EL SAEID & MASIH
[2019] FamCA 497
•25 July 2019
FAMILY COURT OF AUSTRALIA
| EL SAEID & MASIH | [2019] FamCA 497 |
| FAMILY LAW – PROPERTY SETTLEMENT – Threshold issue to identify and determine the value of the asset pool – Where the wife contends that the husband was, at all relevant times, in control of a company and trust accounts established by his family – Where that finding is not available on the evidence – Where the wife contends that the husband’s actions pertaining to these assets were attempts to deny the wife her entitlement to them – Where both the company and trust accounts were established prior to the husband meeting the wife – Points of claim dismissed. FAMILY LAW – PRACTICE AND PROCEDURE – Where the husband and wife each seek to re-open the case for the purpose of tendering fresh evidence while judgment is reserved – Where the evidence could not have been discovered prior to the end of the hearing – Where there would have been no prejudice to either party by way of the late admission of the evidence – Where the evidence to be considered is in relation to findings about the credit of the wife and husband – Where that evidence would not affect the outcome of the proceedings - Where that evidence is not so material that the interests of justice require its admission– Both applications dismissed. |
| Evidence Act 1995 (Cth) ss 118, 122, 125 Family Law Act 1975 (Cth) ss 75, 29, 85A, 90AC, 90AE, 106B Family Law Rules 2004 r 17.04 |
| Atkins & Hunt and Ors [2017] FamCAFC 79 Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 F.Y.D. Investments Pty Ltd v Promptair Pty Ltd [2017] FCA 1097 Inspector General in Bankruptcy v Bradshaw [2006] FCA 22 Kennon & Spry (2008) 238 CLR 366 Sharrment Pty Ltd and Ors v The Official Trustee in Bankruptcy (1988) 82 ALR 530 AA v New South Wales Bar Association(1992) 176 CLR 256 Stephens & Stephens and Ors [2005] FamCA 1181 Zau & Uong (No. 2) [2015] FamCA 56 |
| APPLICANT: | Ms El Saeid |
| FIRST RESPONDENT: | Mr A Masih |
| SECOND RESPONDENT: | E Pty Limited |
| THIRD RESPONDENT: | Mr B Masih ATF D Family Trust |
| FOURTH RESPONDENT: | C Unit Trust |
| FILE NUMBER: | SYC | 2986 | of | 2012 |
| DATE DELIVERED: | 25 July 2019 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Loughnan J |
| HEARING DATE: | 12, 13, 14, 15, 16 & 21 March 2018 and 23 July 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Leggat SC with Mr Friedlander and Mr D Raphael (23 July 2019) |
| SOLICITOR FOR THE APPLICANT: | Sharah & Associates Solicitors & Conveyancers |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Schonell SC |
| SOLICITOR FOR THE FIRST RESPONDENT: | Diamond Conway Lawyers |
| COUNSEL FOR THE SECOND TO FOURTH RESPONDENTS: | Mr Campton SC |
| SOLICITOR FOR THE SECOND TO FOURTH RESPONDENTS: | York Law Family Law Specialists |
Orders
The husband’s application to re-open filed on 19 June 2019 and the wife’s application to re-open filed on 19 July 2019 are dismissed.
The wife’s applications for orders and findings in accordance with paragraphs 2, 3, 4, 22, 23, 24, 25, 26, 27, 28, 31, 32, 51, 53, 54 & 56 of her Points of Claim (exhibit X) are dismissed.
The property settlement proceedings are adjourned to a date to be fixed by arrangement with the parties.
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 El Saeid & Masih 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: SYC2986 of 2012
| Ms El Saeid |
Applicant
And
| Mr A Masih |
First Respondent
And
E Pty Limited
Second Respondent
And
Mr B Masih ATF D Family Trust
Third Respondent
And
C Unit Trust
Fourth Respondent
REASONS FOR JUDGMENT
Introduction
There are proceedings between Ms El Saeid (“the wife”) and Mr A Masih (“the husband”) for property settlement. A preliminary issue in those proceedings has been raised by the wife’s claims in respect of certain assets. The wife seeks orders and findings in relation to certain dispositions and assets, ultimately for the purpose of expanding the net pool of assets to be taken into account in the property settlement proceedings.
E Pty Limited, Mr B Masih (“the husband’s brother”) in his capacity as the trustee of the D Family Trust and the C Unit Trust are affected or could be affected by the orders and or findings sought by the wife and as a result, are parties to the proceedings.
What follows are the reasons for the orders and findings set out at the commencement of this judgment.
Short history
The husband was born in 1962 and is 56 years of age. The wife was born in 1977 and is 41 years of age. They met in Country X in April 2005 and were married there in 2005. They separated on a final basis on 25 March 2012.
There are two children of the marriage. R was born in 2006 and is 13 years of age. Q was born in 2009 and is 10 years.
Parenting proceedings between the wife and husband were heard in May and June 2018 and final orders were made on 16 April 2019 in respect of these children.
Applications
The wife seeks various orders largely aimed at bringing into the hands of the husband, assets held by third parties. In her Points of Claim dated 8 March 2018, at least in the alternative, the wife set out the orders and findings she seeks as follows:
2.An order that pursuant to s 106B of the Family Law Act1975 the court set aside the transfer, which was made on or about 1 November 2012 by Mr A Masih (the husband) to Mr F Masih of 100 shares in E Pty Limited.
3.An order that pursuant to s 106B of the Family Law Act 1975 the court set aside the transfer, which was made on or about 7 November 2014 by the estate of the late Mr F Masih, to Mr B Masih of 100 shares in E Pty Limited.
4.An order that pursuant to s 90AE(2) of the Family Law Act 1975 Mr B Masih as executor and/or trustee and/or beneficiary of the estate of the late Mr F Masih forthwith transfer to the husband 100 shares in E Pty Limited.
22.That the Deed of Variation effective as of 30 June 2011 between Mr A Masih and Mr B Masih (the trustees) and the Trustee for the G Family Trust and the Trustee for the D Family Trust (unit holder), be set aside pursuant to s 106B of the Family Law Act1975 (Cth).
23.That Mr B Masih as Trustee of the G Family Trust forthwith cause one half of the moneys paid to the G Family Trust from the C Unit Trust from 30 June 2011 to date be paid to the D Family Trust.
24.A Declaration that Mr B Masih has at all relevant times held all and any of his right, title and entitlement to the assets and income of the D Family Trust for the benefit of Mr A Masih.
25.An order pursuant to s. 106B of the Family Law Act1975, the court set aside any document appointing Mr B Masih as the trustee of the D Family Trust.
26.An order that Mr A Masih be appointed as the trustee of the D Family Trust
27.An order that Mr A Masih be declared the Appointor of the D Family Trust.
28.An order that pursuant to s 106B of the Family Law Act1975, the court set aside the Deed of Variation effective as of 30 June 2011 in relation to the C Unit Trust.
31.An order that, pursuant to s 106B of the Family Law Act1975, the court set aside the appointment of Mr B Masih as the trustee of the D Family Trust.
32.That Mr A Masih be appointed as the Trustee and appointor of the D Family Trust.
51.i. In the event that the Court makes a finding that the assets of the D Family Trust being 50% of the units in the C Unit Trust are not to be included in the asset pool of the Husband and the Wife herein then a finding that the assets and income of the D Family Trust are a financial resource of the Husband for the purposes of Section 79 and Section 75 (2)(b) of the Family Law Act 1975.
ii.In the event that the Court makes a finding that the issued shares in the E Pty Limited are not to be included in the asset pool of the Husband and the Wife herein then a finding that the issued shares and assets of E Pty Limited are a financial resource of the Husband for the purposes of Section 79 and Section 75(2)(b) of the Family Law Act 1975.
52.That the legal fees paid by the Husband and the Wife respectively in these and related proceedings shall form part of the asset pool to be divided between them.
53.Pursuant to Section 85A (1) of the Family Law Act1975 the Court may treat the acquisition of the interest of the D Family Trust and/or the Husband in the Suburb O property as a post-nuptial settlement made in relation to marriage.
54.That the Declaration of Trust by the husband that he held his legal interest in for [sic] the Suburb O property on behalf of the C Unit Trust was a post-nuptial settlement made in relation to marriage pursuant to Section 85A of the Family Law Act 1975.
55.That the Declaration of Trust by the husband that he held his legal interest in the property situate at N Street, Suburb O (Suburb O Shopping Centre) on behalf of the C Unit Trust was a post-nuptial settlement made in relation to marriage pursuant to Section 85A of the Family Law Act 1975.
56.That the transfer of 100 shares in E Pty Limited by the Husband on 1 November 2012 to his father Mr F Masih, was , a post-nuptial settlement made in relation to marriage pursuant to Section 85A of the Family Law Act 1975.
(As per the original)
The husband sought that the wife’s claims be dismissed.
Insofar as the orders sought by the wife might affect the interests of the second, third and fourth respondents respectively, they too seek that the wife’s claims be dismissed.
The Hearing
The case was listed for hearing over four days commencing 12 March 2018. The hearing could not be contained within that time and by arrangement with the parties’ counsel, the hearing extended into 16 March 2018 and then to 21 March 2018.
On 21 March 2018, judgment was reserved.
Applications to re-open
On 19 June 2019 the husband filed an Application in a Case seeking to re-open his case “for the purpose of making submissions as to the wife’s credit and relying on evidence in relation to the wife’s credit in the final parenting hearing.” The parties requested that the application be heard on 23 July 2019, when proceedings in relation to giving effect to final parenting orders were already listed. On 23 July 2019 the husband’s application was heard. The wife did not oppose that application and by her Application in a Case filed on 19 July 2019 also sought leave to re-open her case.
The applications to re-open are both dismissed. What follows are the reasons for that decision.
The evidence sought to be relied on by the husband was contained in the following pages of the transcript in the parenting hearing: 802-820, 858, 859, 860, 862, 867-870, 872, 873 & 937 – 939.
The wife sought leave to re-open her case in respect of the following passages of the same transcript:
Page 663 line 9
Page 784 lines 1-3, 15-18, 33-34, 36, 40-41 & 44-45
Page 789 lines 7-9
Page 1011 lines 17 & 20 – 34
Page 1115 lines 32-46
Page 1116 lines 1, 6-23, 37-39 & 46-47
Page 1117 lines 3-9, 11, 31-32 & 34
Page 1118
Page 1119 lines 31 – 45
Finally, in the event that the wife was successful in her application to re-open, the husband sought to rely on an affidavit sworn by him on 23 July 2019.
The second respondent did not wish to be heard in respect of the applications to re-open and there was no appearance for him.
The Law about re-opening
I gather that there is no significant controversy between the parties about the proper approach to applications to re-open a trial where judgment is reserved. The overriding principle on which a court will act in respect of an application to re-open is the interests of the administration of justice having regard to all the circumstances of the case.[1]
[1] Per White J in F.Y.D Investments Pty Ltd v Promptair Pty Ltd [2017] FCA 1097 at [30] – [33] citing many authorities including Inspector General in Bankruptcy v Bradshaw [2006] FCA 22 at [24], [26]; Brown v Petranker (1991) 22 NSWLR 717 at 728; Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 at 478, Harrington Smith (on behalf of the Wongatha People) v Western Australia (No 8) [2004] FCA 338, (2004) 207 ALR 483 at [121].
