CULL & LENZ
[2020] FamCA 50
•5 February 2020
FAMILY COURT OF AUSTRALIA
| CULL & LENZ | [2020] FamCA 50 |
| FAMILY LAW – SUMMARY DISMISSAL – Where the third party Trustee seek the wife’s case be summarily dismissed – Where the wife’s application seeks orders against the Trust and the Trustees in proceedings between the husband and the wife – Where the wife asserts the husband exercised de facto control of the Trust –Where the husband’s parents were at all times in control of the Trust – Where the Trust was not “made in relation to” the marriage – Where the wife asserts the husband has a claim in restitution against the Trust – Where the wife lacks standing to pursue the husband’s right – Where the wife claims the Trustee has been unjustly enriched by unpaid efforts of the husband and wife – Where there was no application to accrue jurisdiction for the equitable doctrine – Orders for Summary Dismissal – Orders for the Trust and Trustee to be removed from proceedings. |
| Family Law Act 1975 (Cth) ss 79, 85A, 90AE Family Law Rules 2004 r 10.12 |
| Arthurman & Arthurman [2019] FamCAFC 214 Full Court in Public Trustee (S.A) and Keays 91985) FLC 91-651 Harris & Dewell [2018] FamCAFC 94 Kennon & Spry (2008) CLR 366 Knight & Knight, Amglow Pty Ltd as trustee of the Jack Knight Family Trust (Intervenor) 1987 FLC 91-854 |
| APPLICANT: | Ms Cull |
| RESPONDENT: | Mr Lenz |
| SECOND RESPONDENT: THIRD RESPONDENT: | Lenz Investments Pty Ltd Lenz Family Trust |
| FILE NUMBER: | SYC | 6598 | of | 2017 |
| DATE DELIVERED: | 5 February 2020 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
| HEARING DATE: | 9 December 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Coulton |
| SOLICITOR FOR THE APPLICANT: | Finn Roache Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Lethbridge SC |
| SOLICITOR FOR THE RESPONDENT: | Nolan Lawyers |
| COUNSEL FOR THE 2ND & 3RD RESPONDENTS: | Mr McInerney SC with Mr Ford |
| SOLICITOR FOR THE 2ND & 3RD RESPONDENTS: | Andrews & Holm |
Orders
IT IS ORDERED
That the application of the wife contained in Paragraphs 3, 7 and 8 of the Second Further Amended Initiating Application filed 15 March 2018 be dismissed pursuant to the provisions of Rule 10.12 of the Family Law Rules 2004.
That orders joining Lenz Investments Pty Limited and the Lenz Family Trust as parties in these proceedings be vacated.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Cull & Lenz has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 6598 of 2017
| Ms Cull |
Applicant
And
| Mr Lenz |
Respondent
And
Lenz Investments Pty Ltd
Second Respondent
And
Lenz Family Trust
Third Respondent
REASONS FOR JUDGMENT
This is an application on behalf of a third party trustee, Lenz Investments Pty Ltd, (“the Trustee”), for summary dismissal of the wife’s application for orders against the Trustee and the Lenz Family Trust (“the Trust”) in proceedings between the husband and the wife.
Ms Cull (“the wife”) and Mr Lenz (“the husband”) are engaged in proceedings relating to their children and their property.
THE COMPETING APPLICATIONS
On 9 February 2018, the wife filed an Application in a Case seeking to join the Trustee as a party to the property settlement proceedings between the husband and the wife.
By her Second Further Amended Application filed 15 March 2018, the wife seeks, relevantly, the following orders:
3. That pursuant to Section 79 and/or in the alternative Section 85A (1) of the Family Law Act that Lenz Investments Pty Ltd (in its capacity as Trustee of the Lenz’s Family Trust and by way of a distribution to Mr Lenz (The Husband) pay the Wife out of the assets of the Lenz’s Family Trust by way of bank cheque, within 28 days of the due date of these Orders the [sic] sum of $20,500,000.00. (Twenty million five hundred thousand dollars)
…
7. That for the purpose of Order 3 herein and pursuant to Section 90AE and/or in the alternative 85A (1) of the Family Law Act 1975 (Cth) ,
cause the Trust to pay the Wife a sum of $17,500,000.00 (Seventeen million five hundred thousand dollars) (The Capital Sum).
8. That pending payment of the Capital Sum, the Husband in his capacity as Director of the Trustee Company of Lenz’s Family Trust, be and is hereby restrained from voting in favour of or causing the company to disburse the sale sale [sic] proceeds or any part thereof of the Property G other than for the repayment of secured creditors, not being beneficiaries of the Trust, an amount of $17,500,000 without giving the Wife 28 days written notice.
