Essex & Essex
[2009] FamCAFC 236
•22 December 2009
FAMILY COURT OF AUSTRALIA
| ESSEX & ESSEX | [2009] FamCAFC 236 |
| FAMILY LAW - APPEAL – PROPERTY – Whether the trial Judge erred in “adding back” into parties’ asset pool money withdrawn by the wife post-separation from the parties’ bank account – Whether the trial Judge erred in finding the wife acted wantonly and recklessly in post-separation spending – Whether the trial Judge denied the wife natural justice in rejecting evidence of post-separation expenditure – Where the trial Judge made adverse findings about the wife’s credit – Where the wife unilaterally removed funds – Where the wife failed to provide appropriate corroboration for expenditure – Where trial Judge carefully assessed the parties’ assets and liabilities – Where issue of lack of corroborative evidence raised at trial – No appealable error. FAMILY LAW - APPEAL – PROPERTY – Contributions – Whether the trial Judge erred in weight given to contributions by husband and husband’s family – Whether the trial Judge erred in failing to provide adequate reasons for contribution assessment – Where the trial Judge carefully considered the parties’ initial contributions – Where the contributions of the husband’s family were significant – The contribution assessment by the trial Judge took into account the contribution by the husband’s family and gave full weight to the contributions of the wife – No error in assessment of parties’ contributions – The trial Judge’s reasoning discernible – No appealable error. FAMILY LAW - APPEAL – PROPERTY – SECTION 75(2) ADJUSTMENT – Whether the trial Judge erred in his assessment of the wife’s earning capacity – Whether trial Judge’s discretion vitiated by factual error in relation to the wife’s employment in 2006 –Where trial Judge mistaken in finding wife had undertaken full-time work in 2006 – Where finding not of magnitude that discretion miscarried – Whether the trial Judge erred in rejecting the evidence of the wife’s medical expert – Where findings in relation to the wife’s earning capacity open to the trial Judge – No appealable error. FAMILY LAW - APPEAL – PROPERTY – SECTION 75(2) ADJUSTMENT – FINANCIAL RESOURCE – Family trust – Whether the finding that husband did not have a financial resource in the trusts was against the weight of the evidence – Whether the trial Judge’s discretion miscarried (per Bryant CJ and Boland J, Faulks DCJ dissenting) Where the evidence before the trial Judge about the two trusts was limited – Where the husband an income beneficiary but not capital beneficiary of one trust – Where the attempt to remove the husband as a beneficiary was ineffective – Where the husband did not seek to remove himself as a beneficiary of trust – Where the settling of two trust was not necessary for the purposes for which it was asserted the trust were settled – Where the husband had effective operation of the trusts for 18 months – Where husband’s evidence inconsistent with that of his brother – No onus on the wife to call trusts’ accountant as a witness – Where the trial Judge did not give appropriate weight to the email and letter from the trusts’ accountant and the evidence of husband’s brother – The evidence admits an inference that the husband will receive distributions from the trust at the conclusion of proceedings – The trial Judge erred in his finding that the trust was not a financial resource of the husband. (per Faulks DCJ) Where is was asserted that the husband’s inclusion as a beneficiary was a mistake – Open on the evidence to find that the husband was not a beneficiary of the trust at the date of the hearing – Where no evidence that the husband would be appointed as trustee of the trust at the conclusion of proceedings – Where any distribution to the husband on behalf of the children would not constitute a financial resource of the husband – Where the husband could not compel the exercise of discretion by the trustee of the other trust – To the extent trusts may constitute financial resource not a resource of substance – No error in the trial Judge’s determination that there was no relevant financial resource available to the husband. FAMILY LAW - APPEAL (per Bryant CJ and Boland J, Faulks DCJ dissenting) – Appealable error established – Appeal allowed. FAMILY LAW - APPEAL – RE-DETERMINATION – (per Bryant CJ and Boland J) Where asset pool increased from pool as found at hearing as a result of increased value of properties when sold – Where contributions of the parties’ during cohabitation and post-separation (other than contributions of husband’s family) equal – Where contributions made by the husband’s family on his behalf substantial – Where contribution based entitlements of 60 per cent to the husband and 40 per cent to the wife appropriate – Where the husband has superior earning capacity – Where the husband has a financial resource as an income beneficiary of trust – Where disparity in the parties’ contribution based entitlements – Where wife’s health affects her capacity to work on a full-time basis – Where the wife responsible for the care of the parties’ younger child – 17.5 per cent adjustment in the wife’s favour appropriate. FAMILY LAW - APPEAL – APPLICATION TO ADDUCE FURTHER EVIDENCE – Where the wife had not sought an adjournment of the hearing in order to place further medical evidence before the trial Judge – Where the evidence of the medical practitioner was contentious – Where the evidence would not demonstrate appealable error by the trial Judge – Application refused. FAMILY LAW - COSTS – Where not in dispute that husband should pay wife’s costs if appeal successful – Husband to pay wife’s costs of and incidental to the appeal. |
| Child Support Assessment Act 1989 (Cth) Family Law Act 1975 (Cth) – s 75(2), s 79 Evidence Act 1995 (Cth) – s 38 |
| Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR. 621 Bennett v Bennett (1991) FLC 92-191 at 78,266 CDJ v VAJ (1998) 197 CLR 172 Chorn & Hopkins (2004) FLC 93-204 Clauson& Clauson (1995) FLC 92-595 De Winter & De Winter (1979) 23 ALR 211; (1979) FLC 90-605 Fox & Percy (2003) 214 CLR 118 Gollings & Scott (2007) FLC 93-319 House v The King (1936) 55 CLR 499 Housing Commission (NSW) v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 386 Jones v Dunkel (1959) 101 CLR 298 Kennon v Spry (2008) 251 ALR 257; (2008) 83 ALJR 145 Kowaliw & Kowaliw (1981) FLC 91-092 Omacini & Omacini (2005) FLC 93-218 Pierce & Pierce (1999) FLC 92-844 Townsend& Townsend (1995) FLC 92-569 |
| APPELLANT: | Ms Essex |
| RESPONDENT: | Mr Essex |
| FILE NUMBER: | HBF | 1141 | of | 2004 |
| APPEAL NUMBER: | SA | 66 | of | 2007 |
| DATE DELIVERED: | 22 December 2009 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Bryant CJ, Faulks DCJ, Boland J |
| HEARING DATE: | 6 May 2008, 15 May 2008 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 2 July 2007 |
| LOWER COURT MNC: | [2007] FamCA 639 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Spicer |
| SOLICITOR FOR THE APPELLANT: | Murdoch Clarke |
| COUNSEL FOR THE RESPONDENT: | Mr Welch |
| SOLICITOR FOR THE RESPONDENT: | Philip Welch |
Orders
That the appeal is allowed.
That Order 3 of the trial Judge be varied by deleting where appearing therein “the sum of one hundred and eight thousand eight hundred and eighty six dollars ($108,886.00)” and inserting in lieu “In payment to the wife of such sum as is necessary to ensure the wife receives 57.5 per cent of the parties’ net assets and liabilities as set out in paragraph 185 of reasons of the Full Court, save and except the value of the matrimonial home and the [J] Property which values shall be the actual sale price of the properties less sale costs, and the liabilities shall be adjusted to delete any liability discharged from the proceeds of sale of either party”.
That the husband pay the wife’s costs of and incidental to the appeal as agreed and failing agreement as assessed.
IT IS NOTED that publication of this judgment under the pseudonym Essex & Essex is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE |
Appeal Number: SA 66 of 2007
File Number: HBF 1141 of 2004
| Ms Essex |
Appellant
And
| Mr Essex |
Respondent
REASONS FOR JUDGMENT
Bryant CJ and Boland J
Introduction
In May 2007 Benjamin J heard property and spousal maintenance proceedings between Ms Essex (“the wife”) and Mr Essex (“the husband”). His Honour determined that the parties’ property, which he found to have a net value of $981,429.00, should be divided between them as to 55 per cent or $539,572.00 to the wife and 45 per cent or $441,467.00 to the husband. His Honour dismissed the wife’s application for spousal maintenance. This is the wife’s appeal against his Honour’s orders.
Before us the wife sought orders that the appeal be allowed, that the parties’ assets (amended from the trial Judge’s determination to reflect sale prices achieved for two properties) be divided between them as to 70 per cent to her and 30 per cent to the husband. In the event the appeal was allowed, she did not pursue her challenge to the dismissal of her spousal maintenance application.
At the hearing of the appeal the wife’s counsel sought leave, which was unopposed, to rely on nine additional grounds of appeal, but abandoned ground 2 of the original grounds. He also sought to adduce three categories of additional evidence:
(a)evidence of the actual sale price of the former matrimonial home and an investment property (this evidence was not opposed and was provided to us after the hearing);
(b)expert medical evidence of Dr O, Rheumatologist concerning the wife’s health; and
(c)an affidavit of Ms N (we refused to admit this affidavit at the hearing).
The husband opposed the admission of the expert medical evidence. We reserved our decision in respect of that evidence, and indicated we would determine the issue of that application with these reasons. We propose to discuss the further evidence application when dealing with the wife’s grounds challenging the adjustment made by the trial Judge for relevant factors under s 75(2) of the Family Law Act1975 (Cth) (“the Act”).
The appeal grounds
It is unnecessary that we set out the appeal grounds and the additional grounds on which the wife relied. There was considerable overlap in some of the grounds which were argued together by the wife’s counsel. The appeal grounds can conveniently be considered in four broad categories:
·asserted error in “adding back” into the pool of assets to be divided between the parties a sum of $30,000.00 withdrawn by the wife from a bank account post separation, and in finding that the wife had acted “wantonly and recklessly” in her post separation expenditure;
·a denial of natural justice by the trial Judge in rejecting the wife’s evidence of post separation expenditure, without notice to her, when her evidence was not challenged by the husband;
·an asserted failure by the trial Judge to give sufficient weight to the wife’s contributions both financial and non financial (particularly her contribution as primary carer of the parties’ two children both during the marriage and after separation) resulting in an asserted error in the exercise of discretion of the trial Judge; and
·asserted error by the trial Judge in failing to take into account the disparity in the parties’ income, property and financial resources, and in particular his Honour’s failure to have regard to a concession by the husband’s counsel that two trusts, of which the husband is a beneficiary, were a financial resource from which, on the balance of probabilities, it could be inferred that he would derive income in the future.