In Inspector General in Bankruptcy v Bradshaw [2006] FCA 22 Kenny J said at [24]:
The authorities indicate that, broadly speaking, there are four recognised classes of case in which a court may grant leave to re-open, although these classes overlap and are not exhaustive. These four classes are (1) fresh evidence (Hughes v Hill [1937] SASR 285 at 287; AA v New South Wales Bar Association [No 2] (1992) 108 ALR 55 at 61-2); (2) inadvertent error (Brown v Petranker (1991) 22 NSWLR 717 at 728 (application to recall a witness); Murray v Figge (1974) 4 ALR 612 at 614 (application to tender answers to interrogatories); Henning v Lynch [1974] 2 NSWLR 254 at 259 (application to re-open); (3) mistaken apprehension of the facts (Urban Transport Authority of NSW v NWEISER (1992) 28 NSWLR 471 (“UTA”) at 478; and (4) mistaken apprehension of the law (UTA at 478). In every case the overriding principle to be applied is whether the interests of justice are better served by allowing or rejecting the application for leave to re-open: see UTA at 478; also The Silver Fox Company Pty Ltd as Trustee for the Baker Family Trust v Lenard’s Pty Ltd (No 2) [2004] FCA 1310 (“Silver Fox”) at [22] and [25].
Here the parties each seek to re-open for the purpose of tendering fresh evidence. The evidence given in May 2018 was obviously not available to the parties for a hearing which concluded in March 2018.
As to relevant considerations in the exercise of discretion to re-open, in Zau & Uong(No. 2) [2015] FamCA 56 Macmillan J quoted Haberberger J in Reid v Brett (2005) VSC 18 at [41] as summarising the relevant criteria as:
(a)the further evidence is so material that the interests of justice require its admission;
(b)The further evidence, if accepted, would most probably affect the result of the case;
(c)The further evidence could not by reasonable diligence have been discovered earlier; and
(d)no prejudice would ensue to the other party by reason of the late admission of the further evidence.[7]
In AA v New South Wales Bar Association, the High Court of Australia stated that in such a situation it was difficult to see why "the primary consideration should not be that of embarrassment or prejudice to the other side."
(The citation for AA v New South Wales Bar Association is (1992) 176 CLR 256)
Discussion
As to (c) and (d) above, the proffered evidence could not have been discovered prior to the end of the hearing and there would be no prejudice to either party by reason of its late admission. However, in my view the new evidence about credit is not so material that the interests of justice require its admission. It follows that even if accepted, the new evidence would not affect the result of the case.
In my view the credit of the wife and husband are not of critical importance in the determination of the threshold issues. In any event their credit about the matters that are the subject of the applications to re-open is entirely irrelevant.
As with many family law disputes the issues to be determined in the threshold inquiry involve a history that ranges over many years and are not about not one event. The new evidence sought to be relied on in relation to credit is evidence about matters that are irrelevant to the matters at issue.
The father seeks to establish that the mother lied in relation to the commencement of her sexual relationship with Mr P; about whether Mr P assisted her with the children; whether the mother had made inconsistent representations about whether the father was a patient man; whether the utilities were cut off at the Suburb J property; and whether the mother slapped the father on an occasion. Not one of those issues is relevant to the mother’s points of claim. In any event, the fact that the mother lied about one issue does not mean that she lies about all issues. Memory is not immutable. It can be affected by the effluxion of time, by subsequent events and the process of recalling facts. In respect of the mother, English is not her first language and giving precise evidence through an interpreter is notoriously difficult.
For her part the mother seeks to establish that the father lied about having a smartphone. Suffice it to say that none of the relevant orders or findings rely on a question about the technical capacity of his mobile phone. Had that evidence been admitted I would have allowed the husband’s evidence about his misunderstanding of the meaning of “smartphone”.
For those reasons the applications to re-open were refused.
Long before the husband’s application to re-open his case there had been a very significant delay in the determination of what were preliminary issues in property settlement proceedings. I sincerely apologise for that delay.
Documents Read
The wife relied on the following documents:
·Amended Response to Initiating Application filed 11 September 2012;
·Points of Claim filed 15 May 2017;
·Amended Points of Claim filed 1 March 2018;
·Affidavit of wife filed 3 April 2017 (Exhibit Books Ms El Saeid-1 and Ms El Saeid-2) (trial affidavit);
·Probate of the Will of Mr F Masih
·Probate of the Will of Ms C;
·Affidavit of Ms Sharah filed 26 February 2018.
Through her counsel the wife sought to also rely on an affidavit sworn by her on 20 December 2017. I invited the advocates to confer about the inclusion of that affidavit but I have no recollection of being advised about the outcome of those discussions nor of the additional affidavit being admitted into evidence.
The husband relied on the following documents:
·Defence to Points of Claim dated 10 October 2017;
·Affidavit of husband sworn 10 October 2017 (trial affidavit);
·Affidavit of Ms AF filed 11 October 2017;
·Affidavit of Mr AG filed 11 October 2017;
·Affidavit of husband filed 21 February 2018 (reply and privilege).
The second to fourth respondents relied on the following documents:
·Affidavit of Mr B Masih filed 13 October 2017;
·Affidavit of Mr MM filed 10 October 2017
·Affidavit of Mr MM filed 15 March 2018
The husband objected to paragraphs 84 and 86 of the wife’s affidavit sworn 3 April 2017 and the annexures identified in those paragraphs on the basis of client legal privilege. At paragraph 84 of her affidavit the wife referred to a document apparently written by the husband to a firm of solicitors dated 30 January 2006. At paragraph 86 of that affidavit the wife referred to a letter from those solicitors to the husband dated 9 February 2006. On 13 March 2018, which was the second day of the hearing, the husband’s privilege claim was upheld in respect of paragraph 84 of the wife’s affidavit and the associated annexure. The claim in respect of paragraph 86 and its annexure was rejected. These are the reasons for those decisions.
The Law about Client Legal Privilege
As the question before the Court relates to the introduction of material into evidence, the determination is governed by the Evidence Act1995 (Cth) (“Evidence Act”). Relevant sections of that Act are as follows:
Section 118 Legal advice
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
(a) a confidential communication made between the client and a lawyer; or
(b)a confidential communication made between 2 or more lawyers acting for the client; or
(c)the contents of a confidential document (whether delivered or not) prepared by the client, lawyer or another person;
for the dominant purpose of the lawyer, or one or more of the lawyers, providing legal advice to the client.
Section 119 Litigation
Evidence is not to be adduced if, on objection by a client, the court finds that adducing the evidence would result in disclosure of:
(a)a confidential communication between the client and another person, or between a lawyer acting for the client and another person, that was made; or
(b)the contents of a confidential document (whether delivered or not) that was prepared;
for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceeding (including the proceeding before the court), or an anticipated or pending Australian or overseas proceeding, in which the client is or may be, or was or might have been, a party.
Section 122 Loss of client legal privilege: consent and related matters
(1)This Division does not prevent the adducing of evidence given with the consent of the client or party concerned.
(2)Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.
(3)Without limiting subsection (2), a client or party is taken to have so acted if:
(a)the client or party knowingly and voluntarily disclosed the substance of the evidence to another person; or
(b)the substance of the evidence has been disclosed with the express or implied consent of the client or party.
(4)The reference in paragraph (3)(a) to a knowing and voluntary disclosure does not include a reference to a disclosure by a person who was, at the time of the disclosure, an employee or agent of the client or party or of a lawyer of the client or party unless the employee or agent was authorised by the client, party or lawyer to make the disclosure.
(5)A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of the evidence merely because:
(a)the substance of the evidence has been disclosed:
(i)in the course of making a confidential communication or preparing a confidential document; or
(ii)as a result of duress or deception; or
(iii)under compulsion of law; or
(iv)if the client or party is a body established by, or a person holding an office under, an Australian law--to the Minister, or the Minister of the Commonwealth, the State or Territory, administering the law, or part of the law, under which the body is established or the office is held; or
(b)of a disclosure by a client to another person if the disclosure concerns a matter in relation to which the same lawyer is providing, or is to provide, professional legal services to both the client and the other person; or
(c)of a disclosure to a person with whom the client or party had, at the time of the disclosure, a common interest relating to the proceeding or an anticipated or pending proceeding in an Australian court or a foreign court.
(6)This Division does not prevent the adducing of evidence of a document that a witness has used to try to revive the witness's memory about a fact or opinion or has used as mentioned in section 32 (Attempts to revive memory in court) or 33 (Evidence given by police officers).
Section 125 Loss of client legal privilege: misconduct
(1) This Division does not prevent the adducing of evidence of:
(a)a communication made or the contents of a document prepared by a client or lawyer (or both), or a party who is not represented in the proceeding by a lawyer, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty; or
(b)a communication or the contents of a document that the client or lawyer (or both), or the party, knew or ought reasonably to have known was made or prepared in furtherance of a deliberate abuse of a power.
(2)For the purposes of this section, if the commission of the fraud, offence or act, or the abuse of power, is a fact in issue and there are reasonable grounds for finding that:
(a)the fraud, offence or act, or the abuse of power, was committed; and
(b)a communication was made or document prepared in furtherance of the commission of the fraud, offence or act or the abuse of power;
the court may find that the communication was so made or the document so prepared.
(3) In this section:
"power” means a power conferred by or under an Australian law.
The letter of 30 January 2006 which is referred to in paragraph 84 of the wife’s affidavit, was clearly written for the purpose of obtaining legal advice. It was probably also written for the purposes of anticipated proceedings, albeit that the proceedings were not commenced for many years thereafter. Therefore the letter is privileged under ss 118 and 119 of the Evidence Act.
The next question is whether the privilege has been lost. There is an argument on behalf of the wife that the husband’s privilege in respect of the letter dated 30 January 2006 was lost pursuant to s 122 and or s 125 of the Evidence Act.
As to the claim under s 122 of the Evidence Act. The two incidents relevant to this argument seem to be the fact that the husband left the document in the Suburb J property when he left in 2012 and the fact that at least part of the document was published in an earlier interlocutory judgment in these proceedings and nothing was done to correct that publication.
The husband left the Suburb J property on 25 March 2012. There is no basis for finding that in doing so and in leaving behind the privileged document, he voluntarily disclosed the document to the wife.
On 6 July 2015, Aldridge J published an interlocutory judgment in these proceedings in respect of the joinder of parties - El Saeid & Masih and Ors [2015] FamCA 516.
Those reasons for judgment included the following:
…
29.It was the wife’s evidence, at least from her observations, the husband’s parents were people of modest means. The wife deposed that shortly after separation she found a letter in the husband’s handwriting dated 30 January 2006 the introductory paragraph of which is:
The parties are aware of the paragraph and I will not repeat it here
(Affidavit of Ms El Saeid sworn 13 February 2015, Annexure ‘A’)
30.The document goes on to list assets one of which is described as “[H Street] Apartment – in the name of [E]”.
…
In that way part of the contents of the privileged document were published.