(as per the original)
Consequent upon the filing of the wife’s application, both the Trustee and the Trust were joined as the second and third respondents, respectively, to the application. It is conceded that the Trust is not capable of being joined as a party to proceedings.
By a Response to an Application in a Case filed 15 June 2018, the Trustee seeks the following orders:
1.Order that the second and third respondents be removed as parties to these proceedings.
2.Order that the applicant’s claim for substantive relief under the Family Law Act 1975 (Cth) against the second and third respondents be struck out or alternatively be summarily dismissed pursuant to Rule 10.12 of the Family Law Rules 2004 (Cth).
It is necessary to provide the facts which form the context of these applications. Where facts are in dispute, the wife’s assertions are, for the purpose of this application, accepted.
The Trustee was incorporated on 10 September 1987. The directors were the husband’s parents. On the same day, the Trust was established. The Trust is a discretionary trust.
The husband, who was born in 1971, was then 16 years old. He is one of four siblings.
The husband’s father is the appointor of the Trust. The Trust Deed provides in Clause 13:
(a)All or any one or more of the Trustees for the time being of these presents may be removed from office at any time by Deed duly executed by [the appointor] during his life or his executors or administrators after his death and the Trustee or Trustees so removed from office shall thereupon retire and cease to hold office as Trustee of the trusts constituted hereunder.
(b)The power of appointing new Trustees of these presents shall be vested in [the appointor]...
The beneficiaries of the Trust are the husband’s father,
TOGETHER WITH such person or persons (if any) who may be or may have been the spouse or widow or widower as the case may be of said [husband’s father] and the parents brothers sisters and children and the remoter issue of either the said [husband’s father or the husband’s mother] and such of the spouses, widows and widowers of those brothers sisters children and remoter issue, or any of them as the Trustees may from time to time appoint.
(as per the original)
The husband is a beneficiary of the Trust.
The wife may also be a beneficiary of the Trust but no document appointing her as a beneficiary was in evidence.
The Articles of Association of the Trustee provide, at Clause 92(d):
The Company may by ordinary resolution remove any Director and may by ordinary resolution appoint another in his stead.
Thus it is clear that, when the Trust was created, the husband’s father as appointor, controlled the Trust by his ability to remove and appoint trustees. The Trustee was controlled by its shareholders, the husband’s parents.
In 1998 the Trustee purchased a commercial property in P Street, Adelaide. The property was tenanted and the rent paid to the Trustee. The funds for the purchase were provided or borrowed by the husband’s parents.
In 2001 the husband left Australia and moved to live in Japan, and then to China in 2008 where the husband worked for a financial institution.
The husband and the wife married in 2003.
The wife asserts that in 2009 the husband began to do unpaid work for the Trustee.
In 2011 the husband’s employment terminated. From 2011 until 2015 the husband continued to work for the Trustee without remuneration, living off the proceeds of sale of jointly owned property. The husband and the wife remained living in China.
The wife asserts that, from time to time, the husband told her that he and she would benefit from the profits of the development being undertaken by the Trustee.
In 2014 the G Street property was demolished in preparation for development.
In July 2014 the husband’s parents signed a development management agreement with Q Pty Limited. Q Pty Ltd was to source the finance for the development. The agreement provided for Q Pty Ltd to nominate three directors of the Trustee.
The husband was appointed a director of the Trustee on 15 April 2015. The husband’s parents continued as directors.
On 4 May 2015 three further directors were appointed as nominees of Q Pty Ltd. At that time there were six directors.
From time to time the husband and his parents have signed personal guarantees for financing for the development.
In January 2016 the husband started to receive remuneration for his work from the Trustee. He was paid a consultancy fee of $10,000 per month.
The construction of the development project was completed in early 2017.
The husband and the wife separated in China on 17 September 2017. The husband and wife returned to live in Sydney separately.
On 9 October 2017 the wife filed an Initiating Application seeking orders in relation to parenting.
On 13 November 2017 the wife filed an Amended Initiating Application seeking orders for property settlement against the husband.
On 9 February 2018 the wife filed as Application in a Case seeking, inter alia, an order that the Trustee and the Trust be joined as parties to the proceedings.
On 7 March 2018 the wife filed a Further Amended Initiating Application.
On 15 March 2018, the wife filed a Second Further Initiating Application referred to above.