Although each category of challenge identified by us above was fully ventilated at the hearing of the appeal, the predominant focus of the appeal was directed to the question of the husband’s entitlement, if any, from the two trusts. Accordingly, for reasons we will shortly expound, after we have recorded some relevant historical material, we propose to deal with the topics of the “add back”, asserted denial of natural justice and then the contribution challenge, before turning to explore more fully the central issue agitated on the appeal – the husband’s position in relation to the two trusts.
Background
The wife and the husband were aged respectively 51 years and 50 years at the date of the hearing. They married and commenced cohabitation in June 1981.
There are two children of the marriage. The elder child “K” was aged 17 years at the date of the hearing and was in her final year at high school. The younger child “B” was aged 13 years at the time of his Honour’s judgment.
The parties were in dispute as to their date of separation. The trial Judge found separation occurred in January 2000. There is no challenge to that finding.
Following separation the wife and children resided primarily in Hobart, initially in various rented properties until the wife purchased, in about January 2006, a home in a suburb of Hobart (“the L Property”). The husband remained living in the matrimonial home.
The matrimonial home was initially purchased by a property investment company owned by the husband’s late father. The parties occupied the property on a rent-free basis from 1981 or 1982 until its transfer by the company to them in 1992 without consideration.
The parties were also the owners of an investment property in Tasmania (“the J Property”).
In January 2006 the wife purchased the L Property for approximately $280,000.00. She borrowed approximately $226,000.00 from Y Company and $70,000.00 from her father to finance its acquisition. Prior to the purchase the wife had rented the property.
The parties had owned another investment property which was sold prior to the hearing resulting in each party having a capital gains tax liability (husband’s liability $5,458.00 and wife’s liability $5,200.00).
By Deed of Trust dated 18 May 2004 a discretionary trust known as the S Trust was settled. W Pty Ltd is the corporate trustee of the S Trust. The S Trust’s assets were assets gifted by the husband’s mother and formerly the property of the husband’s parents.
By Deed of Trust dated 31 May 2004 a second discretionary trust known as the N Trust was settled. W Pty Ltd is also the corporate trustee of the N Trust. The N Trust’s assets were also assets gifted by the husband’s mother and formerly the property of the husband’s parents. We will discuss the terms of the respective trust deeds and other evidence concerning the trusts later in these reasons.
Asserted error in ‘adding back’ of $30,000.00, and finding that the wife had acted ‘wantonly and recklessly’ in her post separation expenditure; denial of natural justice in rejecting wife’s evidence of her expenditure
There was no dispute that, after separation, the wife who was living in Hobart, unilaterally altered a withdrawal slip signed by the husband for expenditure for the children’s education thereby increasing the amount withdrawn by $30,000.00 in excess of the agreed withdrawal. It was also uncontroversial that, after living in various rented premises, the wife purchased the L Property which she had formerly rented. The purchase resulted in her weekly commitments in respect of the property increasing by approximately $149.00 per week. She carried out repairs to this property, and asserted she had other expenditure resulting in some outstanding liabilities, including liabilities to tradespersons, at the date of hearing.
The trial Judge determined, in the exercise of his discretion, he should “add back” the sum of $30,000.00 withdrawn by the wife from the bank account as a premature distribution of funds to her, and he disallowed some of the wife’s claimed expenditure and liabilities.
The submissions made on behalf of the wife were essentially framed to assert that the wife’s expenditure was reasonable in all the circumstances, and that as her expenditure claimed was essentially unchallenged, even if not supported by receipts, it should have been allowed by the trial Judge. In short, her counsel said her expenditure, including the unauthorised removal of the $30,000.00, and liabilities did not fall within the type of conduct recognised in Kowaliw & Kowaliw (1981) FLC 91-092, which conduct, if established, warrants rejecting liabilities incurred as joint liabilities.
In dealing with these complaints it is important to bear in mind that the trial Judge, who had the benefit of observing the wife in the witness box, made adverse findings about her credit (reasons paragraph 21 and 22). We will return to these findings and the basis on which they were made shortly.
The trial Judge’s discussion and findings about the wife’s expenditure
The trial Judge discussed the wife’s purchase of the L Property for $280,000.00 at paragraph 50 of his reasons. After reciting the purchase price of the property and how the wife asserted it was funded by borrowings totalling $296,000.00 which were applied in part for stamp duties, legal fees and transfers his Honour said:
…No satisfactory explanation was given by the wife as to the disposal [sic] balance of that sum. Some part was applied to legal costs but the evidence of the wife was that such amount was well less than $7,000.00. The wife said that part of the funds were applied for repairs to the house, yet only limited invoices and receipts were provided and amounts for a builder, a plumber and an electrician remain outstanding.
At paragraphs 53 and 54 his Honour further discussed the wife’s purchase of the L Property and said:
The decision to buy [the L Property] was made in circumstances where the wife was struggling to make “ends meet” and I find the wife had no serious regard to her financial circumstances in terms of this acquisition and I find that the wife was either negligent, wanton or reckless in that decision. The wife was, in the circumstances, profligate in that purchase. She put herself in a position where she was living beyond her means and the fact that she was unable to meet expenses did not seem to detract or deflect her once she had made up her mind. Her evidence was that it was to provide a secure home for the children pending the outcome of these proceedings, yet the wife put her financial security at risk with that purchase.
This purchase led the wife to be unable to meet all bills when they fell due. This can be seen in the claims for the balance of her dental accounts, mechanical repairs, electrician, plumber, and builder.
In the following paragraphs (paragraphs 55 to 59) the trial Judge discussed in some depth a list of the wife’s claimed expenditure, and receipts provided to him in a bundle of documents.
In referring to the wife’s evidence that she had expended part of the $30,000.00 withdrawn from the bank account for her dental expenses, the trial Judge said:
…She says a part of the $30,000.00 was spend [sic] on dental treatment, the invoices show expenditure of $5,610.00 and the wife claims a further liability of $7,640.00. The wife ought not have the benefit of that liability set off against the asset pool. It is possible that it does not exist or if it does, it is not to the extent alleged by the wife. Further the need for this post separation expense has not been satisfactorily explained. If the debt is at that level it is up to the wife to satisfy the court both of its existence and need. (paragraph 59)
Later, at paragraphs 60 and 61, his Honour said:
I find that the wife was negligent, reckless or wanton in respect of incurring such debts claimed in this paragraph I do not propose to treat the debts to the electrician $950.00, plumber $3,470.00, builder $2,400.00, wife’s MasterCard debt $6,400.00 and [BC Mechanical repairs] as liabilities against the assets. The debts were incurred in circumstances where the wife chose to live beyond her means or alternatively or additionally there is doubt about whether they exist at all or at the level alleged.
As to the MasterCard liability it has arisen post separation and at a significant rate. It has increased from $4,200.00 in March 2007 to $6,400.00 in May 2007. I infer this has occurred because of the wife’s continued rate of spending which was beyond her means and as such was wanton or reckless.
His Honour then discussed the fact the wife had retained a Saab motor vehicle (when she had another vehicle) and disallowed claimed expenses for the Saab car, when the wife did not produce documentary evidence to support the claimed debt. His Honour also discussed the wife’s debt to the Department of Education. This related to money the wife had received from the Department, and although she knew it was an overpayment, had expended the sum. The trial Judge again found the wife’s behaviour “wanton and reckless”. His Honour accepted the wife’s debt was a genuine debt, but refused to include it as a liability in calculating the parties’ net assets. His Honour made similar findings about a Centrelink overpayment.
Early in his reasons, under the heading “Credit of the parties”, the trial Judge summarised his findings about each of the parties, and referred briefly to the evidence the wife had altered a withdrawal slip to enable her to receive $30,000.00 more than the original sum on the withdrawal slip signed by the husband. His Honour returned to this topic at paragraphs 72 to 75 of his reasons. At paragraph 75 his Honour said:
The documentary evidence in respect of the use of these funds is limited and the wife has had reasonable opportunities to provide it to the court and the husband.
At paragraph 78 and 79 his Honour set out his conclusions on the topic of the $30,000.00 and said:
I do not accept the accuracy of the wife’s explanation as to how she disposed of the $30,000.00. Even if I had accepted her evidence as to the expenditure, there is the underlying failure of the wife to live within her means. That circumstance should not be visited upon the husband. What the wife did was to distribute to herself an asset in which the husband had a legitimate interest.
Taking all of those factors and facts into account, the $30,000.00 will be added back into the pool as an asset of the wife, as being a premature distribution to her.
Discussion
The grounds which go to the trial Judge’s findings about the quantification of the parties’ net assets involve two issues – “add backs” and identification of either joint or sole liability for debts.
Questions of how a trial Judge should deal with so called “add backs”, and/or premature distribution of assets, regularly arise in cases under s 79 and are often the subject of grounds of appeal. Often the amounts are minor when compared to the overall property in issue and the time taken and costs involved to agitate the claims both at first instance and on appeal, lack proportionality. Trial Judges are correct to deal with such claims robustly in the broad exercise of their discretion under s 79.
The principles about when an expense should be “added back” have been comprehensively discussed in Full Court decisions particularly Chorn & Hopkins (2004) FLC 93-204, Omacini & Omacini (2005) FLC 93-218 and Gollings & Scott (2007) FLC 93-319.
The principle that where one party has unilaterally assumed control of, and has improperly disposed of, or diminished the value of, an asset to the detriment of the other party, that the disposal should be regarded as a premature distribution to the party at fault is not in doubt (see Townsend& Townsend (1995) FLC 92-569).What is often controversial is when the principle is applicable.
In this case there is no doubt that his Honour dealt with the sum of $30,000.00 as a premature distribution of an asset to the wife, and included such sum in the property to be retained by the wife at its full amount – that is his Honour did not take into account any part of the sum as reasonable or necessary post separation expenditure by the wife.