Although the written submissions on behalf of the wife assert otherwise, it is common ground that the letter of 30 January 2006 was not part of the evidence before Aldridge J. The parties were aware that at all relevant times in those interlocutory proceedings, the husband maintained his privilege claim in respect of that document. As I understand the argument on behalf of the wife, she would say that something should have been done by the husband, once the mistaken reference to the privileged document was noticed, to have the reasons for judgment amended or corrected and because nothing was done, the privilege was lost.
There is scope for the correction of the Court record under a procedure referred to as “the slip rule”. Aspects of that rule are incorporated into rule 17.02 of the Family Law Rules 2004, which deals with the correction of court orders. As at mid-2015 there was no legislative acknowledgment of such a provision for this Court, in respect of reasons for judgment. However, the Family Law Amendment (Arbitration and Other Measures) Rules 2015 introduced rule 17.02A which had operation from 1 January 2016. That rule provides as follows:
Varying or setting aside reasons for judgment
The court may, at any time:
(a)vary or set aside reasons for judgment if the reasons were issued by mistake; or
(b)correct a clerical mistake in reasons for judgment, or an error arising in reasons for judgment from any accidental slip or omission.
As I have suggested above, the power to correct the record is probably an implied power of superior courts and not one dependent on a court rule. Rule 17.02A was not available to the husband in the middle of 2015 but an application could have been made to correct the record, in any event. However, in my view the failure of the husband to seek to have the privileged material removed from the reasons for judgment does not amount to the husband knowingly and voluntarily disclosing the substance of the letter to another person or that disclosure occurring with his express or implied consent.
Finally, it is submitted on behalf of the wife that the privileged status was lost because of circumstances falling within s 125 of the Evidence Act. It is submitted that the document was prepared in furtherance of the commission of a fraud.
I have been referred to a number of authorities, or more correctly, decisions dealing with similar issues.
The gravamen of the argument made on behalf of the wife is that in the letter of 30 January 2006, the husband was seeking advice from solicitors as to how he could improperly defeat a claim by the wife to his assets. In my view, that is not an accurate characterisation of the terms of the letter. There is no suggestion that the husband was thereby seeking advice about defrauding his wife. Indeed, I would imagine that a question like the one posed in the passage quoted in the judgment of Aldridge J is commonly and properly posed to family lawyers. It speaks of no necessary impropriety. Such a question would elicit a response directed to the approach to be advocated for the treatment of certain assets in the preliminary stages of the s 79(4) enquiry, such as the isolation of assets from the relevant net pool of assets or at least the separation of assets into separate pools for the purposes of assessing contributions, making adjustments and the formulation of operative orders.
The question is all the more understandable in the circumstances that applied at the time of this letter, relating to a marriage of less than six months duration. In any event, in my opinion there is not a necessary suggestion of a fraud on the wife in the letter of 30 January 2006.
The solicitors’ letter of 9 February 2006 which is referred to in paragraph 86 of the wife’s affidavit, is a letter setting out the terms under which the solicitors would contract with the husband as a client. The letter in question is an administrative document prepared for the purpose of establishing a retainer between solicitor and client. That was the dominant purpose of the letter. In my view no privilege could attach to that letter and the husband’s objection is dismissed. Not only is the document not privileged, the terms of the retainer between solicitor and client must be disclosed, for example in respect of costs proceedings related to that client.
Conclusion
As to paragraph 84, the letter is a privileged communication and none of the circumstances in ss 122 or 125 are attracted to rob it of that protection. For that reason the objection was upheld, and paragraph 84 and the annexure were struck out.
The retainer letter of 9 February 2006 was not prepared for the dominant purpose of legal advice or anticipated proceedings. Therefore the objection to paragraph 86 of the wife’s affidavit failed.
Background Facts
The husband is a health professional and at all relevant times he has lived in Sydney.
In 1993 the husband purchased I Street, Suburb J (“the Suburb J property”).
In 1993 the husband leased a property at NN Street, Suburb OO (“the Suburb OO property”) for his medical practice.
On 1 June 1998 the D Family Trust[2] was established. The husband’s mother, Ms C, was the appointer and trustee of the D Family Trust. There are three corpus beneficiaries, TT Pty Limited, KK Pty Limited and Mr F Masih[3]. The trust deed refers to a category of Specified Beneficiaries but none are specified. The discretionary beneficiaries include[4] the corpus beneficiaries and relevantly their children and grandchildren. The spouses and former spouses of the children are included as related beneficiaries. It is not controversial that through the husband’s father, the husband, the wife and their children as well as the husband’s brother are discretionary beneficiaries.
[2] The Deed of Trust commences at page 343 of the tender bundle to the wife’s affidavit
[3] The husband’s father
[4] See page 344 of the tender bundle
From its commencement, the husband assisted his mother in the administration of the D Family Trust.
On 19 April 1999 E Pty Limited was registered.
On 12 May 1999 E Pty Limited borrowed $798,000 from FF Bank to assist in the purchase of H Street, Suburb M (“the Suburb M property”). This property was then tenanted.
The C Unit Trust was established, probably in late 2001. At the time of formation of the trust, the unit holders were the D Family Trust (50 per cent) and the G Family Trust (50 per cent). The husband’s mother was the trustee of the C Unit Trust.
On 18 December 2001 the C Unit Trust purchased 213 Forest Road, Suburb L (“the Suburb L property”) for $2,760,000. The purchase of the property was funded by borrowing $1,400,000 from KK Pty Limited (which is the husband’s company) and the balance of the funds were provided by LL Pty Limited (which is the company of Mr B Masih, the husband’s brother).
In late 2001 KK Pty Limited and LL Pty Limited became tenants of the Suburb L property.
On or about 8 April 2005 the husband and wife met in Country X. They were married there in 2005.
The husband and Mr B Masih became joint trustees of the C Unit Trust. It is submitted for the wife that this occurred on 28 June 2005 and for the husband, on 19 July 2005. The resolution of that contention is of significance in the proceedings. The Suburb L property was transferred into the name of the husband and Mr B Masih as the trustees of the C Unit Trust.
On 14 July 2005 the wife immigrated to Australia.
It was the wife’s evidence that upon arrival she immediately moved into the Suburb J home. As I understand it, the husband contends that she moved into that home at a later date. Nothing turns on that issue.
The husband’s mother passed away in 2005.
Following his mother’s death the husband continued to administer the D Family Trust including signing documents which represented that he was a trustee of the D Family Trust.
The husband’s father travelled overseas for six months in October 2005 and when he returned to Australia he was very ill and was admitted to hospital for periods ranging in length from one week to six months.
In 2006, R was born.
On 18 July 2006 100 shares were transferred from Ms C to the husband.
In or about 2007 the Suburb L property ceased to be used by KK Pty Limited and LL Pty Limited. Adjustments were made to the office space and the property was tenanted.
In July 2007 the C Unit Trust purchased N Street, Suburb O (“the Suburb O property”). This purchase was funded by a borrowing of $4,375,000 from the Commonwealth Bank of Australia (“CBA”). Around the time of settlement for the Suburb O property the C Unit Trust received approximately $520,000 from both KK Pty Limited and LL Pty Limited by way of payment of rental arrears.
On 17 March 2008 the husband was appointed director of TT Pty Limited, joining his brother, Mr B Masih who was also a director of the company.
In 2009 Q was born. While the wife was pregnant with Q the husband was working three days per week.
The husband and wife met Mr P in 2011. He came to the Suburb J property to install a satellite dish or related equipment.
On 14 March 2012 the wife informed the husband that she did not want to live with him anymore and that she had seen a solicitor.
The physical separation of the husband and wife occurred on 25 March 2012 when the police were called to the former matrimonial home and the husband left the property.
The husband filed an Initiating Application seeking parenting orders on 23 May 2012. On 11 September 2012 the wife filed an Amended Response to Initiating Application in response to the husband’s parenting application. By that Response she commenced the property settlement aspect of these proceedings.
On 1 November 2012 the husband ceased to be a director and shareholder of E Pty Limited. The husband’s father, Mr F Masih was appointed director and secretary. On this same date the husband transferred 100 shares in E Pty Limited to his father.
On 2 May 2013 the husband ceased to be a director of TT Pty Limited.
The husband’s father passed away in early 2014.
On 6 July 2015 judgment was delivered by Aldridge J including an order that relief sought by the wife in her statement of claim dated 7 May 2015 in relation to the Suburb O and Suburb L properties be struck out. The following orders were made:
1)Pursuant to r 10.12 of the Family Law Rules 2004 (Cth) paragraphs 5, 6, 7 and 8 of the relief sought and paragraphs 14 – 26 inclusive of the Statement of Claim dated 7 May 2015 be struck out.
2)That leave for the wife to amend her Application in a Case filed 17 June 2014 to add a claim to join Mr B Masih in his capacity as a director of E Pty Limited and as an executor and/or trustee of the estate of the late Mr F Masih and also in his capacity as trustee of the D Family Trust to these proceedings is refused.
3)That the wife pay the costs of the husband and Mr B Masih of the Application in a Case filed on 17 June 2014 on a party and party basis as agreed, or in default as assessed. Such costs to be payable upon the determination of these proceedings.
4)That E Pty Limited be joined as a party to these proceedings and served with all relevant documents within twenty eight (28) days of these Orders.
On 7 November 2016 orders were made that the C Unit Trust and that Mr B Masih in his capacity as trustee of the D Family Trust be joined as parties to the proceedings. It was then also noted that E Pty Limited was the second respondent.
In 2016 the wife gave birth to AL who is the son of Mr P.
On 20 February 2017, among other orders, the Court found that it was appropriate to “determine as a threshold issue the contentions of the Applicant Wife in the Points of Claim prior to determination of the final hearing”.
On 13 October 2017 the following orders were made:
1.Any supporting affidavits to Exhibits 1 and 2 dated 13 October 2017 be filed and served as soon as practicable and that copies of the Exhibits be provided to the other parties as soon as practicable.
2.The proceedings be listed as to threshold issue in the financial proceedings dealing with a finding as to whether certain assets are included in the pool of property for division between husband and wife be listed for hearing over four days commencing 12 March 2018.
3.Within 14 days from today’s date the solicitors for the wife provide notice to the solicitors for the respondents a list of names of forensic document examiners and in the event that there is an agreement as to a forensic document examiner as a single expert in the proceedings the parties shall thereafter join in instructing that examiner, in one letter of instruction.
4.Not later than the close of business on 5 March 2017 the parties provide to each other and the associate to Justice Loughnan a case outline document setting out the findings sought in relation to the issue before the Court, the list of documents to be relied on and a summary of the arguments to be made in aide of the findings sought by each party.
5.By 10.00 am on 12 March 2017 the advocates join issue in relation to any objections to evidence.
6.In the event that any party becomes aware of any matter which would prevent the hearing commencing on 12 March 2018 or continuing to conclusion on 15 March 2018 that party is to forthwith restore the proceedings to the list by arrangement with the associate to Justice Loughnan.
7.Leave is granted to the parties to restore the proceedings to the list in relation to any issue in the proceedings and particularly in relation to family therapy in respect of the relationship between the children and the father and in respect of the preparation and implementation of a mental health plan in respect of the children.