On 16 May 2018, the three external appointed directors of the Trustee resigned, leaving the husband’s parents and the husband as directors.
On 15 June 2018 the second and third respondents filed a Response to an Application in a Case seeking the dismissal of the wife’s application against them pursuant to Rule 10.12 of the Family Law Rules 2004 (“the Rules”).
THE LAW
The Trustee, in these proceedings, relies on the provisions of Rule 10.12 which provides:
10.12 Application for summary orders
A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:
(a) the court has no jurisdiction;
(b) the other party has no legal capacity to apply for the orders sought;
(c) it is frivolous, vexatious or an abuse of process; or
(d) there is no reasonable likelihood of success.
Specifically, the Trustee asserts that the wife’s application has no reasonable likelihood of success.
In Arthurman & Arthurman [2019] FamCAFC 214 the Full Court considered Rule 10.12 (d) and said:
The phrase “no reasonable prospect of success” has been the subject of frequent discussion in this and other superior courts. In Spencer v Commonwealth of Australia (2010) 241 CLR 118 at [59], Hayne, Crennan, Kiefel and Bell JJ discussed this phrase as it appeared in s 31A of the Federal Court of Australia Act 1976 (Cth) and noted that it must be read as a whole. It should not be paraphrased or defined by analogy to other terms such as “frivolous”, “untenable”, “groundless” or “faulty”.
In Bretton & Bondai [2013] FamCAFC 168 at [59] and [122], the Full Court held that “no reasonable prospect of success” was conceptually different to “doomed to fail”. This distinction was cited with approval by the Full Court in Ebner & Pappas (2014) FLC 93-619 at [60], who went on to consider the interpretation of the same words by the Victorian Court of Appeal in Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd (2013) 42 VR 27 (“Lysaght”).
According to the Court in Lysaght, the test asks whether the application has a “real” as opposed to “fanciful” chance of success. Whilst it must be applied by reference to its own language, the test is nonetheless broader than “hopeless” or “bound to fail”. It must also be borne in mind that “the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried” (Lysaght at [35]).
THE WIFE’S CASE
The wife was ordered to file Points of Claim and did so on 15 March 2018. On 6 December 2019 the wife filed Amended Points of Claim.
In her Amended points of Claim the wife asserts, relevantly:
5.At all material times the 1st Respondent exercised de facto control of the Trust through the Trustee Company and/or at all material times the 1st Respondent was the manager of the Trustee Company.
6.In furtherance of his de facto control and/or as such manager of the Trustee Company the [husband] applied all his efforts to the proposed development including but not limited to:
6.1Obtaining consent to develop the Adelaide land.
6.2Making the significant decisions in respect of the development including but not limited to liaising with architects, town planners and local authorities to obtain planning approval for the construction of the development.
6.3[The husband] was the principal organiser, manager of the development including investigating, negotiating and arranging the necessary finance and refinance at all stages of the development.
6.4[The husband] has signed requisite director signatures in lieu of & behalf of his Father by way of electronic signature since 2013.
6.5The 1st Respondent admits that he carried out work on an unpaid basis for the Trustee Company from at least July 2011 to May 2015 for the purpose of carrying out the development.
6.6The 1st Respondent was the only family member appointed a director of the Trustee Company on 15 April 2015 and remained the only director with both his parents until Ms R was appointed in 2019.
6.7The 1st Respondent did not receive any income or apply for any employment from at least July 2011 until 2015 as he was working full- time on the development.
6.8The 1st Respondent executed personal guarantees for some or all of the borrowings for the development.
...
18....it is contended ...that the profit stream of the Trustee Company is the product of [the husband] as the de facto controller of the Trustee Company.
19. The current wealth of the Trustee Company is the product of [the husband’s] and [the wife’s] contributions, work and effort.
20.The [wife] seeks a declaration that the assets or part thereof of the Trustee Company be treated as the property of [the husband] for the purposes of s79 of the Family Law Act.
21.There is sufficient association between the corpus of the Trust and the contribution of the parties for the Court to direct that pursuant to s85A of the Act an Order be made against the Trust to satisfy [the wife’s] claim pursuant to s79.
The claim at Paragraph 21 will be dealt with later in these reasons. As will be explained, this is not a Trust to which the provisions of s 85A of the Family Law Act 1975 (Cth) (“the Act”) can attach in relation to the subject marriage.
Control of the Trust, through control of the Trustee, as asserted in paragraph 5 of the Amended Points of Claim is not sufficient to establish that the property of the Trust is the property of the husband.
