August 2003. Having regard to the rate of interest prescribed by the Family Law Rules, interest is accruing in the sum of a little over $4500 per week. Thus, the maintenance payable will be totally offset in accordance with the provisions of paragraph 11 of her Honour’s order.
209.Having regard to our conclusion in relation to the appeal against paragraph 5 of the order of the trial Judge, the maintenance payable will not exceed the interest accrued. Senior counsel for the husband acknowledged this situation in the course of his oral submissions.
210.In the course of her reasons, the trial Judge noted that, in light of the funds the wife is to receive by way of property settlement, there could be no argument that she will be able to adequately support herself. However, her Honour further noted that the wife did not have the funds as at the date of her order and that “the practicalities suggest that will take a while to achieve.”
211.Her Honour went on to record:-
“198.… As to that [i.e. the time for payment of the $3,877.658] , without the benefit of any specific input on it at this stage, I think four months sufficient time to devise and secure whatever the means to be adopted to satisfy the order for payment. In the meantime, she requires support. What she has received from Mr Coventry in the past is $610 per week, but that is some way behind her reasonable needs, which I set at $1,200 per week. That figure gives her an increase on what has been paid to date, obviously insufficient, but allows some pruning of the weekly expenses of her household on those claimed in her financial statement. Of course, with no child support agreement or assessment, G’s costs are rolled up in that. There can be no question about Mr Coventry’s capacity to pay it.”
212.Having regard to the evidence, it was open, in our view, to her Honour to find that her reasonable needs were $1200 per week and to allow the husband a period of four months within which to comply with paragraph 5 of her order, offsetting as she did the interest payable.
CONCLUSION
213.As in our view none of the grounds of appeal have been established, we would dismiss the appeal.
COSTS OF THE APPEAL
214.At the conclusion of the hearing of the appeal, we raised with counsel the question of the costs of the appeal. Both submitted that, in the circumstances, rather than deal with this issue at that time, they would prefer to make written submissions following the delivery of judgment. We indicated that we would accede to that request.
ORDER
215.We order:-
1. That the appeal be dismissed.
2.(a) That the parties be at liberty to make an application by way of written submissions in respect of costs incurred by him or her in relation to the appeal within 21 days of the date hereof.
(b)That the other parties have a further 14 days in which to make written submissions in answer thereto.
(c)That the first mentioned party have a further seven (7) days in which to make any written submissions in reply thereto.
(d)That each submission have endorsed on the cover sheet the date on which a copy of that submission was served on the other party.
I certify that the preceding 215 paragraphs
are a true copy of the reasons
for judgment delivered by
this Honourable Full Court.
Associate
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