His Honour’s task in this case was not easy. The issues to be determined regarding the wife’s expenditure of the $30,000.00 (and the liabilities asserted to be outstanding at trial) did not, as often happens, fall to be determined as a discrete issue. In other words, it was not suggested in the husband’s submissions that, although the wife had obtained the $30,000.00 in a deceitful manner, she “lost” the whole of that sum, for example, by gambling, an illegal activity, or a highly speculative investment. Without trying to define categories of conduct, in the examples just described, conduct which results in the loss of funds or a liability incurred will, in an appropriate case, attract the description of negligent, wanton or reckless conduct. Nor was his Honour being asked to deal only with outstanding liabilities, and to assess the reasonableness or otherwise of those liabilities, and whether they should be regarded as “joint liabilities” for the purpose of determining the parties’ net assets and liabilities (the second issue we have identified). Rather, the wife’s claims were hybrid. The position asserted on her behalf was that her expenditure from what might broadly be described as “matrimonial funds” should not be added back, and received by her as part of her property entitlement, rather it was asserted that the money she had expended should be disregarded, and her outstanding liabilities should be regarded as “joint liabilities”.
In Townsend, Nicholson CJ found appealable error in the trial Judge dealing, under s 75(2), with a loss of matrimonial property caused by the husband’s unilateral purchase of taxi plates which he then sold at a loss. The Chief Justice, with whom Fogarty and Jordan JJ agreed, determined that some sums expended by the husband should be “added back” to the pool of property as a premature distribution, but excluded funds used to repay a loan.
Did the wife’s conduct require that the whole of the $30,000.00 should be added back and some of her liabilities asserted at trial be disregarded?
This topic cannot be considered in isolation from the trial Judge’s evaluation of the evidence of the wife. His Honour’s findings about the wife were, as we have already noted, carefully documented in paragraphs 21 and 22 of his reasons. Those findings are, in our view, pivotal to this challenge. The paragraphs included the following:
…[t]he wife was not an impressive witness. Her demeanour was poor and she took many opportunities to minimise the husband’s contributions to the family and to expand her own. From time to time she prevaricated. She had a tendency to exaggerate. An example of this was in terms of her initial evidence that the furniture and furnishings that she brought into the marriage had a value of some $17,000.00 and in evidence in chief she said it had a value of over $20,000.00. The wife gives the husband very little credit for his contributions to the family. Furthermore, the wife engaged in fraud in order to procure funds from the joint account of the parties and in addition she took the benefit of monies mistakenly deposited into her account by the Department of Education in circumstances when she knew the deposit to be a mistake. These incidents cast further doubt on the wife’s credibility as a witness of truth, and as such her evidence is, from time to time, unreliable.
On balance I generally prefer the evidence of the husband to that of the wife, except where the wife’s evidence is supported by some objective facts. [footnote omitted]
His Honour made findings adverse to the wife about her conduct in altering the withdrawal slip and her unilateral use of funds the parties had agreed were for the education of the children. Those findings were open on the evidence. His Honour also found the wife’s evidence was exaggerated and unreliable. She produced little documentary evidence to support the expenditure of the $30,000.00 in circumstances where it would have been readily apparent her conduct would be subject of careful scrutiny at the trial.
It may be that the wife did spend the money as she asserted, particularly in circumstances where her income was not large and she had to provide accommodation for herself and the children whilst the husband remained in the matrimonial home. Some support for her assertion of need for dental work is found in the history she recounted to Dr T in his report dated 9 May 2007 (Exhibit “H2).
The circumstances in which the wife was living were, in all the circumstances, relatively modest. Her expenditure claimed does not suggest extravagant expenditure. The language used by the trial Judge to describe her conduct as “living beyond her means” and thus “negligent”, “reckless” or “wanton” is, in our view, unfortunate.
There is no doubt the wife’s conduct in altering the withdrawal slip deserved his Honour’s criticism. But how she spent the funds obtained did not, in our view, amount to conduct which would warrant the descriptions used by his Honour.
It is arguable that the wife’s expenditure of the funds could have been considered in all the circumstances reasonable. The husband’s earnings exceeded those of the wife, he occupied the matrimonial home, and pursuant to an undertaking given to a local court she was excluded from it. The wife and children had lived in a number of rented properties in Hobart and the property she purchased was formerly occupied by her as rented premises. The wife had worked until mid 2006 when she asserted her health prevented her continued employment. The purchase of the L Property occurred after the institution of proceedings for property settlement so that the wife could reasonably have anticipated an adjustment of property sufficient for her to discharge the mortgage obtained to purchase the L Property in a relatively short period.
Other judges, in the exercise of their discretion, may have found it appropriate to “add back” part only of the $30,000.00, or none of it, and/or to allow the liabilities claimed by the wife in full. But here the question is whether his Honour’s decision was “plainly wrong” or outside the reasonable ambit of his discretion. We are not satisfied his Honour’s decision falls into that category when looked at in the context of his judgment overall, including his strong adverse credit findings about the wife, the wife’s unilateral removal of the funds, and the failure of the wife to provide appropriate corroboration for her expenditure.
The question then remains, was his Honour correct in rejecting other post separation expenditure claimed by the wife, which remained unpaid at trial, when that expenditure was not corroborated by receipts or other relevant documents?
The transcript reveals that, in closing submissions, the trial Judge carefully worked through the list of assets and liabilities and enquired of the wife’s counsel where he would find supporting documentation for the wife’s claimed expenditure and outstanding liabilities. Discussion between the wife’s counsel at trial and his Honour discloses that the trial Judge was made aware not all claims were supported by documents tendered. The husband’s counsel submitted that the absence of supporting documentation about the debts claimed by the wife would lead the trial Judge to wonder whether the debts claimed by her remained outstanding. The lack of corroboration for many of the wife’s claims, and the submission that his Honour should disregard the liabilities as joint liabilities, was clearly raised at the trial. The wife did not seek any further opportunity to put receipts before the trial Judge. We are not satisfied that the wife’s claim of lack of natural justice is made out.
As with the issue of $30,000.00, while other judges may have accepted the debts claimed by the wife without corroboration, we do not discern appealable error by his Honour in failing to do so. His Honour obviously formed a very poor opinion of wife’s evidence, and that her claims were exaggerated. We are not satisfied that the wife has established this ground.
Asserted error in contribution assessment
In the original grounds of appeal it is asserted that the trial Judge had erred in failing to give proper weight to the wife’s homemaker and parent contributions. The additional grounds of appeal sought to challenge the trial Judge’s assessment of the 60 per cent contribution assessment in the husband’s favour without providing adequate reasons for so doing. It was also asserted the trial Judge’s finding that the husband’s contribution as the “overwhelming provider of income” during the marriage was against the evidence and the weight of the evidence. It was further asserted that the trial Judge was in error in failing to have regard to the wife’s evidence of her involvement in the renovations to the matrimonial home.
In his written submissions, counsel for the wife submitted, having regard to the principles enunciated in Pierce & Pierce (1999) FLC 92-844, that the “weight of [the husband’s initial contribution of the matrimonial home] should be significantly reduced” (amended submissions, p 7).
Trial judge’s reasons - contribution
The trial Judge dealt with the matrimonial home and the parties’ contributions to it as a discrete topic under the heading “F property”. There was no dispute that the matrimonial home was transferred to the parties from the husband’s father’s company in 1992 at no cost to them and it remained their matrimonial home until separation. They had occupied the property on a rent-free basis from about the time they commenced cohabitation.
In paragraph 36 of his reasons, the trial Judge referred to the wife’s affidavit evidence at paragraph 73. In that paragraph the wife set out tasks she had undertaken to maintain and improve the matrimonial home. The trial Judge noted that, in her oral evidence, the wife had conceded the husband was also involved in the restoration and maintenance of the matrimonial home.
At paragraph 138 of his reasons, the trial Judge commenced his discussion of contributions. He found that the wife had furniture and furnishings at the date of the marriage, and that her net property assets at that time had a value of $10,500.00 or less. This finding was not challenged by the wife.
Under the heading “Monies advanced by the husband’s family to the husband and wife” the trial Judge chronicled the contributions the parties received from the husband’s family, including the matrimonial home, a gift of $25,000.00 in 1982, the provision to the wife of a Mazda 323 motor vehicle early in the marriage, such car having a value of $8,500.00, and provision of a further motor vehicle in 1988.
His Honour went on to make findings that the husband’s mother had given the husband a cash sum of $40,000.00 in October 1995 and in December 1996 a further sum of $6,000.00, which sums were applied for the benefit of the family.
His Honour also explained, at paragraph 145, that the husband’s family had provided educational funding to the children of at least $11,000.00 subsequent to 1995 and an unspecified sums had been paid by the husband’s late father prior to that date.
His Honour also found that the wife had, in 1992, contributed her redundancy pay of $26,000.00 which was used for the bathroom extension at the matrimonial home and purposes for the family.
His Honour then turned to consider the parties’ contributions to their two investment properties noting that one property in Tasmania (“the M Property”) had been sold by agreement between the parties and used to fund some education expenses of the children.
His Honour also had regard to the fact that the husband had the exclusive occupation of the matrimonial home from 2000 and that from 2004 he had effectively excluded the wife from the home.
At paragraph 157, his Honour said:
[The matrimonial home] is a substantial asset in the context of the finances of these parties and the wife’s contribution to providing that accommodation for the husband (albeit contrary to her wishes) is a fact and factor which has been taken into account and given weight in determining the relative contributions of the parties.
His Honour then discussed the husband’s self-managed superannuation fund, noting the base of the fund had been created whilst the parties lived together and had substantially increased since separation.
In paragraphs 161 to 165 the trial Judge discussed the wife’s claims about her parenting contribution and made findings that:
·the husband was absent from the matrimonial home on an average of one day and one night per week leaving the bulk of the parenting and homemaking to the wife;
·the husband worked throughout the entire period of the parties’ marriage and was the overwhelming provider of income;
·the wife worked as a teacher from 1981 to 1982 when she took a redundancy; and
·from 1984 the wife trained as a therapist and she undertook private practice in that occupation.
His Honour concluded, at paragraph 164:
Both of the parties contributed in their own ways from the date of the marriage until separation in 2000 and on balance I find that such contributions, with the exception of gifts to the parties from their respective families, were equal.
His Honour, at paragraph 165, accepted that post separation the wife had had the overwhelming care of the children.