In Harris & Dewell [2018] FamCAFC 94 the Full Court, dealing with an assertion that the husband controlled a trust stated:
Control is not sufficient of itself. What is required is control over a person or entity who, by reason of the powers contained in the trust deed can obtain, or effect the obtaining of, a beneficial interest in the property of the trust.
It is the contention of the wife that the degree of control exercised over the Trustee by the husband is such that he can direct the Trustee to allocate the assets of the Trust to him. In her written submissions, counsel for the wife stated:
The wife contends that that husband was in such a position of control over the trustee company as effectively to dictate the manner in which and those of the prospective beneficiaries to whom its income and capital were to be distributed from time to time.
Further, in written submissions, counsel states:
The respondent-wife contends that the assets of the Trust should be treated as matrimonial assets for the purposes of s79 of the Act.
What then is the evidence upon which the Court could find, on the balance of probabilities, that the husband has such a degree of control over his father as appointee of the Trust and of his parents as shareholders of the Trustee, that he can obtain a beneficial interest in the property of the Trust?
The wife deposed to conversations with the husband which, it was submitted, demonstrated his control of the Trustee. Although the husband does not admit these conversations, for the purpose of this application I have accepted that they occurred as the wife deposed.
At an unspecified time she deposed that he said, “I’m not working for free. I will be paid when we sell the units”.
She deposed that “from June 2017” he said to her “I am not working for free my assets are in the family trust - I am the CEO”.
She deposed that on about 17 December 2017 the husband said to her, “There is no trace of my interest in the family trust. we [sic] have hidden it very well. You will have no chance in court”.
The wife deposed that, at some time between 2009 and 2016, the husband said to her, “At the moment we have no money, my money is in the trust”.
The wife deposed that in mid-2013 she asked the husband to draw a wage from the Trust and he said, “I can’t now. The lender won’t allow it”. The wife then proposed that she should get the penthouse when the development was completed and the husband said, “That’s fine, and when we finish selling, we can travel the world...”
The wife does not refer to any conversation where she asserts that the husband told her that he could allocate the assets of the Trust, or any portion of them, to himself without regard to the Trustee.
The conversations to which the wife refers are consistent with the husband’s expecting that he will, at some future time, benefit from his work on behalf of the Trustee. However, they do not either assert or establish that he would do so other than by the agreement of the Trustee and, by necessary implication, the agreement of his parents. Neither do those conversations suggest, nor the wife assert, that the husband would benefit to the exclusion of his parents or his siblings.
The wife tendered a volume of documents, submitting that the cumulative effect of the documents was to establish that the husband controlled his parents. Those documents, in the order in which they were tendered, and in so far as they are relevant to the submission, are summarised below:
· On 31 August 2010 the husband forwarded an email annexing a business plan of the G Street project to the wife, his sister Ms R, her husband Mr S and Mr T (the husband of the husband’s sister Ms P) stating:
The business plan for G Street is almost completed, please please please proof-read and correct it for me.
Please send your amendment directly to me, no need to copy everyone.
· On 30 March 2015 Commercial & Legal forwarded, addressed to the Directors of the Trustee, marked for the attention of the husband, a letter titled:
Advice – Review of National Australia Bank (Financier) Mortgage and General Security Deed (together, the ‘Security Documents’) in relation to Property G (‘Project’). The document was prepared on instructions of the Trustee to review the security documents prepared “by the Financier, to which Lenz Investments Pty Ltd as trustee for the Lenz’s Family Trust (“you”) will be subject.
The only specific reference to the husband is in Clause 24 of the letter dealing with guarantors where the writer confirms that the husband and his parents are to provide personal guarantees.
· Document from the NAB entitled “Approved Terms” addressed to the Trustee, dated 27 January 2015. In relation to each facility the borrower is the Trustee. The document refers to a guarantee and indemnity given by the husband’s father and the husband.
· An NAB Application Form for a loan to the Trustee signed by Mr V as Director on 21 November 2017 and by the husband’s father and the husband as Directors of the “Credit User”. The document makes no specific reference to the husband.
· Letter dated 2 May 2017 from B Pty Ltd to the Directors of the Trustee annexing a document referring to personal guarantees by the husband’s parents and the husband.
· Deed of Guarantee between the husband and L Pty Limited undated and unsigned.
· Statements for May to July 2017 from D Pty Ltd showing the balance of the loan owing. The statements are addressed to:
Lenz Investments Pty Ltd
Mr Lenz
C/- Q Pty Ltd…
· Letter from the husband, in his capacity as Director of the Trustee, to D Pty Ltd in relation to finance for the development dated 28 July 2017 in relation to refinancing. The letter otherwise makes no reference to the husband.