Notation:
A.The Court notes that on 15 December 2017 the parties will seek trial dates in relation to the entire proceedings.
On 1 March 2018 the following orders were made:
1.The solicitors for the wife provide to the solicitors for the other parties by the close of business on Monday 5 March 2018 an outline of the argument to be made in relation to the findings sought at paragraphs 53 - 56 inclusive of the points of claim document which is marked as Exhibit 1 today, together with identifying the paragraphs of the affidavits(s) relied on in relation to those points of claim.
2.Leave is granted to the solicitor for the husband to restore the proceedings to the list in relation to any objection to an amendment to the wife’s case in relation to points of claim in numbers 53 – 56 inclusive and that leave is on 24 hours’ notice.
3.Leave is granted to the parties to inspect documents produced on subpoena by RR Firm.
4.Leave is granted to cause a subpoena to issue at the application of the wife to VV Limited in relation to the husband and KK Pty Limited on condition that the subpoena is served not later than 12 noon on Friday 2 March 2018 and is returnable on the first morning of the trial.
5.Leave is granted for a subpoena to issue at the application of the wife to the Commonwealth Bank in relation to records after 15 March 2013 in respect of C Unit Trust, D Family Trust, KK Pty Limited, E Pty Limited, Mr A Masih or Dr HH on condition that the subpoena is served not later than 12 noon on Friday 2 March 2018 and is returnable on the first morning of the trial.
6.Leave is granted for the issue of a subpoena to MM Associates Pty Limited, the purpose of the subpoena includes the repetition of a subpoena that issued in these proceedings to that entity in 2013 and for more recent records.
7.The Court notes that there may be an agreement between the solicitors for the wife and the solicitors for the husband in relation to the precise terms of that subpoena.
On 16 March 2018 the following orders were made:
1.By 12 noon on Tuesday 20 March 2018 the solicitors for the wife provide to the solicitors for the husband and to the second, third and fourth respondents an indexed tender bundle of documents provided from material submitted by MM Accountants.
2.The solicitors for the wife provide to the solicitors for the husband and to the second, third and fourth respondents any written summary of submissions in relation to that matter as soon as practicable.
3.The proceedings be adjourned to 10.00 am on Wednesday 21 March 2018 for the conclusion of submissions in the matter.
On 21 March 2018 the hearing concluded and judgment was reserved.
Further submissions dated 20 March 2018 were provided on behalf of the wife.
Although the threshold issues were aimed at settling issues for the balance sheet for the property settlement proceedings, no jointly prepared balance sheet was put into evidence. However, during submissions[5] on behalf of the husband reference was made to the balance sheet contended for in his case. The document was not formally tendered but there was no objection to the references to that document as an aide-mémoire in the husband’s case. It is contended for the husband that the balance sheet will be as follows:
[5] Line 17, page 16 of the transcript of 12 March 2018
Assets
Owner Description Wife’s value Husband’s value 1 Husband Property situated at I Street Suburb J 1,900,000 2 Husband Property situated at UU Street Suburb SS 1,100,000 3 Husband Funds in FF Bank account #...18 7,166 4 Husband Company WW shares (4,600) 16,330 5 Husband Shares in KK Pty Limited 952,951 6 Husband Motor vehicle 1 9,000 7 Husband Amount owed to Husband by D Family Trust 562,555 8 Wife Bank account 20 9 Husband Loan to KK 40,000 Total 4,588,022
Liabilities
Owner Description Wife’s value Husband’s value 10 Husband Suburb J mortgage (NAB) 700,048 11 Husband Suburb SS mortgage (FF Bank) 352,000 12 Husband Debt to Mr B Masih 128,570 13 Husband Liability to KK 85,852 14 Husband Amount owed to LL Pty Limited 1,235,630 15 Husband Amount owed to TT Pty Limited 11,000 16 Husband CGT on disposal of Suburb SS and Suburb J - Estimate 156,000 Total 2,669,100
Superannuation
Owner Description Wife’s value Husband’s value 17 Husband First State Super Accumulation 16,305 Total 16,305 NET TOTAL ASSETS (Including Superannuation) $1,935,227
It was expressly not within the scope of the preliminary hearing that values be attributed to any asset to be included in the balance sheet[6].
[6] Page 486 of the transcript of 16 March 2018
Credit
There are issues in respect of which the testimony of witnesses is relevant in that independent records are unclear, contested or inconsistent and there is a lack of probative corroboration. Certainly much of the threshold hearing was conducted with a significant focus on credit issues. Given the lack of involvement of the wife in the relevant dispositions and dealings of the relevant trusts, the testimony in question is almost exclusively that of the husband and his brother.
In light of the lengthy delay in delivery of judgment I should state that the observations about witnesses were made and recorded at the time of the hearing.
The Wife
The wife gave her evidence through an interpreter. She was able to respond in English on occasions and sometimes she corrected the interpreter. Nevertheless, the fact that English is not the wife’s first language presents difficulties in respect of credit findings because of the notorious imprecision of the process of translation. By that comment I mean no disrespect to the interpreter who assisted the wife before me. Not all expressions have a precise equivalent in another language, for example. Although the affidavit is not part of the evidence in this section of the proceedings, during cross-examination the wife effectively repudiated an affidavit she swore in 2012. During her cross-examination she was asked about an incident in 2005/2006 when she had slapped the husband on the face. She denied hitting the husband. The wife later said that she hit his hand. The wife was taken to the earlier affidavit in which she deposed that she slapped him in the face. The wife said that she was sure that she hit his hand and not his face. The wife said that she prepared the affidavit with a solicitor, Mr JJ and that there was no interpreter present. The wife was taken to a clause at the end of her affidavit that represented that it had been translated to her. The wife repeated that there was no interpreter present and that no one explained the clause to her. Later in her cross-examination the wife agreed that each affidavit she had sworn in these proceedings was sworn by way of an Arabic translator – translating the contents of the affidavit to her in Arabic from English. She was asked whether she had earlier given evidence of an affidavit that was not translated to her and she denied that proposition.
Although it is on a largely irrelevant issue, it is possible that the wife lied about having a degree from a university in Country X. Some time ago the wife was ordered to provide a copy of the certificate from the university which allegedly conferred the degree and she has never complied. During cross-examination the wife variously said that she had provided the required document to a previous solicitor and to her current solicitor. Nevertheless, it was open to the wife to obtain conclusive proof of her degree from the university at any time up to and including 21 March 2018. In the absence of another explanation, an available inference is that the proof was not provided because no such degree was ever awarded.
In relation to an alleged assault on her by the husband while they were in Country X, the wife did not call her mother to corroborate her testimony and gave no reason for her failure to do so.
As to more general credit issues, the wife conceded that for the purposes of being prescribed a mood stabiliser medication she had lied to a doctor in 2011 about having a motor vehicle accident. It was her evidence that she lied to the doctor at the direction of the husband. Finally, in the parenting proceedings which were concluded by orders and reasons for judgment published on 16 April 2019, I noted that there were aspects of the mother’s testimony which I did not accept based on the evidence before the Court.
All of that said, the focus of this threshold inquiry is on the assets of the husband. In that context the wife’s evidence could only be of marginal or tangential relevance. Neither the wife nor any other witness suggests that the wife was involved in the acquisitions, transfers or other dispositions in question.
Mr P
The relevance of the evidence of Mr P to the threshold proceedings is confined to his assertion that the husband communicated to him an intention to defeat or frustrate any financial claims by the wife. There were problems with the evidence of Mr P. He was careless in at least some of his answers. Mr P was asked if he accompanied the wife to see her solicitors and he answered “never”. He was later asked how many times he and the wife saw a solicitor and he answered “maybe 30”.
Mr P and the husband were asked about exchanges of words between them and they gave entirely inconsistent evidence. Where there is a conflict between the evidence of the husband and of Mr P and communication between them, I prefer the evidence of the husband.
Ms Sharah
Ms Sharah is the wife’s solicitor and her credit was not called into question.
The Husband
The husband answered questions directly and was not successfully challenged on any significant issues.
Mr B Masih
Mr B Masih responded very quickly to questions asked of him, on occasions answering before the question was completed. That meant that he missed the point of some questions. On occasions he said “no” when he meant “yes”. That said, his answers were brief and to the point. He was not successfully challenged on any significant issues. Of course, Mr B Masih is the husband’s brother and despite asserted difficulties and failure to communicate between them[7], he cannot be said to be independent of the husband.
[7] For example in respect of the contents of their mother’s will
Ms AF
Ms AF is the second cousin of the wife but she is estranged from the wife and aligned with the husband for the purposes of these proceedings. For example, the father paid the fees of a private enquiry agent retained by Ms AF to conduct surveillance on the mother in order to support the father’s case in Apprehended Violence Order proceedings against Mr P. Suffice it to say that Ms AF is not an independent witness and therefore not in a position to give probative evidence on controversial issues in these proceedings.
Mr AG
Mr AG is the husband of Ms AF and is also aligned with the husband. He was not in a position to give probative evidence on controversial issues in these proceedings.
The Relevant Law
Section 85A of the Family Law Act 1975 (Cth) (“the Act”) provides:
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.
Section 90AC of the Act provides:
(1)This part has effect despite anything to the contrary in any of the following (whether made before or after the commencement of this Part):
(a)any other law (whether written or unwritten) of the Commonwealth, a State or Territory;
(b)anything in a trust deed or other instrument.
(2)Without limiting subsection (1), nothing done in compliance with this Part by a third party in relation to a marriage is to be treated as resulting in a contravention of a law or instrument referred to in subsection (1).
Section 90AE of the Act provides:
(1)In proceedings under section 79, the court may make any of the following orders:
(a)an order directed to a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt owed to the creditor;
(b)an order directed to a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt owed to the creditor;
(c) an order directed to a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt owed to the creditor than the proportion the parties are liable to before the order is made;
(d)an order directed to a director of a company or to a company to register a transfer of shares from one party to the marriage to the other party.
(2)In proceedings under section 79, the court may make any other order that:
(a)directs a third party to do a thing in relation to the property of a party to the marriage; or
(b)alters the rights, liabilities or property interests of a third party in relation to the marriage.
(3) The court may only make an order under subsection (1) or (2) if:
(a) the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
(b) if the order concerns a debt of a party to the marriage--it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and
(c) the third party has been accorded procedural fairness in relation to the making of the order; and
(d)the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and
(e)the court is satisfied that the order takes into account the matters mentioned in subsection (4).
(4)The matters are as follows:
(a)the taxation effect (if any) of the order on the parties to the marriage;
(b)the taxation effect (if any) of the order on the third party;
(c)the social security effect (if any) of the order on the parties to the marriage;
(d)the third party's administrative costs in relation to the order;
(e)if the order concerns a debt of a party to the marriage--the capacity of a party to the marriage to repay the debt after the order is made;
Note: See paragraph (3)(b) for requirements for making the order in these circumstances.
Example: The capacity of a party to the marriage to repay the debt would be affected by that party's ability to repay the debt without undue hardship.