At paragraph 166 his Honour set out his conclusions on contribution as follows:
I have made an overall assessment of all of the facts relating to contribution and having regard to same and the findings I have made in respect of facts in issue I determine that the contribution entitlement to the husband should be 60% and the wife 40%.
Discussion
The challenge to his Honour’s contribution assessment was agitated on three bases, namely:
·the giving of inappropriate weight to the husband’s contributions from his family and, in particular, to the matrimonial home;
·inappropriate weight to the husband’s greater financial contribution by way of income; and
·failure to give adequate reasons for the overall contribution assessment;
A careful reading of the judgment overall shows that the trial Judge carefully took into account the parties’ initial contributions, their respective roles and contributions throughout the marriage and post-separation. Nothing to which we were directed indicates that the trial Judge overlooked any relevant fact or circumstance. Rather, he meticulously chronicled the parties’ respective contributions and gave such weight as he thought appropriate to the evidence.
We discern no appealable error in the trial Judge’s assessment that, at the conclusion of this lengthy marriage which produced two children, the parties’ contributions, other than those which came from the husband’s family, should be regarded as equal.
In Pierce the Full Court discussed initial contributions and at paragraph 28 said:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home…
There was no dispute that at trial the value of the matrimonial home represented approximately 43 per cent of the net assets. The home provided by the husband’s parents, firstly on a rent-free basis, and then by way of ownership, enabled the parties to acquire investment properties and was a very significant contribution by and on behalf of the husband. The other financial contributions of the husband’s parents were not disputed. They too were significant.
The trial Judge’s contribution assessment resulted in a differential of 20 per cent or $196,286.00 in the parties’ entitlements. That assessment properly took into account the very significant contributions by the husband’s parents while at the same time giving full weight to the contributions made by the wife, both during the course of the marriage and post-separation.
The reasons challenge may be disposed of shortly. The necessity to give adequate reasons is not in doubt (see Bennett v Bennett (1991) FLC 92-191 at 78,266 and Housing Commission (NSW) v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 386).
In this case, his Honour’s path of reasoning is clearly discernable and no appealable error is demonstrated.
Disparity in income earning capacity, property and financial resources
The wife’s challenge enunciated under this topic was essentially twofold. First, she asserted that the further evidence she sought to adduce would, if admitted, demonstrate that the trial Judge was in error in rejecting the evidence of her expert at trial, Dr E, and preferring the evidence of the single expert, Dr T. The wife’s counsel submitted that the trial Judge had given insufficient weight to her two medical conditions (ulcerative colitis and osteoporosis), and the limitations those conditions place on her ability to earn income. Second, and the gravamen of her appeal, was her assertion the trial Judge was in error in rejecting the argument advanced on her behalf that the husband had a significant financial resource in the S Trust and the N Trust. Her counsel asserted, properly analysed, the evidence supported a finding that husband had a significant resource in these two trusts. It was asserted the settling of the trusts had, as a primary purpose, an intention to preclude the Court being able to deal with these trusts.
The submissions in respect of the medical and other evidence before the trial Judge about the wife’s earning capacity
Counsel for the wife submitted that the trial Judge made a factual error in respect of his findings about the wife’s employment in 2006, and that this factual error vitiated his discretion. A challenge to the evidence recorded by the trial Judge in paragraph 76 of his reasons was abandoned at the hearing of the appeal, but counsel maintained that paragraph 77 of his Honour’s reasons was contrary to the evidence. In that paragraph the trial Judge said:
In the 2006/2007 financial year the evidence is that the wife worked most of the final two school terms full time, she has done little paid work in 2007. I find that her income, government benefits and child support in the 2006/2007 financial year will be about $50,000.00. For reasons set out later, I find that the wife has a good working capacity. The school fees and some expenses for the children were paid, at least in part, out of the CBA account.
Later in his reasons when dealing with what his Honour described as “[t]he other factors” he said, at paragraph 178, when discussing the expert medical evidence:
It is significant to note that subsequent to that report the wife worked virtually full time through Tasmanian school terms two and three in the year 2006. [footnote omitted]
The wife’s evidence was that she had worked as a relief teacher on a 50 per cent workload, and that in relying on a statement in the single expert, Dr T’s report, his Honour had misconstrued the evidence. The relevant extract from Dr T’s report is as follows:
…
[Ms Essex] indicated that in 2006 she worked as a relief teacher at [a school in Tasmania] on a 50% workload teaching TCE subjects, with time spent on preparation of the education material. She indicated that she had been overly conscientious and committed to the girls with the result that she worked virtually full time throughout terms 2 and 3. [Ms Essex] stated that she worried about the “kids doing well”.
…
The wife’s oral evidence disclosed her income in the financial year ended 30 June 2006 was $23,113.00 and that she received a pension and allowances of $6,241.00, together with child support for the children (Transcript, 18 May 2007, p 49). Later, in re-examination, the wife confirmed she had not worked on a full time basis in 2006.
The trial Judge’s discussion of the medical evidence
The trial Judge, as a preamble to his discussion about the expert medical evidence, noted the wife’s health related issues and summarised the wife’s evidence about her ulcerative colitis recording she had suffered from that condition for about 22 years “albeit mostly asymptomatic”.
His Honour went on to note that the wife disagreed, in part, with the report of the single expert, Dr T. The trial Judge explained, at paragraph 173, that Dr T had concluded the wife would be able to “return to active employment in either part or full time capacity”. His Honour also recorded that Dr T had acknowledged the seriousness of the wife’s illnesses but noted she had managed with the conditions for many years.
The trial Judge went on to explain that as the wife had not accepted the opinion of Dr T, by leave, she had been allowed to obtain her own expert evidence from Dr E who prepared reports dated 2 March 2006 and 16 May 2007.
His Honour explained how both doctors had given evidence at the same time and accordingly had been able “to explain their relative opinions and the difference between their opinions from the witness box” (paragraph 176). His Honour noted that neither expert was a qualified gastroenterologist.
Ultimately, after examining in some detail the expert evidence, the trial Judge determined he preferred the evidence of Dr T and concluded his findings on this topic at paragraph 187 where he said:
I am concerned about the history provided by the wife to the experts. I find that [Dr T’s] analysis of the wife and her condition is better based than that of [Dr E]. Accordingly, and having regard to all of the evidence I prefer the findings of [Dr T] and find that the wife is able to work part time or full time as a teacher.
The medical evidence
At the appeal the wife’s focus was directed principally to an assertion her osteoporosis, and its effect on her ability to work, had not been properly taken into account by the trial Judge.
Dr E, in his report dated 2 March 2006, referred to the wife giving a history of diagnosis of osteoporosis.
Under the heading “information from other practitioners”, Dr E noted he had discussed the wife’s medical history with her general practitioner who confirmed that bone density testing showed evidence of osteoporosis affecting her hip and osteoporosis of her spine. Dr E considered the interrelationship of the wife’s osteoporosis and ulcerative colitis in his first report when he said:
The avoidance of episodes of ulcerative colitis is made all the more important by her development of osteoporosis. If she did have a significant flare in her ulcerative colitis, there may be a greater need for her to resume steroid medication, which may further exacerbate her other conditions. It is therefore of even greater importance that she avoids stressors that could trigger further attacks of ulcerative colitis to avoid the need for further medication. In addition to the risk of requiring further steroids if her ulcerative colitis is not controlled, there is also the risk of bowel cancer associated with that condition that needs to be managed.
Dr E specifically addressed the question of the wife’s osteoporosis in his report dated 16 May 2007. He noted at the commencement of his report that it was prepared after he had prepared a summary of major issues of disagreement between himself and Dr T in his reports of 9 May 2007 and 28 September 2005. At paragraph 4 he discussed the wife’s osteoporosis as follows:
[Dr T] indicates that osteoporosis is common in middle age women and that he believes that [Ms Essex’s] osteoporosis is related to her age, even though he acknowledges that steroids can exacerbate the condition. My understanding however is that her use of steroids is an important factor in the development of her osteoporosis which is quite severe. She developed back pain last year which may relate to progression of her osteoporosis which may have further impact on her fitness to work. It is certainly my understanding that in some individuals the use of steroids alone can cause significant osteoporosis.
The further evidence – report of Dr O
The wife sought to adduce by way of further evidence an affidavit of Dr O sworn 23 November 2007. The wife also sought to rely on her affidavit filed 18 April 2008. In her affidavit, the wife deposed she had not seen Dr O when the decision of the trial Judge was delivered. She further deposed, in paragraph 3, “[t]he appointment had been made prior to the Court case but due to the specialist [sic] unavailability it had not been possible to see him”.
Dr O deposed to seeing the wife on two occasions, namely 9 July 2007 and 15 August 2007 (that is, the wife’s first appointment was a week after his Honour’s reasons for judgment were delivered).
Dr O is a rheumatologist carrying on practice in Tasmania. He deposed to the wife suffering severe spinal osteoporosis and set out in his report appropriate treatment for the wife. He did not set out any specific prognosis for the wife other than recording in paragraph 6 of his report “[w]hen [Ms Essex] suffers factures in my opinion her capacity to work as a relief teacher is compromised”. He noted the medication prescribed for the wife was likely to improve her back pain and that she had commenced the medication Forteo on 15 November 2007 after sustaining three factures at T3, T4 and T5.
In seeking to have Dr O’s report admitted as further evidence, her counsel conceded that the wife had not sought an adjournment of the hearing before the trial Judge to place further medical evidence before the Court.
The wife’s counsel sought to adduce the evidence on two bases, namely, that it demonstrated error in the assessment the trial Judge made of relevant s 75(2) factors and his refusal to make a spousal maintenance order.
The husband’s counsel opposed the admission of Dr O’s report noting that if the report was admitted that he would want to cross-examine Dr O and provide alternate material. He submitted that we should not admit the evidence having regard to the principles enunciated in CDJ v VAJ (1998) 197 CLR 172. In summary, he submitted that Dr O’s evidence was contentious and further, if it had been available at trial it would not have affected the result. He submitted that the diagnosis of osteoporosis had been dealt with by both Dr T and Dr E. Significantly, he submitted the report was defective, on its face, containing internal inconsistencies about fractures reported to have been suffered by the wife.