· Document entitled “Junior Creditor Assumption Agreement” whereby the husband became a party to a loan between the Trustee and L Pty Ltd signed by the husband, undated and similar agreements signed by the husband’s sister Ms P and by Mr T.
· Payslips issued by the Trustee for payments to the husband in his capacity of “Project Director” of $10,000 in June, July and August 2017 and of $25,000 in August 2017.
· Invoice issued by the husband to the Trustee for reimbursement of expenses dated 14 June 2017.
· Invoice issued by the husband to the Trustee for Project Management Fee of $10,000 and “Reimbursement of marketing expenses” of $25,000 on 1 September 2017.
· Email from the husband to the Chief Financial Officer of Q Pty Ltd (Ms M) dated 17 August 2017 stating:
After speaking with uncle Mr N on yesterday, we decided to adopt a simple average approach (i.e. Total cost/[No.] lots) to calculate the cost of each apartment.
That letter was in response to an email from Q Pty Ltd addressed to the husband and the accountant enclosing the draft financial statements of the Trustee for the year ended 30 June 2017.
· Minutes of a meeting of the Trustee held 10 February 2017 attended by three directors, the husband, Ms M and Mr W and signed by the husband as chairman.
· Bundle of emails between Q Pty Ltd and the husband where Q Pty Ltd asks the husband to approve expenses relating to the development project and the husband does so.
· Email correspondence between Q Pty Ltd and the husband in relation to a meeting of directors of the trustee. The husband on 12 July 2016 stated:
Thank you very much for documenting the strategy. I have just now briefed my parent s[sic] about them, all 3 of us are fully on-board with the actions.
The email exchange attaches Minutes of Board meeting of the Trustee on 6 May 2015, attended by the husband, his parents and Ms M. The husband’s father chaired the meeting.
· Two undated documents titled “Declaration by Thirds Party Mortgagor, Guarantor, Surety Mortgagor ...” executed by each of the husband’s parents.
· Chain of emails between a selling agent and the husband about the settlement of a sale of a unit in June 2017.
· Email dated 2 October 2015 from the husband to Ms R and Mr S (the husband’s sister and her husband) about upgrading light fittings in the units.
· Various emails to and from the husband dealing with valuations, sale price, costs and variations and modifications to plans in 2014.
· Email attaching a document from husband to Q Pty Ltd stating “I signed this on behalf of my father…”. The document appears to be a drawdown authority in relation to financing.
· Emails in June 2014 between the husband and Q Pty Ltd relating to the proposal to create a company Lenz Administration PL. (It is not disputed that no such company was incorporated). The emails include the husband’s confirmation of his wish to remain “involved in the project” and Q Pty Ltd’s statement “It just says you will provide ‘assistant development management services’ to the project”.
· Document entitled “Customer Information” setting out the husband’s qualifications and expertise. The document states, under the heading “Timeline of events” inter alia:
…
Oct 2008Given the rezoning of the land at G Street, [the husband] saw the opportunity of redevelopment and relocated his family from Japan to China in preparation for the project.
Aug 2008After the dark cloud of the Global Financial Crisis had cleared, Lenz Investments Pty Ltd through the work of [the husband] invited 10 architectural firms to express their interest for the development of G Street.
Sept 2010Lenz Investments Pty Ltd appointed experienced local firm Company Z to be the project’s town planner.
…
Nov 2010Out of the 10 architect submissions, [the husband] invited the top 3 candidates to participate in a design competition...
...
Aug 2011[The husband] resigned from [his employer] to focus solely on the redevelopment...
May 2012...[the husband] fast-tracks marketing efforts to launch the project for sale and works hard to complete the marketing plan.
...
Mar 2014In an effort to save on project costs, [the husband] instructs Company U to submit a variation in the existing DA...
...
June 2014Five (5) top-tier builders were invited to submit their expressions of interest... Company U manage this process and report directly to [the husband] for feedback and instruction.
...
Sep 2014[Q Pty Ltd] is being engaged as development manager to take over the day to day operation from [the husband].
· Under the heading “How this project came about” the document states:
§ A few years following the rezoning of the property in 2005, [the husband] identified the potential for the redevelopment of the property and commenced his due diligence investigations in 2008.
§ [The husband] sought the approval of his parents (then retired) to take control and explore the potential redevelopment opportunities.
§ [The husband’s] plans were delayed slightly with the GFC and resumed again in 2010.