(f)the economic, legal or other capacity of the third party to comply with the order;
Example: The legal capacity of the third party to comply with the order could be affected by the terms of a trust deed. However, after taking the third party's legal capacity into account, the court may make the order despite the terms of the trust deed. If the court does so, the order will have effect despite those terms (see section 90AC).
(g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters--those matters;
Note: See paragraph (3)(c) for the requirement to accord procedural fairness to the third party.
(h) any other matter that the court considers relevant.
Section 106B of the Act provides:
Transactions to defeat claims
(1)In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(1A)If:
(a)a party to a marriage, or a party to a de facto relationship, is a bankrupt; and
(b)the bankruptcy trustee is a party to proceedings under this Act;
the court may set aside or restrain the making of an instrument or disposition:
(c)which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the bankrupt; and
(d)which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(1B)If:
(a)a party to a marriage, or a party to a de facto relationship, is a debtor subject to a personal insolvency agreement; and
(b)the trustee of the agreement is a party to proceedings under this Act;
the court may set aside or restrain the making of an instrument or disposition:
(c)which is made or proposed to be made by or on behalf of, or by direction or in the interest of, the debtor; and
(d)which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(2)The court may order that any money or real or personal property dealt with by any instrument or disposition referred to in subsection (1), (1A) or (1B) may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.
(3)The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
(4)A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
(4AA)An application may be made to the court for an order under this section by:
(a)a party to the proceedings; or
(b)a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the instrument or disposition were made; or
(c)any other person whose interests would be affected by the making of the instrument or disposition.
(4A)In addition to the powers the court has under this section, the court may also do any or all of the things listed in subsection 80(1) or 90SS(1).
(5)In this section:
"disposition" includes:
(a)a sale or gift; and
(b)the issue, grant, creation, transfer or cancellation of, or a variation of the rights attaching to, an interest in a company or a trust.
"interest" :
(a)in a company includes:
(i)a share in or debenture of the company; and
(ii)an option over a share in or debenture of the company (whether the share or debenture is issued or not); and
(b)in a trust includes:
(i) a beneficial interest in the trust; and
(ii) the interest of a settlor in property subject to the trust; and
(iii) a power of appointment under the trust; and
(iv) a power to rescind or vary a provision of, or to rescind or vary the effect of the exercise of a power under, the trust; and
(v) an interest that is conditional, contingent or deferred.
The effect of trusts on the determination of property of the parties to the marriage was discussed by the High Court in Kennon & Spry (2008) 238 CLR 366 (“Kennon”). The High Court by majority, French CJ, Gummow, Hayne & Kiefel JJ, Heydon J dissenting, upheld a decision made at first instance and confirmed on appeal by majority in the Full Court of this Court. At page 390-91 Chief Justice French said:
The word “property” in s 79 is to be read as part of the collocation “property of the parties to the marriage”. It is to be read widely and conformably with the purposes of the Family Law Act. In the case of a non-exhaustive discretionary trust with an open class of beneficiaries, there is no obligation to apply the assets or income of the trust to anyone. Their application may serve a wide range of purposes…
Where property is held under such a trust by a party to a marriage and the property has been acquired by or through the efforts of that party or his or her spouse, whether before or during the marriage, it does not, in my opinion, necessarily lose its character as “property of the parties to the marriage” because the party has declared a trust of which he or she is trustee and can, under the terms of that trust, give the property away to other family or extended family members at his or her discretion.
For so long as Dr Spry retained the legal title to the Trust fund coupled with the power to appoint the whole of the fund to his wife and her equitable right, it remained, in my opinion, property of the parties to the marriage for the purposes of the power conferred on the Family Court by s 79. The assets would have been unarguably property of the marriage absent subjection to the Trust.
In Ascot InvestmentsPty Ltd v Harper (1981) 148 CLR 337 (“Ascot”), the High Court of Australia discussed the power of the Court to make orders that are binding on third parties. Relevant to the third party claims in those proceedings, Gibbs J stated that:
19. ...It can safely be assumed that the Parliament intended that the powers of the Family Court should be wide enough to prevent either of the parties to a marriage from evading his or her obligations to the other party, but it does not follow that the Parliament intended that the legitimate interests of third parties should be subordinated to the interests of a party to a marriage, or that the Family Court should be able to make orders that would operate to the detriment of third parties. There is nothing in the words of the sections that suggests that the Family Court is intended to have power to defeat or prejudice the rights, or nullify the powers, of third parties, or to require them to perform duties which they were not previously liable to perform. It is one thing to order a party to a marriage to do whatever is within his power to comply with an order of the court, even if what he does may have some effect on the position of third parties, but it is quite another to order third parties to do what they are not legally bound to do. If the sections had been intended to prejudice the interests of third parties in this way, it would have been necessary to consider their constitutional validity. (at p354)
20.The position is, I think, different if the alleged rights, powers or privileges of the third party are only a sham and have been brought into being, in appearance rather than reality, as a device to assist one party to evade his or her obligations under the Act. Sham transactions may always be disregarded. Similarly, if a company is completely controlled by one party to a marriage, so that in reality an order against the company is an order against the party, the fact that in form the order appears to affect the rights of the company may not necessarily invalidate it. (at p355)
21. Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or convenants that limit the rights of the party who owns it. To take two obvious examples, the Family Court could not compel a husband to assign to his wife a lease without obtaining the necessary consent of the lessor, and could not order the transfer to a wife of land owned by a husband free of mortgage, when in fact the land was mortgaged to a third party. Thus, in the present case, the Court must deal with the husband's shares in Ascot Investments as they in fact are, that is, as shares in a company whose memorandum and articles contain a restriction on transfer. (at p355)
22. In the present case the provisions of cl. 4 (a) of the memorandum of association and art. 143 (a) of the articles were of a common enough kind, and there is no evidence that they were adopted as a sham or device. (Article 11, upon which some reliance was also placed, does not appear to add much to the strength of the directors' position.) They give to the directors the discretionary power whose nature I have described. If the directors refused to register a transfer, and it were proved that they had failed to act in good faith in what they considered to be the interests of the company, there would be a remedy in the ordinary courts, but, subject to a possible qualification which I shall state, the Family Court has no jurisdiction or power to direct them as to the manner in which their discretion should be exercised. Of course, in the present case the directors have never been asked to exercise their discretion, because the transfers were never submitted to them for registration, so that on any view the proceedings, so far as they concerned the orders sought against the company and the directors, were premature.
23. The position might have been different if it had been proved that the directors had refused to register a transfer for the sole reason that the husband had asked them not to do so. I would leave open the question whether in such a case the wife would have a remedy in the Family Court, because it seems wise in this difficult area to avoid unnecessary dicta, and to allow the courts to explore the outer limits of the powers of the Family Court step by step as cases calling for a decision arise. (at p355)
It was similarly held by Barwick CJ:
13.….. I have said earlier that the husband's shareholding did not place him in control of the company. By that I mean to say that not only could his vote in a general meeting of the company not determine the result of a motion before that meeting: I mean also to indicate that the husband was not shown to be able to treat the company as his own, an alter ego. Though he was managing director, it does not follow that he could exercise the powers of that office for his own personal purposes. The word "control" in this connexion may be ambiguous. The control which is significant here would be the ability to treat the company and its affairs as his own.
Similarly in Sharrment Pty Ltd and Orsv Official Trustee in Bankruptcy (1988) 82 ALR 530 (“Sharrment”) factors impacting whether a party could be taken to own company property were discussed by Beaumont J at 552 as follows:
21. …
The facts that the companies had little paid-up capital and that Mr Wynyard controlled their affairs do not justify the conclusion that the assets of the companies are, in truth, or “in reality”, the beneficial property of Mr Wynyard. Even if Mr Wynyard as controller of the affairs of the companies, had acted without due regard for the interests of their shareholders or creditors…it would not follow that the property of the companies became the property of Mr Wynyard in some informal way. In such circumstances, the controller may be liable for misfeasance or for breach of fiduciary duty. But it does not follow from the use, or even abuse, of control of the companies’ affairs that their controller acquired any of the companies’ property by some information process...
In Atkins & Hunt and Ors [2017] FamCAFC 79 (“Atkins”) the majority of the Full Court adopted the position of Gibbs J in Ascot and Beaumont J in Sharrment.
In Atkens Bryant CJ and Murphy J stated at [35]:
…each of the statements of Gibbs J, Beaumont J….point to the need for evidence beyond the evidence from a corporation’s structure – including its articles, the nature and extent of its shareholdings, and the manner in which dividends have in the past been paid – in order to found a submission…that the corporate veil should be pierced.
Discussion of the wife’s claims
I will address those of the wife’s Points of Claim[8] that call for orders or findings.
2.An order that pursuant to s 106B of the Family law Act 1975 the Court set aside the transfer, which was made on or about 1 November 2012 by Mr A Masih (the husband) to Mr F Masih of 100 shares in E Pty Limited.
[8] Exhibit X
Points of claim 2, 3, 4 & 56 all relate to transfers of shares in E Pty Limited. The underpinning contention in the wife’s case is that at one time, the husband had the beneficial interest in the shares of E Pty Limited and through those shares, in the Suburb M property.
It is the evidence of the husband that in September 1998 his mother told him that she had seen an apartment at H Street, Suburb M that would be a good investment. Shortly thereafter the husband accompanied his mother to a conveyancing solicitor. A holding deposit of $5,000 was paid and contracts were exchanged with the purchaser being the husband’s mother. The husband recalls a deposit of $50,000 being paid.
E Pty Limited was registered on 19 April 1999 and the shares (100 ordinary shares) were owned by the husband’s mother. The husband’s mother told the husband that she had $300,000 to put towards the purchase. FF Bank provided a facility to the company in the sum of $798,000 for the balance of the purchase price. The facility was secured by a first registered mortgage over the Suburb M apartment; by a fixed and floating charge over the assets and undertakings of E Pty Limited and a limited personal guarantee and indemnity was provided by the husband.
It is the evidence of the husband that his mother asked if he was prepared to become a director of the company so that he could assist her in the administration of the company and that he agreed to do so. However, the husband did not become a director during his mother’s life.
The husband and wife first met in April 2005 and they were married in 2005.
The husband’s mother died in August 2005 but she remained registered as the sole director, shareholder and secretary until 4 May 2006[9].
[9] Paragraph 4 & 5 of the Affidavit of Mr MM filed 10 October 2017
It is the wife’s evidence that early in her relationship with the husband he represented to her that he owned an apartment at Suburb M. The husband rejected that evidence.
It is the husband’s evidence that the Suburb M property was rented out and that the net rental payments were paid via a managing agent to the bank account of E Pty Limited. The husband was involved in the administration of E Pty Limited, including receiving and paying invoices, dealing with the managing agent and liaising with the company accountant to assist with the production of financial statements and income tax returns. The husband continued in that role until about April 2014.
It is the evidence of the husband that he believed that upon his mother’s death, he had inherited her shares in E Pty Limited. The will of the husband’s mother was made in May 2004. It is the husband’s case that he was not aware of the true contents of his mother’s will until 2012. Both the husband and his brother were challenged during cross-examination about the improbability of that proposition. It was the husband’s evidence that at the time of his mother’s death he did not know where the will was. It transpired that his father had the will. The husband said that, prior to discovering the will was with his father, he tried to obtain the will through other means with no success.
