Frederic & Brisset
[2023] FedCFamC2F 1291
•10 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Frederic & Brisset [2023] FedCFamC2F 1291
File number(s): LNC 600 of 2022 Judgment of: JUDGE TURNBULL Date of judgment: 10 October 2023 Catchwords: FAMILY LAW – PROPERTY – JOINDER – SUMMARY DISMISSAL - application to join an individual and a corporate trustee of a discretionary trust to the proceedings – cross application to summarily dismiss the Husband’s application made pursuant to s106B – where there were dispositions made to remove the Wife as a beneficiary of a discretionary trust that the Husband seeks to set aside - consideration as to whether the Wife had equitable rights to ‘consideration and due administration’ that were brought to an end when she was removed as a beneficiary of the Trust – whether the Husband’s application has no prospect of success – whether the individual and the corporate trustee are necessary parties. Legislation: Family Law Act 1975 (Cth) ss 45A(1), 79(10)(b), s106B
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 Part 10(3), rr 3.01, 10.09.
Cases cited: Barrett & Winnie [2022] FedCFamC1A 99
Curtain & Curtain [2022] FedCFamC1A 134
Gormley & Gormley [2023] FedCFamC1F 296
Hall v Hall [2016] HCA 23
Jordan & Sutton (No2) [2022] FedCFamC1F 850
Kerr & Christie [2021] FedCFamC1F 313
Riemann & Riemann and Ors (No 3) [2017] FamCA 911
Spry v Kennon [2008] HCA 56
Stanford & Stanford (2012) 247 CLR 108
Wheeler & Loggins [2023] FedCFamC1F 66
Division: Division 2 Family Law Number of paragraphs: 52 Date of last submission/s: 2 October 2023 Date of hearing: 2 October 2023 Place: Launceston Counsel for the Applicant: Mr McKenna Solicitors for the Applicant McGrath & Co Counsel for the Respondent: Ms Dean Solicitors for the Respondent: McVeity Dean Counsel for the proposed Joinder Mr Trezise Solicitors for the proposed Joinder Dobson Mitchell Allport ORDERS
LNC 600 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR FREDERIC
Applicant
AND: MS BRISSET
Respondent
ORDER MADE BY:
JUDGE TURNBULL
DATE OF ORDER:
10 OCTOBER 2023
THE COURT ORDERS THAT:
1.Mr C — in his capacity as sole director and shareholder of D Pty Ltd and D Pty Ltd ATF Brisset Family Trust, be joined as parties to proceedings number LNC600 of 2022 as the Second and Third Respondent’s respectively.
2.The Husband’s Application in a Proceeding filed 23 May 2023, the First Respondent’s Wife’s Response filed 22 June 2023 and the Second and Third Respondents Response filed 13 September 2023, be otherwise dismissed.
3.Noting that paragraphs 2 and 3 of the Husband’s Application in a Proceeding filed 23 May 2023 have not been litigated nor determined, the Husband has leave to file an application seeking orders in the nature of paragraphs 2 and 3, if such an application becomes necessary.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE TURNBULL
Overview
The Applicant de-facto husband, Mr Frederic (‘the Husband’), seeks to join:
·Mr C (‘Mr C’) — in his capacity as sole director and shareholder of D Pty Ltd; and
·D Pty Ltd (‘the corporate trustee’) ATF Brisset Family Trust (‘the Trust’),[1]
to property proceedings[2] filed against the Respondent de-facto wife, Ms Brisset (‘the Wife’).
[1] The Husband’s Application in a Proceeding filed 23 May 2023 seeks slightly differently constructed orders to those set out in his summary of argument [1] including joining ‘Any other persons or entities to obtain disclosure relevant to the current proceedings…’ - which was not pressed at the time of the hearing.
[2] Frederic & Brisset (Federal Circuit and Family Court of Australia, LNC600/2022) commenced 14 September 2022.
Originally, the Wife did not oppose the application to join,[3] but changed her position by the time of the hearing.
[3] Response of Ms Brisset, filed 22 June 2023.
Mr C filed a Response[4] opposing the application and countered with his own application to summarily dismiss s106B orders sought by the Husband in his Amended Initiating Application.[5] One might ask whether Mr C has standing to bring such an application when he is not a party to the proceedings? The Wife, however, supports the application — in essence becoming a joint applicant for the summary dismissal — which allows me to deal with it first in time.[6]
[4] Response of Mr C, filed 18 September 2023.