§ After the 1st year of planning, in 2011, [the husband] was so confident of the redevelopment opportunity and success that he resigned from his senior post at [a finance agency] to focus solely on this project.
§ In 2012 [the husband] outlines the project marketing strategies and commences marketing whist at the same time working with [an architecture firm] to procure initial Planning Consents.
§ Within several months of commencing his marketing plans, early 2013, [the husband] is rewarded with more than $26 million of property sales.
· An unsigned draft document entitled “Property G Development Project Agreement of Principles of Participation” between the Trustee and Q Pty Ltd. The agreement appears to propose the creation of a new company, Lenz Administration Pty Limited to “provide assistant developmental and project management services to the Project”. It is common ground that no such company was incorporated.
The documents upon which the wife relies demonstrate that the husband did a great deal of work, both unpaid and paid, in the planning and execution of the redevelopment.
There is no evidence to support the assertion that the husband has the control of the Trustee.
From the incorporation of the Trustee until April 2015, the husband was not a director of the Trustee. From May 2015 there were three directors appointed by Q Pty Ltd. Those directors remained in office until May 2018. It was not asserted that the husband exercised any control over the three Q Pty Ltd directors.
However, having the day to day management of the development is not analogous to, or the same as, being able to obtain a beneficial interest in the property of the Trust.
There is no evidence that the husband has ever caused the Trust to make a distribution to him.
The Trustee relied on affidavits from the husband’s father; the husband’s mother; the husband’s sister Ms R and Mr N who is the accountant for the Trustee.
The husband’s father deposed that:
· Each year he gives instructions to the accountant, Mr N, to prepare the financial returns and tax returns of the Trustee and the Trust, with the exception of the years from 2015 to May 2018 when Q Pty Ltd prepared them.
· The address of the Trustee has always been his home address except when Q Pty Ltd was involved.
· That from 2004 Ms R helped him to administer the trust property.
· That he and his wife “are the bosses of the G Street property”.
· That Ms R and Mr S who are architects researched the proposed development commencing in 2006.
· That in 2010 Ms R and Mr S interviewed prospective architects and, after discussion with him, his wife and the husband shortlisted three.
· That after the husband was retrenched in 2011 he asked the husband to become involved in the development project as a consultant and to be the project manager.
· That in February 2012 he instructed the husband to commence pre-selling the apartments.
· That he asked immediate family members to lend money for the project. The husband’s mother has lent $666,616. The husband’s sister Ms P has lent $760,556. Mr T has lent $455, 819. Mr Y has lent $350,000. The husband has lent $99,978. The husband’s sister Ms R has lent $80,000. These loans are recognised in the financial statements of the Trust.
· That he asked the husband to find finance for the project.
· That he made the decision to commence demolition even though financer was not in place for the redevelopment.
· That he and his wife guaranteed the initial loan of $80 million.
· That he asked the husband to become a director of the Trustee in 2015.
· That he and his wife signed the Participation Agreement with Q Pty Ltd.
The husband’s father deposed:
As a director I am actively involved as regards to decisions made for the project. My wife and I are the people who make the final decisions on all important matters.
and:
I am the primary decision maker for [the project]. I made the final decisions for all major decisions including the architect, the builder and the money, after consultation with my wife. My children, primarily Ms R, son-in-law Mr S, and [the husband] give me their professional opinion, but I am the decision maker.
The husband’s father deposed that each day he looks over the accounts and checks every dollar that is spent and provides this information to the accountant.
When Q Pty Ltd drafted payment authorities for the costs of the development, those authorities were sent to him for approval and signature.
The husband’s parents sold property that they owned in 1990 and paid down the mortgage over G Street.
In August 2013, the husband’s parents sold their Suburb O property and lent some $973,000 to the Trust to the funding of the development.
In May 2018, the Trust paid the husband’s parents $1,180,000 as part of a refinancing. They used that money to buy a house to live in. The husband lives with his parents.
The husband’s father deposed:
I have kept up to date on the sales of the apartments through a WhatsApp group... that I use to communicate with the sales agents of [the apartments] through text messages in Chinese.
Once all debts are paid from the Trust I would like to purchase another development site like the G Street property and would consider doing another development. My son [the husband] has said that he will need another job once his current role as project manager for [the Trustee] is finished. Also my son-in-law, Mr T has expressed an interest to be more involved should we proceed with another project.
The evidence of the husband’s mother, and sister and the accountant corroborates that of the husband’s father.
The evidence relied upon by the wife is consistent with the premise that the husband was the project manager.