Our examination of the transcript discloses that both Dr T (Transcript, 22 May 2007, p 208) and Dr E (Transcript, 22 May 2007, p 216) addressed the question of the wife’s osteoporosis. Dr T, whose evidence the trial Judge accepted, opined that the wife was more likely to have osteoporosis occur at her present age than in 1992, and that her condition was exacerbated by steroid treatment.
Accordingly, we are not satisfied that the evidence of Dr O, if admitted, would demonstrate that the trial Judge’s orders were infected by appealable error. Further, we are satisfied that the evidence sought to be admitted on the wife’s behalf is contentious and if appealable error is otherwise found that it would be inappropriate to admit the evidence and a retrial would be necessary.
Thus, we are of the view the wife’s application to adduce further evidence should be refused.
Discussion
We accept that the trial Judge appears to have mistaken the evidence in his finding that the wife had undertaken full-time work during two terms in 2006. It is difficult to be satisfied, however, that error has been carried through in his Honour’s calculation that the wife would have an income in 2006/07 of $50,000.00 comprised of earnings, government benefits and child support. That calculation was based on the wife earning at least $23,000.00 in the financial year, and the husband continuing to pay child support at the rate of approximately $20,000.00 per year. It was not in dispute that the wife ceased work after terms 2 and 3 in 2006 when she worked a 50 per cent load, but she did not put evidence before the Court of her earnings from her 50 per cent workload. Thus we are not satisfied that the trial Judge’s findings “she worked most of the final two school terms full time” was of such magnitude that his Honour’s discretion miscarried (see De Winter & De Winter (1979) 23 ALR 211; (1979) FLC 90-605 and Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR. 621).What was of relevance was his Honour’s finding that the wife had a “good earning capacity” – that finding was based on his Honour’s rejection of the evidence of Dr E, the wife’s independent expert, and his acceptance of, and preference for, the evidence of Dr T, the single expert.
Although his Honour’s focus in his reasons for judgment was on the wife’s ulcerative colitis he did not overlook the osteoporosis suffered by the wife. At paragraph 180 of his reasons, the trial Judge addressed the issue of alternatives to steroids for the wife’s treatment and explained the doctors had been in agreement there were other options available to the wife. His Honour concluded:
…I find that there are other options available to the wife for the treatment of her ulcerative colitis and that the evidence of Dr [T] in this regard is to be preferred. (paragraph 180)
His Honour’s pivotal findings about the wife’s health were contained in paragraphs 187 and 188 of his reasons. Although we have already set out paragraph 187 it is useful we repeat it, as well as reproducing paragraph 188:
I am concerned about the history provided by the wife to the experts. I find that Dr [T’s] analysis of the wife and her condition is better based than that of Dr [E]. Accordingly, and having regard to all of the evidence I prefer the findings of Dr [T] and find that the wife is able to work part time or full time as a teacher.
Notwithstanding that finding, I accept that the wife’s health is problematic and that she does not have the income earning capacity of the husband. I do not accept her submission that her income earning capacity is severely restricted but I do find that it is moderately restricted.
These findings were ones open to the trial Judge, and while we accept his Honour was in error in his finding the wife had worked full-time in terms two and three in 2006, we are not satisfied that error itself vitiated his discretion and appealable error has not been established. His Honour relied, and was entitled to rely on, Dr T’s evidence about the wife’s earning capacity.
The S Trust and the N Trust
(a)the evidence about the trusts
The evidence before the trial Judge about the two trusts was limited. The husband’s brother, swore an affidavit to which he annexed the two trust deeds. He gave oral evidence and was cross-examined.
The husband’s brother deposed to receiving from his mother a transfer of her shares in W Pty Ltd, the corporate trustee of the trusts, in June 2004, and that prior to that date he became the sole director of the company. An accountant, Mr RO, also became a director of W Pty Ltd on 21 February 2005. The husband’s brother deposed that he agreed with his mother that two trusts should be established, and some of her assets contributed to the trusts. W Pty Ltd was to be the corporate trustee of each trust. The S Trust was settled by Deed of Trust dated 18 May 2004 and the N Trust settled by Deed of Trust dated 31 May 2004. The trust deeds are not identical. The deeds were prepared by different solicitors.
The husband’s brother deposed to the two trusts being established for the following purposes:
·to provide income to enable the husband’s mother’s expenses to be met, and after five years, to enable her to be eligible to receive an aged pension;
·to ensure the husband’s mother did not, with advancing years, dissipate her assets “through unwise or ill considered investments”; and
·to protect the husband’s mother’s assets from any claim by the wife for property settlement had she died and left provision for the husband in her will.
He further deposed that the husband had not received any distribution from either trust. He said “[i]n keeping with my parents’ wishes there will never be a distribution to [the husband] if it has the effect of providing directly or indirectly for [the wife]”.
The husband’s brother also deposed to approaching the husband to manage the day to day affairs of W Pty Ltd and the trusts while he, the husband’s brother, was overseas. The husband was subsequently authorised to operate W Pty Ltd’s bank account. The husband’s brother does not depose in his affidavit to when the husband’s role in the day to day operation of W Pty Ltd ceased. The husband’s brother annexed to his affidavit a letter signed by the husband on letterhead of “W Pty Ltd” and bearing the date 5 July 2006 in which the husband authorised inspections of three properties in Tasmania which properties were acknowledged to be assets of the trusts.
The husband’s brother gave oral evidence and was cross-examined. He confirmed in cross-examination that the directors of W Pty Ltd were himself and Mr RO although he said the latter had resigned on his return to Australia. He acknowledged Mr RO remained the accountant retained by the trusts. He agreed the husband had managed the affairs of W Pty Ltd from March 2005 and said that, in January 2007, he had gone to the husband’s house and taken the relevant company books into his possession.
The husband’s brother was cross-examined about an email and letter received by him from Mr RO as follows:
MR TREZISE: The question was: did you, in your discussions with [Mr RO], mention to him that your brother [the husband] was having matrimonial problems?---Yes, I did.
Which explains, does it not, the comment which [Mr RO] makes under the heading Trust Restructure?---What comment is that?
He says, if you can read it, “It is proposed that two trusts be formed.” One for [the husband] and one for yourself. Initially you’ll be the appointor and primary beneficiary of both trusts, however on the resolution of [the husband’s] matrimonial problems, you would retire from [the husband’s] trust, handing control over to him?---As I said to you before, that is not correct. [Mr RO] overrun what was talked about and he said, “And we’ll do this, this, this and this.” I set up the trusts. I set up the trusts to protect my mother’s assets for a number of reasons and that was it. And the way the trusts are set up would indicate that I can’t give him back his trust real easy, if you want to call it “his trust”. At the moment he doesn’t have a trust.
…
Could the witness be shown W9C. If you could just cast your eye over that, …?---Yes.
That is, is it not, a letter from [Mr RO] to yourself?---Yes.
Dated 27 April 2004?---Yes.
It’s, if you like, advancing the matter of the establishment of the two trusts?---Yes.
He goes on to say – this is the fourth paragraph – “I would recommend that [W Pty Ltd] is the trustees of the respective blood line trusts”?---Yes.
Is that the first time you had seen or heard the expression “blood line trusts”?---No.
What did that term mean to you?---“Blood line trust” meant that – it meant that you had to either – well, you had to be born of that person or both within that family.
In this case [the Essexes]?---That’s correct. (Transcript, 23 May 2007, pp 271-272) (our emphasis)
Later the husband’s brother was cross-examined about his ability, as appointor or principal of the trusts, to change the trustee of the trusts and appoint the husband as trustee which he conceded he could do. He also agreed that if the husband was an income beneficiary of the S Trust he could distribute income to him, but he asserted the husband was not a beneficiary “at the moment”. Later the husband’s brother expanded his evidence about the husband being named as a beneficiary of the S Trust as follows:
You’re the one that says it’s the trustee?---I’m the trustee, but if you’ll let me expand on - - -
Yes, sure - - -?--- why I say it’s not the correct document. When I went in to see [Mr RO] to set up the trusts he said, “We can set up two trusts,” and he said to me – I said. “I don’t want my brother’s name to appear on the trust. It’s my mother’s wishes that the money is protected and as such, given [the husband’s] situation, I don’t want his name in the trust. My mother has asked me to manage her affairs and her money and it’s inappropriate for me to take part of that money and run. I want her to see that the money is still there,” and we went about setting up the trusts. He had the trust documents drawn up, he sat me down and he said, “Here’s the documents,” and I said, “What is [the husband’s] name doing on this trust?” He said, “Don’t worry about it. You have the sole discretion” – or “the discretion”, as you said – “of making the benefits payable to beneficiaries,” and I said, “Well, I’m not comfortable with this,” and that discussion took place probably obviously at the signing of the document. (Transcript, 23 May 2007, p 274)
A document was tendered before the trial Judge which purported to remove the husband as a beneficiary of the S Trust. When referred to this document and asked to agree he could distribute income to the husband the following exchange occurred:
Again, dealing with [the S Trust], was it your understanding that the trust allowed you to, in your discretion, distribute income to [the husband]?---If he was a beneficiary of the trust, yes.
And you agree he’s named as one?---He’s not at the moment. (our emphasis) (Transcript, 23 May 2007, p 274)
The husband’s brother also gave evidence that he had borrowed funds to a total of $135,000.00 from the N Trust, but said he had not made any withdrawals from the S Trust’s accounts (Transcript, 23 May 2004, p 279).
The following concession was made by the husband’s brother towards the end of his cross-examination:
MR TREZISE: In broad terms … in a perfect world where there are no Family Court proceedings, no marital problems, would it be your desire to share the wealth of these trusts with [the husband]?---Is that a relevant question? That isn’t the case.
Well, no-one has objected so I would seek an answer to it?---Well, of course it would be.