The husband engaged with solicitors resulting in the retainer letter of 9 February 2006[10]. Although not expressed in this way, the effect of the wife’s case is that this would confirm that there were problems with the marriage at that early stage and further that the husband was motivated to deal with his assets in a way that was intended to protect them from the wife. I accept that at that time the husband had concerns about his marriage. However, engaging a solicitor at the time does not support the contention that marital concerns motivated his financial decisions in the following decade.
[10] See paragraph 86 of the wife’s affidavit
The husband says that in early May 2006 he received notice from the company accountants that the register for E Pty Limited continued to show his mother as the director and secretary and that steps should be taken to transfer the company shares in accordance with her will. The husband says that on 11 May 2006 he asked Mr AA from the accountancy firm to transfer the shares into his name.
Mr B Masih deposed that following his mother’s death, he believed that his father was well aware that he (his father), and not the husband, had inherited his mother’s estate including her interests in E Pty Limited and control over the D Family Trust.
Mr B Masih deposed that there was an occasion in October 2012 when he and his father had a discussion about the will of the mother, of the husband and Ahmed. Mr B Masih says that his father told the husband that he had not inherited anything under his mother’s will. He says that there was the following interchange:
The husband: I thought that I was and that is why I changed the shareholding of E Pty Ltd to my name and also had me appointed as a Director.
Mr B Masih:That’s not right, that’s not what your mother’s will said. All these years I understood that you were simply acting because my father said to you that you could act and help him out.
The husband’s father: Yes, I told you that you can act as a Director to help me out because of my health but you were never entitled to receive the shares in the company. I want you to fix this immediately and have the shares transferred to me as they are my shares as your mother left all of her estate to me except for GFT.
The husband deposed that on 7 October 2012 he met with his father and his brother and agreed to continue to act as a director of E Pty Limited[11] and that he subsequently agreed to transfer his shares to his father and to resign as a director of the company.
[11] See minutes of company meeting at annexure N to the husband’s affidavit filed 11 October 2017
On 1 November 2012 changes were recorded[12] on the register of members of E Pty Limited. Among other changes, 100 fully paid ordinary shares in that company were transferred from the husband to his father. The shares were shown as being beneficially owned by the husband and then, by his father. It is that transfer of shares from the husband to his father that the wife seeks to have set aside. On the same date a change of office holders[13] was recorded for that company, with the husband ceasing to be a director and secretary and his father taking up those offices.
[12] Copy of ASIC change to company details at page 229 of the exhibits to the wife’s affidavit Ms El Saeid-1
[13] Copy of ASIC change to company office holders at page 226 of the exhibits to the wife’s affidavit Ms El Saeid-1
Submissions about claim 2
As I understand it, it is the wife’s case that the Suburb M property was beneficially owned by the husband from the date of its purchase by E Pty Limited. From paragraph 105 of the wife’s affidavit I take it that she contends that from the time of its acquisition or from sometime thereafter, the husband beneficially owned the Suburb M property. Despite contrary evidence from the husband and the fact of the legal title, the submission on behalf of the wife is that the husband paid for the apartment. Evidence was given about the husband’s parents having modest occupations compared to their son who was a high earning medical professional. On the basis of that evidence it was contended for the wife that the $300,000 deposit must have come from the husband, rather than his mother. The wife points to the fact of the husband was the only person to give a guarantee of the FF Bank loan despite the fact that the loan was taken out in the name of the company.
The fact is that the Suburb M property was bought by E Pty Limited at a time when the husband did not own that company. The wife cannot establish that the husband bought that property.
It is the wife’s evidence that when she first met the husband he told her that he owned the Suburb M property. The husband rejects that evidence and there is no reason to prefer the evidence of the wife over that of the husband.
The wife would argue that the 2006 transfer of shares in E Pty Limited into the husband’s name simply recognised the rightful ownership of the shares and therefore, of the Suburb M property. The wife then argues that the subsequent transfers of those shares, first in 2012 into the name of the husband’s father and then into the name of Mr B Masih were transfers intended to defeat an order in these proceedings or that had that effect. Albeit not at the time of the acquisition of the Suburb M property, the husband concedes that for some years from the time of his mother’s death he thought that he was the owner of the shares in E Pty Limited. He concedes that he took steps and signed documents consistent with that belief until he became aware that he had not inherited the shares from his mother. Again there is no reason to prefer the interpretation of the wife to that of the husband on those events.
The wife points to the fact that the husband took the wife and children to the property; he had the access of an owner to the garage for the apartment; he spoke about himself as an owner and that he referred to the family having the use of the apartment into the future. She refers to the fact that communications, correspondence and accounts for the apartment were sent to the husband.
However, when the wife was asked whether she had been into the apartment, she said that she had not but that she went to the car park underneath the apartment at the most, on three or four occasions. Having access to the carpark of a property may be an indicium of ownership of a property but it is not proof of ownership.
The husband concedes that he managed the apartment from the time of purchase until 2014. The husband was asked about those matters in cross-examination. It was put to him that he used E Pty Limited as his alter ego to acquire the Suburb M property. The husband strongly disagreed. The husband was taken to a reference to there being a debt of over $500,000 owed by E Pty Limited to entities, including entities associated with the husband. The husband agreed that the debt was owed to him, to the unit trust, KK Pty Limited and the D Family Trust. It is the husband’s case that any valuable, recoverable debts owed to the husband and to entities in which he has an interest should be included in the property settlement balance sheet.
As is referred to earlier in these reasons, it is the evidence of the husband that his mother asked if he was prepared to become a director of the company so that he could assist her in the administration of the company and that he agreed to do so. The fact is that the husband did not become a director of E Pty Limited during his mother’s life. The wife cannot gainsay that evidence.
The husband’s evidence and that of his brother about him not being aware of the contents of his mother’s will is referred to in the wife’s case as “the will fantasy”. The problem is that there is no issue about there being a will or about its contents. The will was made prior to the husband meeting the wife and cannot have been part of a contrivance to defeat her claims.
The husband was cross-examined at some length about his failure to ascertain the contents of his mother’s will for about seven years following her death in August 2005. The husband explained that he made efforts to see the will but his father was very ill for a period and the husband steadfastly maintained that he was not aware of the contents of the will until 2012. It lends some credibility to the husband’s case on this issue that probate was only granted on the husband’s mother’s estate on 14 March 2016.
The wife has not made her case on this claim. The evidence about the husband being allowed by his father and brother to believe that he had inherited E Pty Limited is odd but odd things happen.
It is part of the wife’s overall case that in June 2005, motivated to hide his assets from her, the husband took steps to avoid taking up roles in the D Family Trust. Why then, barely 12 months later, would the husband cause his mother’s shares in E Pty Limited to be transferred into his name? In my view the husband’s actions in respect of the shares were wholly inconsistent with an important aspect of the wife’s case. The most likely reason for the transfer is the reason advanced by the husband.
The wife is not in a position to gainsay the evidence about the establishment of the company, the acquisition of the Suburb M property or the disposition of the husband’s mother’s estate. Importantly, the wife cannot establish that the husband purchased the apartment. Most of the events leading to the current financial situation pre-dated the relationship of the husband and the wife and therefore, cannot have been contrived to defeat her property settlement. To the extent that particular events apparently reduced the husband’s assets, they simply corrected the record. The husband had no entitlement to the shares in E Pty Limited and therefore no disposition had any effect on an order that could be made in the property settlement proceedings.
The wife’s claim must fail.
3.An order that pursuant to s 106B of the Family law Act 1975 the Court set aside the transfer, which was made on or about 7 November 2014 by the estate of the late Mr F Masih, to Mr B Masih of 100 shares in E Pty Limited.
This is a claim founded on the proposition that the husband was and is the beneficial owner of the shares. An order under s 106B is necessary for the wife’s case, as in order to vest the ownership of the shares in the husband, both the transfer to the husband’s father and the transfer by the husband’s father to the husband’s brother must be set aside. I have not accepted the wife’s case about the husband having the beneficial ownership of the shares and therefore, the foundation of her case about the further transfer to the husband’s brother must also fail.
I am not satisfied that the transfer was made to defeat an anticipated order in these proceedings or that, irrespective of intention, it was likely to defeat any such order.
4.An order that pursuant to s 90AE(2) of the Family law Act 1975 Mr B Masih as executor and/or trustee and /or beneficiary of the estate of the late Mr F Masih forthwith transfer to the husband 100 shares in E Pty Limited.
This claim relies on the Court’s power to order third parties to take a step in respect of the property of a party to a marriage. Among other requirements, the step needs to be required or appropriate or adapted to achieve a settlement between the married parties and the Court must take certain consequential issues into account.
The shares and the Suburb M property were acquired long before the marriage. I am not satisfied that the shares are the property of the husband (or the wife). In any event Mr B Masih is not a party to these proceedings either in his own right nor as the executor and/or trustee of the estate of his late father. This claim must fail.
22.That the Deed of Variation effective as of 30 June 2011 between Mr A Masih and Mr B Masih (the trustees) and the Trustee for the G Family Trust and the Trustee for the D Family Trust (unit holder), be set aside pursuant to s 106B of the Family law Act 1975.
The C Unit Trust was probably established in late 2001 or on 1 February 2002. The D Family Trust and the G Family Trust each held 50 units in the trust. Until 2011 the unit holders each received 50 per cent of the income from the trust. The Deed of Variation in question is in evidence at pages 593 and 594 of the tender bundle to the wife’s trial affidavit.
During oral submissions senior counsel for the wife submitted that the husband and his brother: “….were caught red-handed in relation to the deed of variation...”
The oral submissions in the wife’s case included the following[14]:
MR LEGGAT:
… your Honour has financial records which show that 50 per cent each year of the income was distributed in accordance with that distribution pattern until it became apparent – this is a submission now – until it became apparent to the husband that the marriage had failed, at which time he caused there to be a deed of variation which we see at page 593.
The effect of that was to add in a clause 9.10 into the unit trust (deed) which changed the unit trust from being one where the income had to be distributed fifty-fifty to D Family and G Family to one where the trustee could distribute entirely at his discretion to either D or G in terms of percentages. So the effect of the change by adding in clause 9.10 at page 594 was to enable the trustee to distribute all of the income to G Family Trust. Now, your Honour knows that G Family – in G Family Trust, the brother – the husband has no financial interest, and in D Family Trust, the husband is the entity with – the person with – with interest, and his brother has no interest in that.
So what was happening was a – a way of transferring the money, being the income of the unit trust, to G Family away from D Family, and that happened in the financial year ending 30 June 2012 and 30 June 2013. That was conceded by the husband yesterday in evidence, and it’s consistent with the financial records which demonstrate that. What the husband did, your Honour, once it was pointed out to him that the wife was aware that that was what he was doing, is he reversed the entries. He said that money ought not to have been distributed to G Family. It was D Family Trust’s money, and the – the distribution that’s reflected in the financial records for 30 June 2012 was incorrect and must be reversed, and similarly, for 30 June 2013.