It does not establish that a court could find, on the balance of probabilities, that the husband controls his parents such that the property of the Trust is the property of the husband.
SECTION 85A
In Order 3 and Order 7 of the Second Further Amended Application, the wife relies, in the alternate, on s 85A as a head of power for the orders she seeks against the Trustee.
Section 85A provides:
85A Ante‑nuptial and post‑nuptial settlements
(1)The court may, in proceedings under this Act, make such order as the court considers just and equitable with respect to the application, for the benefit of all or any of the parties to, and the children of, the marriage, of the whole or part of property dealt with by ante‑nuptial or post‑nuptial settlements made in relation to the marriage.
(2) In considering what order (if any) should be made under subsection (1), the court shall take into account the matters referred to in subsection 79(4) so far as they are relevant.
(3) A court cannot make an order under this section in respect of matters that are included in a financial agreement.
The Full Court in Public Trustee (S.A) and Keays 91985) FLC 91-651 held:
The words `in relation to the marriage' must therefore be interpreted as defining the ambit within which the section can operate. To adopt the words of Gibbs J. in Re Ross-Jones; Ex parte Green (1984) FLC ¶91-555 at p. 79,485; (1984) 9 Fam. L.R. 888 at p. 895, the words `in relation to' import the existence of a relationship between the settlement and the marriage of the parties. The settlement must in some manner be consequential upon or incidental to the marriage.
In Knight & Knight, Amglow Pty Ltd as trustee of the Jack Knight Family Trust (Intervenor) 1987 FLC 91-854, Nygh J stated:
The Australian legislation does not require that the settlement be on the husband or on the wife. A settlement on the children only will equally suffice. It does, however, require a relationship with the marriage between the parties. For that reason the definition given by Henn Collins J. in Joss v. Joss (1943) P. 18 at p. 20, is in my view to be preferred. There his Lordship said:
``What is really meant, I think, is that the particular marriage must be a fact of which a settlor takes account in framing the settlement. If the particular marriage is recited or referred to, it is patently a factor. Hence, a settlement made before marriage, but not in relation to or contemplation of a particular marriage, is not within the section, but a settlement is within it if from its recitals or substance it is apparent that it is related to a particular marriage. Similarly, in the case of a settlement made after marriage. If the marriage is recited or expressly referred to it is patently a factor but if it is not recited or referred to it may still be a factor, and, since the marriage is an existing fact which the settlor must have had in mind, the absence of recital makes little difference.''
Nygh J further stated:
In my view a settlement cannot be described as being a settlement in relation to a marriage, if persons outside of the marriage are substantial potential beneficiaries. The purpose of sec. 85A is to allow the court to deal with the property which is the subject of the trust. To the extent that the court removes any assets from the trust, it takes away any potential benefit which a third party may have derived therefrom. As Gibbs J. said in Ascot Investments Pty. Ltd. v. Harper and Harper (1981) FLC ¶91-000 at p. 76,061; (1981) 6 Fam. L.R. 591 at p. 601, Parliament did not intend that the legitimate interests of a third party should be subordinated to the interests of a party to the marriage or that the Family Court should be able to make orders that would operate to the detriment of third parties. This would be the immediate effect if any of the assets of the trust were removed from the trust.
In Kennon & Spry (2008) CLR 366, Kiefel J (as she then was) stated in relation to s 85A:
The essential requirement of the section is that there be a sufficient association between the property the subject of a settlement and the marriage the subject of proceedings. It does not require that a settlement made prior to marriage be directed to the particular marriage at the point it is made. It is sufficient for the purposes of the section that the association of which it speaks ("made in relation to") be present when the Court comes to determine the application of the property settled under s 85A(1).
It is difficult, if not impossible, to envisage a circumstance in which the Trust, settled when the husband was 16 years old and before he met the wife, could be construed to be “made in relation to” the marriage of the husband and the wife in these proceedings.
Section 85A has no application here.
THE POINTS OF CLAIM
Although the only orders sought are those set out in the Second Further Amended Application, the Amended Points of Claim raise other matters. To the extent that those other matters do not raise a claim pursuant to s 90AE, I propose to deal with them separately.
RESTITUTION
The Amended Points of Claim state:
7.The [husband] applied his efforts skill and expertise to the development without remuneration commencing in 2009 and continuing until at least the completion of sales of the development in the expectation of personally profiting from the development by way of distribution of capital & income of the Trustee Company.
8.The [husband] has been receiving remuneration from the Trustee Company of $10,000 net per month since July 2015.