Thank you?---I just qualify, by “a perfect world”, that he wasn’t being attacked by someone else. (Transcript, 23 May 2007, p 280)
Documents tendered during the hearing included documents from the file of Mr RO’s firm including an email from Mr RO to the husband’s brother dated 25 November 2003 (Exhibit W9B), a copy of Minute of Meeting of the Directors of W Pty Ltd dated 28 February 2005 which purported to record the removing of the husband as a beneficiary of the S Trust (Exhibit W9D) and further Minutes of a Meeting dated 30 June 2005 (Exhibit W9E) recording the resolution that income of the trusts be paid to W Pty Ltd. The transcript discloses that the financial statements for the two trusts for year ended 30 June 2005 (Exhibit W9E) were admitted into evidence (Transcript, 23 May 2007, p 279).
We consider it appropriate to set out parts of the exhibits, or to summarise their effect, in order to properly consider the wife’s challenge to his Honour’s rejection of the probability of any benefit flowing to the husband from either trust:
(a)Exhibit W9B - email from Mr RO to the husband’s brother dated 25 November 2003 (which referred to a meeting and discussions the previous day) included the following:
Trust Restructure
It is proposed that two trusts be formed one for [the husband] and one for yourself. Initially you will be the appointer and primary beneficiary of both trusts however on the resolution of [the husband’s] matrimonial problems you would retire from [the husband’s] trust handing control over to him.You would need to update you [sic] will and [the husband’s] possibly hold a power of attorney in relation to his proposed trust.
(b)Exhibit W9C – file copy letter from Mr RO to the husband’s brother dated 27 April 2004 included the following:
Further to my oral advice I advise [C] is happy to assist with the restructure of your mother’s affairs.
As discussed, this would involve changing Directors and the shareholders of [W Pty Ltd] and gifting [the husband’s mother’s] existing loan account to your brother and your trust. There is Tasmanian stamp duty on the gifting of the loan account and we would estimate the stamp duty to be around $1,415.00.
…
I would recommend that [W Pty Ltd] is the trustees of the respective “Bloodline Trusts” and on establishment you amend your Will to allow for appointor changes. I would also recommend you have an Enduring Power of Attorney and Medical Power of Attorney drawn up at the same time. This must be done through a solicitors [sic] office and I would estimate the combined cost of the three (3) documents to be around $500.00.In the case of your brother he would also need to address these issues and give consideration to guardianship for his children, Executors and perhaps a Testamentary Trust.
…(c)Exhibit W9D – Minutes of Meeting of Directors of W Pty Ltd dated 28 February 2005. The Minutes is in the following terms:
…
PRESENT: [The husband’s brother]
[Mr RO]GENERAL
BUSINESS:One of the Primary Beneficiaries of [the S Trust], being [the husband], was excluded by the Trustees from any class of beneficiaries and no sums, whether of income or capital, shall be allocated or set aside or paid to or otherwise applied to or for the benefit of such Beneficiary in accordance with Clause 20.1 of [the S Trust] Deed.
The resignation was hereby accepted by the Trustees effective immediately.
There being no further business the meeting was closed.
…It is necessary to understand the powers and restrictions and the differences between the S Trust and the N trusts to set out in some detail relevant provisions of each trust deed.
(b)The S Trust Deed
The S Trust deed was settled on 18 May 2004. The corporate trustee of the trust named in the schedule to the trust deed is W Pty Ltd. The principal of the trust is the husband’s brother. The primary beneficiaries are W Pty Ltd, the husband’s brother and the husband. The capital beneficiaries are the two children of the marriage, K and B. The default beneficiaries are W Pty Ltd, the husband’s brother and the husband.
Clause 3.8 provides in the case of a beneficiary entitled to income that the income may be paid to one or more of the parent, guardian or spouse of that beneficiary or to that beneficiary for the maintenance, benefit, support and advancement in life of that beneficiary.
Clause 4.1 deals with the termination and vesting of the trust fund and enables the trustee to pay the capital of the trust to one or more of the capital beneficiaries at its absolute discretion, and in the event that a capital beneficiary has not attained the age of 18 years, to that capital beneficiary’s parent or guardian.
Clause 5.1 provides power to the trustee, in its absolute discretion, at any time prior to the vesting date to apply the whole or part of the capital for the benefit of one or more of the capital beneficiaries, and the income for the benefit of all or any of the income beneficiaries “in such proportions or manner as the Trustee shall think fit”.
Clause 5.3 enables the trustee at any time in its absolute discretion to transfer the whole or part of any income to the trustees of any other settlement to which any of the income beneficiaries are or is beneficially entitled whether absolutely, contingently, presumptively or prospectively, or to any other company or corporation in which any one or more of the income beneficiaries are or is beneficially entitled whether absolutely, contingently, presumptively or prospectively to any shares.
Clause 5.4 provides a similar provision to clause 5.3 in relation to the capital of the trust.
Clause 6.1 of the trust deed empowers the trustee from time to time before the vesting of the trust to lend any sum out of the trust fund to any primary or capital beneficiary on the terms set out in clause 6.3 of the trust deed.
Clause 6.3 provides appropriate commercial provisions for the granting of a loan.
Clause 7.1 of the trust deed enables the trustee, either in writing, or orally before a Justice of the Peace (as prescribed in clause 30), to appoint further income beneficiaries as either primary or secondary beneficiaries subject to provisos, including a restriction to the appointment of the settlor or any person as a capital beneficiary.
Clause 13 provides for amendment of the trust deed by the trustee, by deed or pursuant to clause 30 of the trust deed. The trustee may under this clause appoint additional beneficiaries, or remove beneficiaries. The removal of a beneficiary may be for a limited time.
Thus, although the trustee may amend the deed to appoint additional beneficiaries, its power to do so is subject to compliance with and the terms described in clause 7. Although somewhat inconsistent, clause 11(h)(iii) of the deed enables the trustee in its discretion to exercise any power, authority or discretion conferred on the trustee, if a sole corporate trustee “by resolution of such corporation or company, or by resolution of its board of directors or governing body”.
In summary, if the husband had been validly removed as a primary beneficiary entitled to the income of the trust he could be again appointed as such, but could not be appointed a capital beneficiary.
Clause 20 deals with the exclusion of beneficiaries by a beneficiary himself or herself and is in the following terms:
20. EXCLUSION OF BENEFICIARIES
20.1 Exclusion
Any Beneficiary by oral declaration recorded in the Minutes or records of the Trustee or by written notice to the Trustee at any time may exclude himself from any class of Beneficiaries and no further sums whether of Income or of Capital shall be allocated or Set Aside or paid to or otherwise applied to or for the benefit of such Beneficiary provided however that any such notice shall not affect the beneficial entitlement to any amount Set Aside for such Beneficiary prior to the date of such notice. (my emphasis)
(c)The N Trust Deed
As we have earlier recorded, the N Trust is also a discretionary trust, but the trust deed is not identical to the S Trust deed. The date of the Deed of Settlement of the N Trust is 31 May 2004. The husband’s brother is the initial appointor and the trustee is W Pty Ltd. The primary beneficiaries are the husband’s brother and his wife.
Clause 13 defines the beneficiaries of the N Trust, and by virtue of clause 13(d), the husband, as the brother of a primary beneficiary, is defined as a general beneficiary.
Clause 3 deals with the income of the trust and provides that the trustee may pay the income to any one or more of the beneficiaries as the trustee determines on or before 30 June each year. However, if the trustee does not exercise its discretion, the income is to be distributed, if there are more than two primary beneficiaries and if there are less than three primary beneficiaries, to those beneficiaries in equal shares as tenants in common. Sub-clause (d) enables the trustee in its discretion to accumulate income which shall be “retained as part of the Trust Fund”.
Clause 4 deals with the capital of the trust fund and enables the trustee, on the vesting date, or such earlier time as the trustee may determine, to pay the trust capital to any one or more of the beneficiaries as the trustee determines and subject to certain conditions the trustee may, prior to the vesting date, pay part of the trust capital to one or more of the beneficiaries as the trustee determines. Sub-paragraph (b) of the clause provides, if the trustee does not make a determination before the vesting date, the trustee shall distribute the capital of the trust to the primary beneficiaries.
Clause 11 deals with the power to amend the trust deed. The clause enables the trustee, at any time prior to the vesting date, and with the prior written consent of the appointor, to amend, add or delete any provisions of the deed, including the schedule and annexure provided the amendment shall not have the affect of causing the trust fund or income to vest after the vesting date. However, sub-paragraph (d) is in the following terms:
No amendment of, addition to or deletion from this Deed shall be effective if it purports to reduce a present entitlement of Beneficiary [sic] to Income or capital.
Clause 12 of the trust deed enables the trustee to arrange for resettlement of the trust.
Clause 14 sets out the procedure for nominating an additional beneficiary but is subject to the restriction in sub-clause (c) which is in the following terms:
No Person may be nominated to be a Beneficiary under sub-clause (b) without the prior written consent of the Appointor, unless that Person is:
(i)a direct lineal descendant or a parent of a Primary Beneficiary;
(ii)a company in which an individual described in sub-paragraph (i) has either a shareholding interest or a directorship; or
(iii)a trust of which any individual described in sub-paragraph (i) is a beneficiary or potential beneficiary.
Clause 15 enables a beneficiary to declare that he or she no longer wishes to be a beneficiary. Such declaration must be made by deed expressed to be irrevocable by the beneficiary. Sub-paragraph (b) provides:
The Trustee may, with the prior written consent of the Appointor, by deed expressed to be irrevocable, declare that a Beneficiary or a class of Beneficiaries is no longer to be included in the definition of a Primary Beneficiary or a General Beneficiary, as the case may be.
However, a person may be reappointed under clause 14 at any time and their removal does not affect any rights accruing to that person before their removal.
The trial Judge’s discussion and conclusions about the trusts
In paragraphs 86 to 137 of his reasons for judgment, the trial Judge discussed the two trusts and reached a conclusion that the husband did not have a financial resource by reason of being a beneficiary of them.
His Honour commenced his discussion by referring to the conflict between the parties about the characterisation of the two trusts.
His Honour explained, at paragraph 87, that the wife claimed the husband had entitlements to assets and/or income from either one or both trusts, the amount of which was not clear.
His Honour went on to explain that the wife’s counsel had submitted that the assets of the two trusts should be treated in full or part as property in the hands of the husband. His Honour also recorded counsel for the wife’s alternate submission that the assets and income of the trusts, or either of them, were financial resources available to the husband.