[5] Amended Initiating Application, filed 29 August 2023 [1] – [3].
[6] See paragraph 22 of these Reasons.
Background and Chronology
The Husband was born in 1970, currently 52 years of age, and runs his own business which trades as E Company, in Town F, Tasmania.[7]
[7] Affidavit of Mr Frederic, filed 16 September 2022 (‘Husband’s affidavit’).
The Wife was born in 1975, currently 48 years of age and is self-employed.
The parties were in a de-facto relationship for at least 21 years, commencing their relationship in 1997 or 2000 and separating in May or December 2021.[8] There are no children of the relationship, with the Husband having one child from a previous relationship (presumably now an adult given the length of the relationship).[9]
[8] The parties hold different views as to the commencement and end of their relationship – the wife claims it commenced in 2000 and ended in May 2021.
[9] Affidavit of Ms Brisset, filed 25 October 2022 (‘Wife’s affidavit’).
In 1985 the Wife’s late father — Mr G — settled the Trust[10] and later that year the Trustee changed its name to H Company.[11] The Trust owned buildings from which a business — J Pty Ltd — operated.
[10] Court book of Mr Frederic, filed 25 September 2023 [31] - [32] (‘Applicant’s Court Book’).
[11] Ibid [37].
In 2011, Mr G changed the shareholding of H Company — transferring one of three shares to the Wife and the remaining shares to her brother, Mr C.[12]
[12] Husband’s affidavit (n7).
In 2015 the Wife, joining Mr C and her parents, was appointed as a director of H Company.
In 2015, the Wife’s parents gifted shares in J Pty Ltd to her and Mr C. At that time her share was valued at $3,164,740.[13] The Wife’s share was received by the Brisset Family Trust. The trustee of Brisset Family Trust is K Pty Ltd — of which the Wife is the sole director and shareholder.[14]
[13] Ibid.
[14] Wife’s affidavit (n9) [13].
In 2018 the Wife’s Father died and in 2019 J Pty Ltd was sold, with the Wife receiving $9,984,025 for her share.
In mid-2020 the Wife and Mr C, in their capacity as directors of H Company — the corporate trustee of Brisset Family Trust — resolved to distribute all capital and income from the Brisset Family Trust to L Pty Ltd — an entity owned and controlled by Mr C[15]— and appoint L Pty Ltd as an eligible General Beneficiary of the Trust.
[15] Mr C Summary of Argument [7]. Husband’s Summary of Argument: Distribution of 100% franked income, 100% capital and 100% remaining net income to L Pty Ltd.
In early 2021 the Wife transferred her share in H Company to Mr C and ceased as Director of that company, resulting in Mr C becoming the sole director and shareholder of H Company.
In the Wife’s case, the parties separated in late May 2021.[16]
[16] Wife’s affidavit (n9) [4].
On 22 September 2022 the Husband initiated property proceedings in this court.
On 9 December 2022 Mr C changed the name of the corporate trustee from H Company to D Pty Ltd.
On 16 June 2023 the corporate trustee executed a Deed of Variation and Resignation which declared the Wife as an ‘excluded class’, thus removing her as a beneficiary of the Trust.[17]
[17] Applicant’s Court Book (n10) [38] – [41].
On 29 August 2023, the Husband amended his initiating application seeking ‘at least 40% of the net property on a two-pool basis and the balance to be retained by the Respondent’.[18] He also sought orders pursuant to s 106B:
[18] Amended Initiating Application (n5) [4].
1.Pursuant to the provisions of section 106B of the Family Law Act 1975 (Cth) (the Act) the instrument entitled Deed of Variation and Resignation [Brisset] Family Trust dated 16 June 2023 and executed as a Deed by [Mr C] in his capacity as sole director/secretary of [D] Propriety Limited (Deed of Variation) and the dispositions made by it as follows be set aside:
a.The declaration in accordance with the second proviso of clause 1(7) of the Trust Deed declaring [Ms Brisset] as a member of the excluded class of the Trust;
b.The declaration in accordance with the second proviso of clause 1(8) of the Trust Deed declaring [Ms Brisset] excluded from the class of General Beneficiaries of the Trust;
NOTING but for the declarations [Ms Brisset] would be within the definition of General Beneficiaries and Specified Beneficiary by virtue of being a child of [Mr G] and [Ms M].
c.The Consent of Appointer at clauses 4 (b) and (c) of the Deed of Variation made in accordance with clause 10 of the Trustee Deed
2.Pursuant to the provisions of section 106B of the Act the disposition of one (1) share by [Ms Brisset] in [H Company] now known as [D] Proprietary Limited to [Mr C] on or about 30 March 2021 be set aside.