9.The Trustee Company has had the benefit of the [husband’s] unpaid work for the period July 2011 to July 2015 totalling at least $360,000.00 plus interest.
10.The Trustee Company has not accounted to the [husband] for his share of the profits and the assets of the work done by him in respect of the development since at least 2009 in addition to the lost remuneration from July 2011 to July 2015 from at least 2009 to date.
In her written submissions, counsel for the wife stated:
In paragraphs 7 – 10 of the Amended Points of Claim the wife asserts that between at least July 2011 and July 2015 the husband provided his industry and efforts to the trustee company without any remuneration. She contends that that fact entitles him to a claim in restitution against the trustee company (again according to the Pavey & Matthews principle) amounting to at least $360,000 plus interest, which claim constitutes matrimonial property within the meaning of section 79. That matter stands to be determined by the court, at the final hearing of the proceedings.
I accept that the right of the husband to make a claim against the Trustee may be a chose in action and therefore property of the marriage.
However, it is his right, and only he can pursue it.
The wife lacks standing to pursue the husband’s right.
Although there is no application on foot in relation to that claim, had there been an application pursuant to the accrued jurisdiction of the Court by the wife in those terms, it must fail for lack of standing.
UNJUST ENRICHMENT
The Amended Points of Claim state:
11.At the request of [the husband] as the de facto controller and/or manager of the Trustee Company [the wife] undertook work during the marriage promoting the development to assist [the husband] to profit from the development including negotiating the sale by the Trustee Company of units to purchasers thereof between 2011 and 2017.
12.[The husband] as the de facto controller and/or manager of the Trustee Company’s business promised [the wife] that she would obtain a share of the profits from the marketing and sale of the development by payments of:
12.1Commission of approximately $1,100,624 ...
12.2Marketing expenses of approximately $640,000.
13.The Trustee Company has been unjustly enriched by the work performed by [the wife] and/or [the husband] as stated in Paragraphs 1 – 12 hereof.
14.The development is now complete with significant profits having been derived as a result by the Trustee Company.
…
15.[The wife] is entitled to an order for restitution against the Trustee Company in the sum of at least approximately $1,100,624 for commission on sales.
This claim appears to have two elements. The first is a claim that the Trustee has been unjustly enriched by the unpaid efforts of the husband and the wife. The second is a claim for commission by the wife.
The claim for commission is not a claim to which s 90AE applies. There is no application to invoke the accrued jurisdiction of the Court to allow such a claim to be prosecuted.
To the extent that the claim can be interpreted as a claim that the Trustee has been unjustly enriched by the unpaid efforts of the husband and the wife, that is not a claim pursuant to s 90AE.
Leaving aside the issue that the elements of a claim have not been identified or demonstrated, the concept of unjust enrichment is an equitable doctrine and there is no application to invoke accrued jurisdiction.
SHAM
The wife abandoned the claim, enunciated in Paragraph 22 of the Amended Points of Claim, that the husband, in utilising the trust structure as the vehicle for the development:
…was a sham designed to distance [the husband] from the development and subsequent profits for the purpose of ultimately defeating [the wife’s] claim pursuant to s 79 of the Act.
EQUITABLE ESTOPPEL
The claim relying on the principles of equitable estoppel in Paragraph 23 is made in the alternate to the abandoned claim in Paragraph 22.
The gravamen of the wife’s claim is that the husband made certain representations to her to the effect that they would benefit from the profits of the development and that she would be paid commission. The wife claims that she altered her position to her detriment in reliance on those representations.
However, as enunciated, the claim relies upon the assertion that the husband was the “de facto controller/manager of the Trustee Company at all material times”.
That claim is not made out.
It is not necessary here to examine the difficulties with this claim, including the fact that the wife does not assert that the Trustee ever represented to her that the husband was its agent.
Again, this is not a claim pursuant to s 90AE and held out and there is no application to invoke the accrued jurisdiction of the Court to allow such a claim to be prosecuted.
LOAN
The wife in the Points of Claim refers to a loan made by the husband to the Trust in the sum of $99,978.
There is no issue that the funds were lent. The debt appears in the financial statements of the Trust.
The sum lent is an asset of the husband for the purpose of the s 79 proceedings.
Section 90AE is not enlivened.
CONCLUSION
There is no reasonable prospect that the wife will succeed in the claim which is pleaded against the Trustee and her application will be dismissed.
I certify that the preceding one hundred and five (105) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 5 February 2020.
Associate:
Date: 5/02/2020
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