[14] Commencing at line 21 on page 492 of the transcript
The wife’s case is met with the evidence of the husband and of Mr B Masih that there was an attempt over some years to change the status of the C Unit Trust from a unit trust in order to avoid or minimise land tax. It was the husband’s evidence that the Office of State Revenue advised that in order to meet the criteria for a fixed trust, one of the unit holders needed to own at least 95 per cent of the shares. It was put to the husband that the attempt involved a change so that 100 per cent of the interest in the C Unit Trust went to the G Family Trust. It is the husband’s evidence and that his brother that the attempted change through the deed of variation was unsuccessful, was not pursued and that the affected accounts (2012 & 2013) have been rectified. In any event as was submitted on behalf of the husband the distribution did not relate to capital out of the fourth respondent but only related to income.
During cross-examination[15] the husband was taken to an email dated 3 January 2012 from Brian Austin to lawyers (presumably lawyers acting for the husband)[16]. In particular the husband was taken to the last sentence of the second last paragraph of the email which reads as follows:
In other words create the “original’ trust deed now but backdated before the unit trust acquired any assets.
[15] Commencing at line 1 on page 286 of the transcript
[16] page 457 of the tender bundle to the wife’s trial affidavit
The husband’s response in cross-examination[17] included:
… it has got to be put into context. This is a – over a series of letters between accountants and the OSR since 2007 whereby there have been attempts to restructure the unit trusts to achieve the criteria of a fixed trust and thereby being able to have this land tax assessment reassessed over the previous years to – to obtain a land tax threshold concession. And that was as a result of a High Court decision handed down in 2006 in Victoria.
[17] Commencing at line 10 of page 287 of the transcript
And later there were the following passages of cross-examination[18]:
[18] Commencing at line 38 of page 287 of the transcript but omitting objections
MR LEGGAT: Very well. You see in that second last paragraph:
“A question has been raised by Mr A Masih as to what prevents the unit trust deed being formed, now dated either 1 October 2001 to 1 January 2002, showing the unitholders as being G Family Trust 99 per cent, and D Family Trust one per cent as being unitholders before purchase of any real estate.”
Now, could I suggest to you that has got nothing to do with land tax or a fixed trust. That has everything to do with you trying to move the 50 per cent fixed interest in D Family Trust to – 49 per cent of it to your brother’s family trust, agreed?
….
THE HUSBAND: My – my answer is, your Honour, is that this email must be put into context of previous letters – a series of letters where this clearly would state that this is related to the definition of a fixed trust whereby the OSR has informed us that to – to meet this criteria, one must obtain – a unitholder must obtain or own at least 95 per cent of the shares. And that was just another attempt to try to find out how the unit trust can be restructured to meet this definition of a fixed trust. However, it became a futile exercise at it was never pursued.
MR LEGGAT: Well, let’s just explore that. You say it was never pursued. What – and I’m doing this generally but I’m trying to do it in the interests of time. Distributions were made from the unit trust of income consistent with there being a change from D’s interests at 50 per cent to G having 100 per cent. Do you agree with that?
THE HUSBAND: Which shares are you referring to, Mr Leggat?
…
If you’re referring to the 2012 and the 2013 ‑ ‑ ‑ and that were amended.
MR LEGGAT: Yes?‑‑‑
THE HUSBAND: And that was because these were unpaid distributions as a result of an audit that was taken in place in 2008 and – and concluded in March 2011. And it was acted upon that unpaid distribution to certain unitholders were not valid and thereby had to be reimbursed back to its original unitholders and, that is, the G Family Trust.
….
MR LEGGAT: …. You say that there was – there were mistaken payments of income distributions from the unit trust to the G Trust, correct?‑‑‑
THE HUSBAND: Payments that were never made to the – the full payment made to the G, correct.
MR LEGGAT: And those payments were reversed, weren’t they?‑‑‑
THE HUSBAND: As a result of an audit that took place, it had to be.
Thus it is the husband’s case that there had been consideration over several years of a strategy to vary the C Unit Trust so as to reduce tax. The wife’s case focusses on a sentence in the email of 3 January 2012 that refers to backdating the trust deed. In my view, read as a whole, the email tends to corroborate the husband’s case on this issue. Omitting formal parts, the email provided as follows:
Hi Vince,
Further to our recent discussion and the many discussions I have held with Mr A Masih I will attempt to summarise below the current position.
1.The information held by myself indicated the original unit trust was formed on 1 October 2001. However it is now been explained to myself by Mr A Masih and Mr B Masih that this is not correct and this date, namely 1 October 2001, was when individual discretionary trusts G Family Trust (Mr B) and D Family Trust (Mr A) were formed with the mother Ms C trustee.
2.The first copy of a deed, already supplied to you, indicates the unit trust was created on 1 January 2002 but efforts to locate the original deed and/or date of stamping have been totally unsuccessful. The Australian Taxation Office does not hold a copy nor does the banker And the Office of State Revenue have no record of such a deed having been stamped. You will note the schedule to that deed shows only two discretionary trusts as initial unit holders. This was a fact relied upon by the superannuation fund auditors when they ruled the superannuation funds did not hold units in the unit trust.
3.The Deed of Variation refers to a deed dated 1 October 2001 but lists the two discretionary trusts and two superannuation funds as unit holders. A reading of the Deed of Variation indicates (reference to Clause 19) that this Deed of Variation refers to the Deed commencing 1 January 2002.
4.Contact with the Office of State Revenue confirm stamp duty was paid on 28 June 2005 for a Deed of Variation changing the trustees from the mother to the two sons. Enclosed herein is an Application to Record New Registered Proprietor on the Suburb L property owned by the unit trust. This stamped application records the change of trustee from the mother to the two sons.
In conclusion there is not available, at least to myself, an original stamped deed to record the formation of the unit trust either on 1 October 2001 or 1 January 2002. The question has been raised by Mr A Masih as to what prevents a unit trust being formed now dated either 1 October 2001 to 1 January 2002 showing the unit holders as being G Family Trust (99%) and D Family Trust (1%) as being unit holders before purchase of any real estate? In other words create the ‘original’ trust deed now but backdated before the unit trust acquired any assets. I have forwarded a copy of this email to Mr A Masih so that he can contact you direct in case my understanding of the position does not agree with himself.
Kind Regards
In my view that email is consistent with the husband’s case and not with that of the wife. It speaks of an effort to obtain favourable treatment for the income of the unit trust. In any event the deed of variation was unsuccessful and the resultant financial records for 2012 and 2013 were reversed.
I am not satisfied that the deed of variation was made to defeat an anticipated order in these proceedings or that, irrespective of intention, it was likely to defeat any such order.
23.That Mr B Masih as Trustee of the G Family Trust forthwith cause one half of the moneys paid to the G Family Trust from the C Unit Trust from 30 June 2011 to date be paid to the D Family Trust.
Mr B Masih is a party to the proceedings in his capacity as trustee of the D Family Trust. Therefore he is not on notice of or in a position to respond to the proposed order. However, this proposed order would follow from the s 106B order which is sought at 22 above. The order sought at 22 will not be made.
It was put to the husband in cross-examination that the family trust structure of the D Family Trust, the G Family Trust and the C Unit Trust was established at his initiative. He rejected that proposition. It was his evidence that the structure was created at the instigation of his mother and created on the basis of “accounting advice with” Mr B Masih. There is no reason to reject the evidence of the husband about those matters.
24.A Declaration that Mr B Masih has at all relevant times held all and any of his right, title and entitlement to the assets and income of the D Family Trust for the benefit of Mr A Masih.
Pursuant to the trust deed[19] establishing the D Family Trust, the appointor and trustee was the husband’s mother. The wife cannot establish that the husband held those positions from the date of settlement.
[19] Page 343 and following of the tender bundle to the wife’s trial affidavit
It is the contention of the wife that a meeting of three trusts (the G Family Trust, the D Family Trust and the C Unit Trust) was held on 28 June 2005 at the Suburb J property. The husband contends that such a meeting was held but on 19 July 2005 rather than 28 June 2005. The husband was taken to a letter[20] from an accountant addressed to him and his brother. The letter annexed bears the date 12 September 2014 but it is common ground that the copy in the relevant records was dated 6 July 2005. The letter commences with:
[20] Annexure P to the husband’s trial affidavit
CHANGE OF TRUSTEE
Please find enclosed minutes of meeting trustee for the D Family Trust, the G Family Trust, and the C Unit Trust.
The changes made are:
1.Mr A Masih is appointed as trustee and appointor for D Family Trust. Ms C has resigned as trustee and appointor.
2.Mr B Masih is appointed as trustee and appointor for G Family Trust. Ms C has resigned as trustee and appointor.
3.Mr A Masih and Mr B Masih are appointed as trustees for C Unit Trust. Ms C has resigned as trustee.
….
On 10 August 2005 the accountant advised the Office of State Revenue of the changes set out in the letter of 6 July 2005, including that the husband had been appointed trustee of the D Family Trust.
During cross-examination the husband conceded that on 28 June 2005 he was aware that the wife was pregnant to him, that she was due to arrive in Australia about two weeks later and that his mother was very unwell. The husband conceded that on or before 28 June 2005 his mother had said to him that she wanted to resign as trustee of all of the trusts. The husband conceded that he gave instructions for the letter dated 6 July 2005. It is the husband’s case that the accountant’s letter of 10 August 2005 issued to the Office of State Revenue on those same instructions. However, the husband denies that there was any meeting on 28 June 2005. It is the husband’s case and his evidence that the meeting in question was held on 19 July 2005. Mr B Masih also deposed that the meeting was held on 19 July 2005 and not on 28 June 2005. It is the husband’s evidence that he and his brother became trustees of the C Unit Trust on 19 July 2005 but that he (the husband) did not become the trustee and appointor of the D Family Trust. In other words, it is the husband’s evidence that his letter of instructions dated 6 July 2005 and the resultant letter from the accountant to the Office of State Revenue proved incorrect, in part, because his mother changed her mind as to some of the changes.
As to the date of the meeting at the Suburb J home, the evidence is unsatisfactory. It was submitted in the wife’s case that an adverse inference[21] arises from the failure of the husband or Mr B Masih to call Mr AA to give evidence about the meeting. Although evidence was given that Mr AA was available to give evidence, in my view no adverse inference arises. Mr MM is a principal of the firm that continues to employ Mr AA and he was a witness in the proceedings. He was able to give relevant evidence, at least in part, as such a principal.
[21]Jones v Dunkel (1959) 101 CLR 298
Upon the death of the husband’s mother, the husband’s father was entitled to those roles of appointor and trustee. There is no doubt that the will of the husband’s mother dealt with the G Family Trust but not with the D Family Trust.
There is no basis for the declaration sought by the wife.
25.An order pursuant to s. 106B of the Family law Act 1975, the court set aside any document appointing Mr B Masih as the trustee of the D Family Trust.
It is submitted for the wife that at all material times the husband had control of the D Family Trust. The evidence does not permit such a finding. The D Family Trust was established on 1 June 1998 and the husband’s mother was the appointor and trustee of the trust. The husband assisted his mother with the administration of the trust but although he thought he was the trustee from the time of his mother’s death in August 2005, that was never the case.
