ELGIN & ELGIN (FORM OF ORDERS)
[2015] FamCAFC 229
•8 December 2015
FAMILY COURT OF AUSTRALIA
| ELGIN & ELGIN (FORM OF ORDERS) | [2015] FamCAFC 229 |
| FAMILY LAW – APPEAL – PROPERTY – Where the Full Court had previously allowed the appeal in part and found that the parties should equally share certain taxation liabilities – Where written submissions on the proposed form of orders were invited – Minor amendments made to the proposed orders. |
| Family Law Act 1975 (Cth): s 81 |
| APPELLANT: | Mr Elgin |
| RESPONDENT: | Ms Elgin |
| FILE NUMBER: | BRC | 2909 | of | 2010 |
| APPEAL NUMBER: | NA | 6 | of | 2014 |
| DATE DELIVERED: | 8 December 2015 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | In chambers |
| JUDGMENT OF: | May, Thackray & Ryan JJ |
| HEARING DATE: | By way of written submissions |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 17 January 2014 |
| LOWER COURT MNC: | [2014] FamCA 10 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Williams |
| SOLICITOR FOR THE APPELLANT: | Hartley & Healy |
| COUNSEL FOR THE RESPONDENT: | Mr Sweeney |
| SOLICITOR FOR THE RESPONDENT: | Glezer Lanteri & Associates |
Orders
Order 7 of the orders made on 17 January 2014 be set aside and the following order made in lieu:
(7)That subject to Orders 12 and 13, the Husband indemnify the Wife in respect of all past, present and future liabilities arising as a result of the Orders herein (save for any liabilities associated with C Street, Apartment D and Apartment G), or from her involvement in the entities or in any trust of which he or any of the entities is trustee.
The orders made on 17 January 2014 be amended by the addition of the following orders:
(12)That in the event either the Husband or the Wife incurs or has incurred any taxation liability by reason of any of the transfers referred to in Orders 2, 3 or 4 hereof, the other party shall indemnify him or her to the extent of 50 percent of any such liability.
(13)That in the event the Husband incurs or has incurred any taxation liability by reason of receiving dividends in order to comply with his obligations pursuant to these orders, the Wife shall indemnify him to the extent of 50 percent of any such liability.
(14)In the event of dispute arising as to whether any taxation liability was reasonably incurred, the parties shall have liberty to apply to Forrest J (or another judge in the event his Honour is not reasonably available) for orders determining the extent of the wife’s obligation pursuant to Order 13.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Elgin & Elgin (Form of orders) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 6 of 2014
File Number: BRC 2909 of 2010
| Mr Elgin |
Appellant
And
| Ms Elgin |
Respondent
REASONS FOR JUDGMENT
May J
In the reasons delivered by the Full Court I reached a different conclusion in relation to the disposition of the appeal. However, having regard to the reasons of Thackray and Ryan JJ in their judgment and these reasons I have read in draft, I agree with the proposed orders.
Thackray and Ryan JJ
On 7 August 2015, the Full Court allowed, in part, the husband’s appeal against property orders made by Forrest J on 17 January 2014.
The part of the appeal that succeeded concerned the allocation of responsibility for the tax liability that the husband will incur in complying with the orders.
For ease of reference, we set out what we said at [273] to [279] of our reasons in dealing with this issue:
273.Having concluded that appellate intervention is warranted only to deal with the taxation issue, the question arises as to the form of intervention required.
274.Senior counsel for the wife submitted that it would be unnecessary for us to remit this issue, and proposed instead a form of order which he argued would bring about a just resolution based upon acceptance of the proposition that the tax should be borne in the same proportions as the assets are to be divided. That proposition has merit, since the husband should not have to pay more of the tax than the wife. Senior counsel for the husband conceded that it would be open to us to re-exercise if we found error only in the treatment of the tax issue.
275.In considering the form of order, it is important to note that [Apartment G] has already been transferred and the tax consequence has therefore crystallised. Furthermore, the husband has paid a substantial sum to the wife and the associated tax will also have crystallised. As the husband would presumably have arranged these transactions in the most tax-effective way, any dispute about how the tax is to be shared is likely to be confined to the way in which he elects to fund the balance owing to the wife.
276.It clearly would be desirable for us to make an order that would avoid any further proceedings dealing with allocation of responsibility for the tax. However, it is not feasible for us to quantify the obligations of the parties. The most we can achieve is to make a generic order, with liberty to the parties to apply at first instance to resolve any disputes that might arise about quantum.
…
277.Having the benefit of the submissions of both senior counsel, the orders we propose are as follows:
·Order 7 of the orders made on 17 January 2014 be set aside and the following order made in lieu:
(7)That subject to Orders 12 and 13, the Husband indemnify the Wife in respect of all past, present and future liabilities arising as a result of the Orders herein (save for any liabilities associated with [C Street], [Apartment D] and [Apartment G]), or from her involvement in the entities or in any trust of which he or any of the entities is trustee.
·The orders made on 17 January 2014 be amended by the addition of the following orders:
(12)That in the event either the Husband or the Wife incurs any taxation liability by reason of any of the transfers referred to in Orders 2, 3 or 4 hereof, the other party shall indemnify him or her to the extent of 50 percent of any such liability.
(13)That in the event the Husband incurs any taxation liability by reason of receiving dividends in order to comply with his obligations pursuant to these orders, the Wife shall indemnify him to the extent of 50 percent of any such liability (but only to the extent that the liability was reasonably incurred).
(14)In the event of dispute arising as to whether any taxation liability was reasonably incurred, the parties shall have liberty to apply to Forrest J (or another judge in the event his Honour is not reasonably available) for orders determining the extent of the wife’s obligation pursuant to Order 13.