His Honour then turned to his examination of the S Trust. He recorded that W Pty Ltd is the corporate trustee of that trust, that the husband’s brother was the director and sole shareholder of W Pty Ltd, as well as the principal of the S Trust with power to appoint and remove trustees.
His Honour went on to record that W Pty Ltd, the husband’s brother and the husband were primary beneficiaries of the S Trust, and then referred to evidence of the husband’s brother that it was not his intention that the husband should be included as a primary beneficiary of the S Trust. His Honour said, at paragraph 92:
…[The husband’s brother] said that he had arranged for the husband to be removed as primary beneficiary, and produced a document prepared by his accountant. I am not sure that such document had the desired effect.
His Honour went on, at paragraph 94, to refer to the capital beneficiaries of the trust – the parties of the children, and recorded similar information to that set out by us above in relation to the powers of the trustee in respect of the capital beneficiaries.
His Honour set out clauses 5.1 and 5.2 of the trust deed dealing with the capital of the S Trust prior to its vesting date. His Honour, correctly in our view, summarised the effect of these provisions of the trust deed in paragraph 98 of his reasons where he said:
In essence the trust deed provides that capital is payable to the capital beneficiaries and, in the absolute discretion of the trustee, the parents of the capital beneficiaries whilst the capital beneficiaries are under the age of eighteen years. [K] attains the age of eighteen years later in 2007. [B] attains the age of eighteen years in June 2013.
His Honour then recorded his determination about the S Trust in paragraph 99 of his reasons as follows:
I find that it is possible but unlikely that the income will be available for distribution to the husband and the wife, but that the trust is primarily set up to provide the capital for the benefit of the parties’ children.
His Honour then referred to the fact that the wife did not seek to join the husband’s brother, W Pty Ltd or the children as parties to the proceedings.
At paragraph 101 his Honour turned his attention to the N Trust and discussed the provisions of that trust deed. He made the finding, again correctly in our view, the husband’s brother has the effective control of the N Trust. His Honour also noted that the husband, the wife and the children fitted within the definition of general beneficiaries under the terms of the deed but noted the pool of general beneficiaries was “quite large”. His Honour went on to explain “[t]here is no evidence that the husband, wife or children have had any benefit from [the N Trust], except as set out in these reasons”.
His Honour then set out his conclusions about the N Trust in the following terms:
…I find that it is unlikely that either party to these proceedings will receive any capital from [the N Trust] and that neither of the parties has any legal or equitable right to the trust’s capital or income… (by reference to clauses 7 and 13(d) of [the N Trust] Deed) [footnote omitted] (paragraph 101)
His Honour then said:
…I find that in the particular circumstances of this case the inclusion of the husband as a general beneficiary in this discretionary trust does not give the husband any interest in the property contained within the trust nor does the trust constitute a financial resource of the husband. (paragraph 101)
His Honour expanded his conclusions at paragraph 102 where he said:
[The N Trust] had all of its assets provided by [the husband’s mother] and/or the estate of [the husband’s late father] or entities controlled by them. There has been no intermingling of funds with those of the parties and I find that the husband has not at any time exercised control over the trust, except in the capacity of an ‘errand boy’ for [the husband’s brother] when he was overseas. Prior to June 2005 [the husband’s brother] went to live overseas with his family and asked the husband to undertake some day-to-day duties with regard to both the trusts. The overall management of the trusts remained with [the husband’s brother]. He returned to Australia in late 2006 and has resumed day-to-day management of the trusts and [W Pty Ltd]. There is no evidence that the husband received any benefits from the trust and there is no evidence that he used any assets in the trust except the airfare referred to later in these reasons.
His Honour then referred to the assets of the two trusts and appropriately qualified his findings as to those assets on the basis that no valuation of either trust was available to him, but on the evidence provided, he inferred that each trust had assets in excess of $700,000.00.
His Honour’s findings at paragraphs 107 to 109 are important and we record them in full:
107.[The husband’s mother] has few assets, almost all of the assets previously owned or controlled by her and her late husband were placed into the two trusts.
108.[The husband’s brother] gave evidence, which I accept, that the primary purpose of creating the trusts was to enable [the husband’s mother] to receive social security benefits in the circumstances of her failing health and her need for assisted care. This was done after consultation by [the husband’s brother] with Centrelink.
109.There was a document produced by the trust accountant which said that the primary intent was to enable [the husband’s mother] to obtain a pension and the other intent was to ensure the wife did not receive any benefit from her estate. This later intent was not accepted by [the husband’s brother], who gave evidence that the accountant did not have such instruction, I accept his evidence in that respect. However, even if it was the case, [the husband’s mother] is entitled to disperse her estate as she thinks fit. If [the husband’s mother] wishes to ensure that the wife receives none of her estate [the husband’s mother] is entitled to do so. [footnote omitted]
At paragraph 115 his Honour referred to a “file note” of Mr RO and set out an extract of the file note. The “file note” which was an email to the husband’s brother became Exhibit W9B and is set out by us earlier in these reasons.
As was commented during the course of the proceedings, and by his Honour Benjamin J, it was the submission on behalf of the wife that a failure to call Mr RO, the accountant, ought to have been regarded by his Honour as falling within the scope of the rule in Jones v Dunkel ((1959) 101 CLR 298) and that the trial judge should have inferred that Mr RO would not have given evidence favourable to, or perhaps supportive of, the position adopted by the husband.
I do not accept that the Rule in Jones v Dunkel has application in this matter about this point. To some extent exhibit #W9D speaks for itself in that it purports to record the removal of the husband as a beneficiary from the S Trust. Whether it accurately records what happened is another matter altogether to which I will return. Moreover, the evidence of the trustee and principal the husband’s brother was to the effect that it was a mistake that he was ever incorporated into the classes of beneficiaries in the first place. The wife, of course, was unable to give any contradictory evidence and although the husband’s brother was questioned about these matters he was not seriously challenged as to the alternative proposition namely that the process whereby the husband was removed as a beneficiary was in effect a sham or a deceit. His Honour the learned trial judge correctly identified that the minute of the trustee company appeared not accurately to record what had happened. The minute is short and I quote it in full.
DATE:
28 February 2005
PRESENT:[The husband’s brother]
[Mr RO]
GENERAL BUSINESS:One of the Primary Beneficiaries of [the S Trust], being [the husband], was excluded by the Trustees from any class of beneficiaries and no sums, whether of income or capital, shall be allocated or set aside or paid to or otherwise applied to or for the benefit of such Beneficiary in accordance with Clause 20.1 of [the S Trust] Deed.
The resignation was hereby accepted by the Trustees effective immediately.
There being no further business the meeting was closed.
The reference to clause 20.1 of the trust deed was misconceived. That clause reads as follows:
20.1 Exclusion
Any Beneficiary by oral declaration recorded in the Minutes or records of the Trustee or by written notice to the Trustee at any time may exclude himself from any class of Beneficiaries and no further sums whether of Income or of Capital shall be allocated or Set Aside or paid to or otherwise applied to or for the benefit of such Beneficiary provided however that any such notice shall not affect the beneficial entitlement to any amount Set Aside for such Beneficiary prior to the date of such notice.
It seems clear that this clause was intended to deal with a situation where a beneficiary sought to exclude himself or herself from the operations of the deed. It is common ground and not suggested by anyone that any written notice was given at any time by the husband to the trustee or to any other relevant person that he wished or would exclude himself from any class of beneficiaries. The only other condition upon which this particular clause could operate was if he had made an oral declaration which was then recorded in the minutes or records of the trustee that he was excluding himself from any class of beneficiaries.
As quoted above, the minute records that the husband was “excluded by the trustees from any class of beneficiaries…” and consistent with the evidence of the husband’s brother in his cross-examination (as referred to above) this is almost certainly what occurred. It was not the case that the husband sought to exclude himself which would have invoked the provisions of clause 20.1 but rather that he was to be excluded by the trustee.
Almost certainly if the husband’s brother’s evidence is to be accepted (and there is no contradiction put to him or indeed called in contradictory evidence if it was a mistake for the inclusion of the husband as a beneficiary in the trust deed) then the correct course for the trustee to have undertaken was to have executed a deed of rectification or more drastically and inappropriately if the issue ever became a matter of doubt to have sought an order for rectification from the Supreme Court of Tasmania in its equitable jurisdiction.
However, under the terms of clause 13.1 of the trust deed, the trustee was given power to vary or delete any of the trusts the subject of the deed. The clause reads as follows:
13.1 By Trustee
Subject to clause 13.2, the Trustee may by deed or in the manner prescribed in clause 30 revoke, add to, release, delete or vary all or any of the trusts or powers or any trusts or powers declared by any revocation, addition, release, deletion or variation made to this Deed from time to time and may by the same or any other deed declare any new or other trusts or powers concerning the Trust Fund or any part or parts of it provided that no such revocation, addition, release, deletion or variation shall be valid if it would have the effect of infringing the law against perpetuities.
Clause 13.2, which is referred to above, simply means that the principal cannot be removed or have his powers or discretions reduced or revoked without the consent of the principal.
Hence, it seems to me that the trustee, in this case W Pty Ltd operating through its sole director the husband’s brother, may have by deed achieved the removal of the husband as a beneficiary. It is clear that this did not occur. In terms of clause 13.1 therefore the way in which the same result may have been achieved was by reference to clause 30. Clause 30, however, does not necessarily provide a total solution to the problem. Clause 30 appears under a general heading of “Oral Declarations” and clause 30.1 reads as follows:
30.1 Powers or Discretions
Notwithstanding any provisions to the contrary in this Deed, any power or discretion vested in the Trustee, Settlor, Principal or any other Person under this Deed may at the discretion of the person exercising that power be exercised by that Person or, where the power or discretion is vested in a company, by any director of that company, making an oral declaration in the presence of a Justice of the Peace or Solicitor of the manner in which the Person is exercising the power or discretion and, where the oral declaration by a resolution of the directors of the company, that he has been authorised to make the declaration by a resolution of the directions of the company. A statutory declaration sworn by the Justice of the Peace or Solicitor in whose presence the power or discretion is exercised declaring that the Person purporting to have such power or discretion has exercised that power or discretion by oral declaration in his presence and setting out the terms of that oral declaration shall be conclusive evidence of the valid and effectual exercise of that power or discretion (emphasis added to the word ‘may’ above).