In any event it is submitted that Mr B Masih became the trustee by operation of law. It is submitted on behalf of the third parties that the appointment can only occur by death, will, the order of a superior court or operation of law and none of those are amendable to the Court’s power under s 106B. In other words, there is no document to set aside. I recall no submission challenging that proposition.
In the event it is further submitted on behalf of the third parties that NSW law[22] provides for the appointment of a new trustee as follows:
(4)The appointment may be made by the following persons, namely:
(a) by the person or persons nominated for the purpose of appointing new trustees by the instrument, if any, creating the trust, or
(b) if there is no such person, or no such person able and willing to act, then by the surviving or continuing trustees or trustee for the time being, or by the legal representative of the last surviving or continuing trustee.
[22] Section 6 of the Trustee Act 1925 (NSW)
This claim under s 106B must fail.
26.An order that Mr AMasih be appointed as the trustee of the D Family Trust.
As was submitted on behalf of the third parties, no head of power is cited in respect of this claim. This claim must fail.
27.An order that Mr A Masih be declared the Appointor of the D Family Trust.
As was submitted on behalf of the third parties, no head of power is cited in respect of this claim. The claim will fail.
28.An order that pursuant to s 106B of the Family law Act 1975, the court set aside the Deed of Variation effective as of 30 June 2011 in relation to the C Unit Trust.
This is a repetition of the claim numbered 22 above and has been addressed earlier.
31.An order that, pursuant to s 106B of the Family Law Act 1975, the court set aside the appointment of Mr B Masih as the trustee of the D Family Trust.
Mr B Masih became the trustee of the trust by operation of law. There is no basis for setting aside his appointment.
This claim must fail.
32.That Mr A Masih be appointed as the Trustee and appointor of the D Family Trust.
This is a repetition of 26 and 27 above.
51.
i.In the event that the Court makes a finding that the assets of the D Family Trust being 50% of the units in the C Unit Trust are not to be included in the asset pool of the Husband and the Wife herein then a finding that the assets and income of the D Family Trust are a financial resource of the Husband for the purposes of Section 79 and Section 75 (2)(b) of the Family Law Act 1975.
ii.In the event that the Court makes a finding that the issued shares in the E Pty Limited are not to be included in the asset pool of the Husband and the Wife herein then a finding that the issued shares and assets of assets and income of E Pty Limited are a financial resource of the Husband for the purposes of Section 79 and Section 75 (2)(b) of the Family Law Act 1975.
In each instance the assets in question will not be included in the balance sheet in the hands of the husband. The wife seeks, by way of an alternate claim, that the assets of the D Family Trust and of E Pty Limited by considered financial resources of the husband for the purposes of s 75(2)(b) [through s 79(4)(e)].
A similar argument arose at first instance in Kennon and the trial judge briefly discussed the question of treating trust assets as a financial resource of the husband. As the trial judge found favour with the primary case of the wife and included the trust assets as property in the net pool of matrimonial assets, it was not necessary for his Honour to take the financial resource issue any further. Similarly, that issue was not a matter canvassed at any length on appeal in those proceedings. The discussion of the trial judge was as follows[23]:
129.4.35 However, in the alternative there can be no question that the level of control that the husband has is such that the assets of the Trust can be treated as a financial resource of the husband. The effect of that of course is not to include these assets in the pool of assets even notionally, but in determining what percentage entitlement the parties should have to their assets the fact of the husband having this financial resource would need to be taken into account.
129.4.36 As I have said the nature of the husband’s interest in the Trust property is a question of fact, and it seems that what is required to treat the assets as a financial resource is the ability of the husband to control the affairs of the Trust and to financially advantage or benefit himself or others on his behalf (KELLY and KELLY (No. 2) (1981) FLC 91-108). The extent of this ability will then determine the degree to which this is taken into account under Section 75(2)(b) of the Act.
129.4.37 An example of where the assets of a Trust were found to be a financial resource is the case of WEBSTER and WEBSTER [1998] FamCA 1517; (1998) FLC 92-832. There the wife established two Trusts with one being for the benefit of the children of the marriage. The wife controlled both Trusts though. Upon the basis of the wife’s undertaking to the court not to make a distribution other than to the children the court found that the Trust primarily for their benefit was a resource of the wife rather than an asset. The court then made an adjustment in favour of the husband pursuant to Section 75(2)(b) of the Family Law Act including because of the value of that Trust.
129.4.38 Here, as referred to already, the husband has historically benefited from the assets and income of the Trust and that can continue certainly via the children. Further, he is clearly able to benefit the children directly. Thus, I find that at the very least the Trust assets can be taken into account as a financial resource of the husband, but of course that is not the basis on which I proceed.
[23]Stephens & Stephens and Ors [2005] FamCA 1181
The D Family Trust was established on 1 June 1998. The husband’s mother was the appointor and trustee of the D Family Trust and she remained the sole trustee and the sole appointor until the time of her death in August 2005. The person who thereafter had a legal or valid claim to become trustee was her husband. The husband in these proceedings never validly became the trustee of the trust. It is conceded that the husband is owed more than $500,000 by the trust but otherwise, the assets of the trust will not be treated as a financial resource of the husband.
As to E Pty Limited, the husband does not own or control the company and I am not satisfied that he was ever beneficially entitled to the shares in that company. Dr Mr B Masih owns the E Pty Limited shares both beneficially and at law. As to the Suburb M property, the wife’s evidence is that the husband spoke as if he owned the property and that the family had access to the car park of the apartment block on perhaps three occasions. The husband was not successfully challenged on this issue. E Pty Limited will not be treated as a financial resource of the husband.
52.That the legal fees paid by the Husband and the Wife respectively in these and related proceedings shall form part of the asset pool to be divided between them.
I do not understand there to be any controversy about this proposition. This would be the usual approach subject to any adjustment necessary because the funds in question or part of those funds being borrowed.
Claims 53, 54 & 55 are similar or related claims.
53.Pursuant to Section 85A (1) of the Family Law Act 1975 the Court may treat the acquisition of the interest of the D Family Trust and / or the Husband in the Suburb O property as a post-nuptial settlement made in relation to marriage.
54.That the Declaration of Trust by the husband that he held his legal interest in for (sic) the Suburb O property on behalf of the C Unit Trust was a post-nuptial settlement made in relation to marriage pursuant to Section 85A (1) of the Family Law Act 1975.
55.That the Declaration of Trust by the husband that he held his legal interest in the property situate at N Street, Suburb O (Suburb O Shopping Centre) on behalf of the C Unit Trust was a post-nuptial settlement made in relation to marriage pursuant to Section 85A (1) of the Family Law Act 1975.
The application of the section requires:
(a)a settlement by way of disposition of property (other than by way of absolute gift) that provides for some continuing right or interest for one or more of the (spouse) parties; and
(b)that there be a nuptial element to the settlement.
There was reference in the wife’s case to the decision of the High Court in Kennon. At first instance Strickland J had set aside under s 106B an instrument varying a trust and certain distributions made under the trust but then made a bare order that the husband pay the wife a sum calculated to be 48 per cent of a pool of matrimonial assets. That pool was found to include trust assets which were available for distribution as a result of the s 106B orders as well as the powers of the husband in respect of the trust assets. By majority the Full Court of this Court dismissed the husband’s appeal against those orders.
The husband was granted special leave to appeal to the High Court but his appeal was unsuccessful.
The application of s 85A had not been relied on in those proceedings at first instance nor in the Full Court but it was raised by the wife before the High Court. The majority either expressly said that they did not need to consider the issue[24] or did not favour the application of s 85A in the context of that case[25]. Justice Kiefel, as the Chief Justice then was, opined that s 85A could have application on a broad interpretation of the connection between the settlement and the marriage of the primary parties. Her Honour found that although the original trust was established before the parties’ marriage, dispositions of trust assets since the marriage should be seen as having the required nuptial element.
[24] French CJ, Gummow and Hayne JJ.
[25] Heydon J.
Before me the wife submits that there are relevant similarities between the facts in Kennon and these proceedings.
It is correctly submitted that as is the situation before me, the trust in Kennon was also established long before the parties’ marriage and the husband was in charge. Thereafter the similarities between the factual background of the cases ends. Importantly, unlike the trust in Kennon the C Unit Trust was created by the husband’s mother and not by him. In Kennon the husband relinquished control and was restored to the earlier position under s 106B.
It is also submitted that the husband made all the financial contributions to the trust but the wife made indirect contributions and that the trial judge found that the trust was maintained to allow the parties to accumulate assets for the benefit of the family in the most tax effective way. Similar findings will not be made by me. As I have referred to earlier in these reasons, the trust was created by the husband’s mother and the evidence does not permit a finding that all of the assets of the trust were contributed by the husband. There is no basis for finding that the C Unit Trust was maintained, let alone created, to allow the husband and wife to accumulate assets for the benefit of their family in the most tax effective way.
Save for the interest of the D Family Trust in the unit trust I will not find that the net asset pool of the husband and the wife includes the assets of the C Unit Trust.
Unlike the situation found to apply in Kennon, the C Unit Trust was not subject to the control of the husband at all times.
I will not be finding that the husband’s actions with respect to distributions from the C Unit Trust were attempts to ensure that the property was beyond the reach of the wife and this Court.
In the proceedings before me the husband is one of the trustees of a unit trust and holds assets as a bare trustee. There is no discretion to be exercised in respect of distributions from the trust.
There is no basis for finding that there is a nuptial element referable to the marriage of the husband and the wife, to the trust.
There is no basis for finding that the assets of the C Unit Trust “constitute property, much of which was obtained by way of the parties’ contribution to the marriage”.
It is submitted that the evidence demonstrates that the D Family Trust and E Pty Limited were at all relevant times subject to the control of the husband. It is submitted that the evidence demonstrates that the C Unit Trust was at all relevant times subject to the control of the husband and his brother. Those findings are not available on the evidence.
It is submitted that the husband’s actions with respect to the C Unit Trust, the D Family Trust and E Pty Limited were attempts to ensure that the property of those entities was beyond the reach of the wife and the Court. With respect, that is a ridiculous submission. The C Unit Trust, the D Family Trust and E Pty Limited were all established years before the husband met the wife.
By way of oral submissions it was argued by learned senior counsel for the wife that “the facts of this case are on all fours with the facts that enabled Kiefel J to treat the (trust) assets in Kennon as part of the asset pool for the purpose of section 75A (sic)”. Suffice it to say that I disagree.
56.That the transfer of 100 shares in E Pty Limited by the Husband on 1 November 2012 to his father Mr F Masih, was , a post-nuptial settlement made in relation to marriage pursuant to Section 85A (1) of the Family Law Act 1975.
The wife cannot establish that the shares were matrimonial property, that they were beneficially owned by the husband. Therefore she cannot establish that the husband was able to make a post-nuptial settlement of those shares.
Conclusion
Save in respect of the treatment of paid costs, the wife cannot sustain any of the arguments she makes in her Points of Claim. Those of the applications contained in the Points of Claim will be dismissed.
I certify that the preceding two hundred and two (202) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 25 July 2019.
Associate:
Date: 25 July 2019
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