278.By way of brief explanation of the form of proposed orders, we note:
·the orders will capture taxation liabilities that the husband has already incurred in complying with his obligations, since our orders will speak from the date of the original orders;
·the orders will also capture the additional taxation incurred by the husband in obtaining the extra funds needed to meet his half share of the tax payable as a consequence of the orders; and
...
279.Although there was a measure of agreement about the core elements of the proposed orders dealing with the taxation issues, counsel should be given an opportunity to comment on the form of orders before they are formally made.
The parties were given time to file submissions about the form of the orders we proposed, and we have now received the submissions. The wife is content with the orders we foreshadowed, but the husband seeks two amendments to proposed Order 13 and the deletion of proposed Order 14.
Words to be deleted from Order 13
The husband seeks the deletion from Order 13 of the words “(but only to the extent that the liability was reasonably incurred)”.
In was submitted that the retention of the words “reasonably incurred” could lead to “a number of potentially unfortunate consequences”.
It was argued that the retention of these words would provide “a retrospective means for the wife to approach the Court, after the event and following the taxation liability having crystallised, to enquire into and have determined previous actions of the husband in his attempt to discharge his liability to the wife under the orders”. It was submitted that such a dispute would involve “significant evidence … so as to provide some parameters by which the ‘reasonableness’ of those actions could be adjudged”. It was argued that this was contrary to the legislative intent of s 81 of the Family Law Act 1975 (Cth), and would likely lead to further delay in the resolution of the matter.
It was also argued that the order in its amended form would provide adequate protection to the wife because “primarily, it is not in the husband’s interests to increase his own taxation liability and unduly penalise himself”.
We accept that importing a test of “reasonableness” into a court order can lead to further disputation between the parties. However, as we pointed out at [275] of our earlier reasons, any dispute about the “reasonableness” of the taxation liability incurred by the husband would be confined to the way in which he elects to fund the balance due to the wife, as we accept that he would have arranged the payment of the earlier amount in the most tax effective way.
In deliberately choosing to impose a test of reasonableness, we had in mind that there would be more than one way in which the husband could obtain funds to comply with the balance of his obligations. Accordingly, there could be different tax consequences depending upon the method employed. The fact that the wife will be obliged to meet half of the taxation could lead the husband to select an option that he would not have selected were he to have been entirely responsible for the tax. The ways in which this might be done were alluded to by senior counsel for the wife in his oral submissions before us (appeal transcript, 8 August 2014, p 122) and in the written submissions (at [8]).
We therefore do not intend to vary proposed Order 13 by deleting the words in brackets. Nor do we intend to include a further order in the terms proposed at [5(b)] of the husband’s written submissions. His proposed new order would require the parties to confer in relation to the appropriate method of extracting funds to meet the husband’s obligations, but could significantly further delay the receipt by the wife of the funds to which she is entitled.
In arriving at our decision, we accept the arguments set out at [6], [7], [11] and [12] of the wife’s written submissions.
Words to be included in Order 13
The husband proposes the insertion of the words “(including monies already paid to the Wife pursuant to Order 1)” after the words “pursuant to these orders”.
It was submitted that the inclusion of these words was necessary because the husband had already paid some amounts to the wife in partial satisfaction of his obligation to her pursuant to the order made by the trial judge. It was submitted that “the husband should not be penalised” for having made such a payment, and that the amendment proposed sought “to achieve uniformity to the parties’ obligations with respect to the taxation liabilities, as well as giving effect to the intent of this Court’s Reasons”.
The wife accepts that she should be responsible for half of the tax incurred by the husband in making the payments she has already received in partial discharge of his obligations. She proposes this can be achieved by adding “or has incurred” after the word “incurs” in proposed Orders 12 and 13.
The amendments proposed by both parties are unnecessary. As we said at [278], the orders we originally proposed “will capture taxation liabilities that the husband has already incurred in complying with his obligations, since our orders will speak from the date of the original orders”. However, while the wife accepts this is the case, she submits that her proposed amendments will avoid any doubt. We agree, and will amend the proposed orders accordingly.
Deletion of Order 14
The final submission of the husband was that proposed Order 14 should be deleted. That would have been appropriate had we included the further order proposed at [5(b)] of the husband’s written submissions, but as we have not done so, Order 14 is required in order to provide a mechanism for resolving any disputes about the quantum of tax payable by the wife.
Orders
For the reasons above, we propose now to make the following orders:
(1)Order 7 of the orders made on 17 January 2014 be set aside and the following order made in lieu:
(7)That subject to Orders 12 and 13, the Husband indemnify the Wife in respect of all past, present and future liabilities arising as a result of the Orders herein (save for any liabilities associated with C Street, Apartment D and Apartment G), or from her involvement in the entities or in any trust of which he or any of the entities is trustee.
(2)The orders made on 17 January 2014 be amended by the addition of the following orders:
(12)That in the event either the Husband or the Wife incurs or has incurred any taxation liability by reason of any of the transfers referred to in Orders 2, 3 or 4 hereof, the other party shall indemnify him or her to the extent of 50 percent of any such liability.
(13)That in the event the Husband incurs or has incurred any taxation liability by reason of receiving dividends in order to comply with his obligations pursuant to these orders, the Wife shall indemnify him to the extent of 50 percent of any such liability.
(14)In the event of dispute arising as to whether any taxation liability was reasonably incurred, the parties shall have liberty to apply to Forrest J (or another judge in the event his Honour is not reasonably available) for orders determining the extent of the wife’s obligation pursuant to Order 13.
Costs orders
The submissions received from the parties include submissions about costs. Separate reasons disposing of the costs issue will be published in due course.
I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Thackray & Ryan JJ) delivered on 8 December 2015
Associate:
Date: 8 December 2015
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