Given the positioning of this clause in the trust deed and its removal by a number of other clauses from clause 13.1 referred to above it may be that the purpose of the drafters was to provide some form of evidentiary provision to overcome an informal or unrecorded exercise of a discretion. If it had been intended that the combined effect of clause 13.1 and clause 30.1 was to prescribe only two ways by which the trusts might be varied then it would have been logical for the word ‘will’ to have been substituted for the word ‘may’ (as emphasised above). The use of the permissive ‘may’ would suggest that this was a further way in which the discretion or power might be exercised without its necessarily being the only alternative to the deed referred to in clause 13.1. What clause 30.1 undoubtedly provided was a mechanism for proving that which had been done orally. It seems to me, however, that it does not preclude the proposition that if satisfactorily otherwise proved, the exercise of a power or discretion might nevertheless be effective to alter the trust deed.
Although a deed of rectification may have been sensible or a deed in any event whether entitled “of rectification” or otherwise would have been wise, and whether or not the procedure for conclusively proving that an oral variation of the trusts had occurred in this matter, there is no evidence to dispute the proposition contended for by the husband’s brother that there had been a variation in the trusts designed and effective, to remove the husband as a beneficiary. To some extent the minute of 28 February 2005 (Exhibit #W9D) is corroborative of this process because it refers to the fact that the husband was ‘excluded by the trustees’.
If my interpretation of the deed is correct then as and from 28 February 2005 and certainly at the date of the proceedings before his Honour the learned trial judge the husband was not a beneficiary of the S Trust except perhaps indirectly as the brother of a primary beneficiary and hence as a secondary beneficiary. However, if he has, as the minute suggests, been removed as a beneficiary then he would have been removed implicitly from that category of beneficiary as well. This means that, in my opinion, there is no basis upon which it could be said that the husband could have had an interest in the S Trust such as to constitute a financial resource after 28 February 2005.
what if the husband were appointed trustee?
However, nothing is ever quite as simple as that. In this matter, it is common ground and was conceded by the husband’s brother that he could in his capacity as director of the trustee company have resigned as trustee and appointed the husband or some other person presumably as his nominee as the trustee of the S Trust. There seems little doubt that such a power exists – see for example clause 14.3 (trustee may resign) and clause 14.2 provides that the principal may remove a person from being a trustee and appoint any person other than a secondary beneficiary to be a trustee either alone or together with any continuing trustee jointly or severally. If my interpretation set out above is correct and that the husband has been removed as a secondary beneficiary (as brother of a primary beneficiary) then he could be appointed as a trustee pursuant to clause 14.2 by the principal being the husband’s brother. If, however, my interpretation of the removal provisions is incorrect and the husband remains as secondary beneficiary as undoubtedly was the case in the original form of the deed, then he could not be appointed as a trustee.
Assuming for a moment that he is not a secondary beneficiary and hence capable of being appointed as a trustee, would such an appointment thereby permit a finding that there was a financial resource for the husband in the S Trust? Applying the reasoning referred to above about clause 13.1 it seems that the trustee might vary the trust to again include the husband as a beneficiary.
Clause 7.1 which enables the appointment of additional beneficiaries precludes the appointment of any further capital beneficiaries and would permit only the appointment of a primary beneficiary or a secondary beneficiary. Whether or not the husband remained as the secondary beneficiary as I have suggested above may be moot but if it were it would preclude him from being appointed as a primary beneficiary.
In this elaborate scenario, therefore, if the trustee resigned and if the principal were to appoint the husband as trustee and if the trustee were then to appoint himself or his nominee as a primary or secondary beneficiary it would be open in such circumstances for the husband to exercise his discretion as trustee in favour of himself (or perhaps his nominee) to distribute income from the trust to him. In such circumstances, it would be the case that this could then represent a financial resource in his hands. It was suggested in the course of cross-examination of both brothers that this was in fact the intention and that once the dust on the matrimonial settlement had settled the trust would be handed over as a ‘blood-line’ trust to the husband who would then have the benefit for it.
To the extent that the processes referred to above were to occur in the form that has been set out then it could conceivably occur that the S Trust could become a financial resource for the husband.
The crucial word in the last sentence however is the word ‘could’. There is no suggestion from the evidence of either of the brothers that this was the necessary and inevitable consequence of either the effluxion of time or the completion of the proceedings before this Court. As such it could only be said that his access to trust funds in the circumstances set out above might become a financial resource but at present his Honour the learned trial judge was correct in determining that it was not a financial resource.
Finally, what of the potential for the husband to have access to funds that might have otherwise be paid either to or for or on behalf of his children? The deed provides in common with most other discretionary deeds that if capital or income might be advanced to a child under the legal age (18) the money may be paid to a parent of the child and that the trustee would not thereafter be called upon to verify that the money had been applied for the purpose for which it was intended.
It might, therefore, be argued in this matter that it would be possible for either the capital of the trust or income to be paid to the husband in effect on behalf of K and B and that he might then apply them for his own purposes. If he applied them for the purposes of the children then it could hardly be validly said to have been a financial resource in his hands. If he were to apply such funds for his own purposes he would do so in breach of a subsidiary trust created by the distribution to him on behalf of the children. No evidence was given, nor could it have been for that matter, that this was the husband’s intention and in default of there being any evidence to even raise an inference that he would behave improperly it is reasonable to assume that all things will be done as they should be and that he would comply with the terms of the trust and apply the money for or on behalf of the children. Accordingly, in such circumstances such a distribution to him, if it were to occur, would not constitute a financial resource in his hands in any proper sense of the word.
It might be argued perhaps that by making application of such funds on behalf of the children he would be relieved from some financial obligation on his own behalf and hence would benefit indirectly. I am now referring to the very fringes of what constitutes a financial resource and such a contention might be rejected out of hand for that reason alone as no weight worthy of consideration. However, it is possible in relation to B, but not in relation to K who is now sui juris, that the application of funds on her behalf would relieve him in some way from an obligation to pay for her financial support. It is feasible that such an application of funds might have that effect but his obligation to support the children arises under the Child Support Assessment Act 1989 (Cth). It is feasible under the terms of that Act for his child support assessment to be varied to take account of any money that might have been derived by a child from his or her own resources, or in this case from a trust in his or her favour. There is no evidence that the husband has any intention of applying to reduce his obligation to pay child support as a consequence of any such advance made through him on behalf of B. If it were the case that he should do so, it is possible that he would thereby derive a benefit to the extent that part of his income would not be applied in a way that it would otherwise be obliged to be applied. Again, if this constitutes a financial resource it is so attenuated as to be unworthy of any weight.
The N Trust
The N Trust, it is common ground, was set up for the benefit of the husband’s brother and his wife and those who might derive some benefit through either or both of them. It appears, although I am not sure there is any direct evidence of the point, that they have no children. Under the terms of this trust deed which was clearly drafted by a different person from the S Trust the primary beneficiaries are the finders the husband’s brother and his wife. The processes referred to in the S Trust are primary and secondary beneficiaries are not pursued in this deed but in clause 34 of the deed (definitions) beneficiary is defined as:
…has the meaning given in clause 13 of this Deed
Clause 13 of the deed provides as follows:
13 Beneficiaries
(a) This clause explains who are the Beneficiaries of the Trust.
(b)In this Deed the word “Beneficiary” means either a Primary Beneficiary or a General Beneficiary and the phrase “a class of Beneficiaries” and any similar phrase shall have a corresponding meaning.
(c)In this Deed the phrase “Primary Beneficiaries” means the persons described as the Primary Beneficiaries in the Schedule and any additional Primary Beneficiaries nominated under clause 14 of this Deed.
(d)In this Deed the phrase “General Beneficiaries” means the Primary Beneficiaries; the parents, brothers, sisters, spouses, widows, widowers, grandparents and any descendant of the Primary Beneficiaries and the spouses, widows, widowers, or any descendant of such brothers, sisters, spouses, grandparents and descendants; any educational body which a Beneficiary attends or has attended; any company in which a Beneficiary has a shareholding interest or a directorship; any other trust under which a Beneficiary is a beneficiary;
The remaining clauses of 13 are not relevant for these purposes. It therefore appears that the beneficiaries under the N Trust would include the husband as a brother of a primary beneficiary. It would appear that the wife is no longer a spouse of the husband and accordingly, would not fall within the definition set out above.
In such circumstances can it properly be said that there is a financial resource available to the husband under the N Trust? There is no suggestion that he has been removed as a beneficiary of the N Trust, but equally it is not suggested that his brother is likely to provide any benefit to him. It was not suggested to his brother that he would and not suggested to his brother that he had, except in the very limited circumstances dealt with in part in cross‑examination whereby an airfare was provided to enable the husband to attend his father’s funeral. Moreover, the terms of the cross-examination of the husband’s brother reveal quite clearly that it is improbable that he would exercise a discretion (as would obviously be required) to make such a provision for his brother.
There is no way that the husband can compel the exercise of such discretion and while he may retain a residual power to seek an order from an appropriate court if he wanted to do so for a proper administration of the trust it would seem that such a remedy would in its terms be somewhat empty. It is not necessary under the terms of the deed and in fact not reasonably within contemplation that any beneficiary might claim a share of the estate except in circumstances of default which are not relevant. This means that it would be enough even if the trustee were to be obliged to give consideration to a distribution in favour of the husband that such consideration be given and rejected. There would be no recourse by the husband against such a determination.
Again, this may, in the circumstances, constitute perhaps, in its most attenuated form, a financial resource but to the extent that it does constitute a financial resource, its weight is of no substance.
Conclusion
Accordingly his Honour’s determination that there was no relevant financial resource to the husband under either of the trusts is in my opinion appropriate and valid and accordingly this particular additional ground of appeal should be dismissed.
As I mentioned above, I also express doubts about the way in which his Honour approached the question of spousal maintenance. However, given the way in which their Honours the Chief Justice and Justice Boland have approached their judgment, this is a moot consideration and it is unnecessary for me to determine this issue.
I certify that the preceding two hundred and thirty-eight (238) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.
Associate:
Date: 22 December 2009
9
5
3