3.Subject to the Court making an Order in terms of paragraph 1 and/or 2 of these Orders, [Mr C] in his capacity as sole director/secretary of [D] Proprietary Limited do all things necessary including, but not limited to, signing all documents and provide all consents necessary to give effect to paragraph 1 and/or 2 of these Orders.
Documents relied upon
The Husband relied upon:
·Amended Initiating Application filed 29 August 2023;
·Application in a Proceeding filed 23 May 2023;
·Affidavits of Mr Frederic filed 22 May 2023 and 29 August 2023;
·Court book containing Brisset Trust Deed and 2x Amending Deeds;
·Affidavits of Ms Brisset filed 22 June 2023 and 12 September 2023;
·Affidavit of Mr C, filed 18 September 2023; and
·A summary of argument.
Mr C and the Wife relied upon:
·Mr C’s Response to the Application in a Proceeding filed 18 September 2023;
·Affidavit of Mr C filed 18 September 2023;
·Affidavits of Ms Brisset, filed 12 September 2023;
·Affidavit of Mr Frederic filed 29 August 2023; and
·A summary of argument for Mr C.
The hearing was conducted on the papers with Mr McKenna making submissions for the Husband and Mr Trezise for Mr C. Ms Dean — representing the Wife — adopted the submissions of Mr Trezise.
It would be futile to make an order to join the parties as sought if Mr C’s and the Wife’s application for summary dismissal is going to succeed.[19] I will therefore deal with that application first.
[19] In Riemann & Riemann and Ors (No. 3) [2017] FamCA 911 at [37], McClelland J (as he then was) cited with approval the judgment of Le Miere J in Hancock Family Memorial Foundation Ltd v Fieldhouse (No 3) [2010] WASC 223 where Le Miere J observed as follows: [27] The applicant on a joinder application must show that there is an arguable case sufficient to resist the entry of summary judgment by the parties sought to be joined: Universal Music Australia Pty Ltd v Cooper [2004] FCA 78 [6] (Tamberlin J). The test is that stated by Barwick CJ at 128 - 129 in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125: Universal Music Australia Pty Ltd v Cooper [7] (Tamberlin J); Review Australia Pty Ltd v Red Berry Enterprises Pty Ltd [2003] FCA 1009 [5] (Heerey J). It would be futile to order that a person be joined as a defendant if the material before the court disclosed that if the person, having been joined as a defendant, applied for summary judgment the application would succeed.
The application to summarily dismiss the Husband’s applications made pursuant to s106B.
Mr Trezise submitted that there was insufficient evidence before the court to establish that the various dispositions — the Wife’s transfer of her share in H Company to Mr C (‘the first disposition’) and the declarations made in the Deed of Variation to remove the Wife as a beneficiary of the Trust (‘the second dispositions’)[20] — were made to ‘defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order’.[21] (emphasis added)
[20] In his application the Husband refers to two declarations that led to the Wife being removed as a general and specific beneficiary of the Trust.
[21] Family Law Act 1975 (Cth) s 106B(1) states – ‘In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.’
Mr Trezise submitted that the evidence establishes that more than a year prior to separation, the Wife and Mr C resolved to distribute all capital and income from the Brisset Family Trust to L Pty Ltd, following the sale of J Pty Ltd in 2019. The Wife was at that time effectively ‘paid out’ of the entities and no further monies were paid to her after 2019.[22]
[22] Mr C’s Summary of Argument (n15) [7] & [8].
In accordance with that resolution, and again prior to separation, the Wife transferred her share in H Company to Mr C and resigned as a director of that company. The Wife nor her brother have any expectation that she will further benefit from the Trust. The Wife states:
7.The last sentence of this paragraph is not true. I had told [Mr Frederic] numerous times after I became a director that I was never going to stay in the [Brisset Family Trust]. Everything was done by [Mr C]. It was always discussed between [Mr C] and myself that I would be removed from the [Brisset Family Trust] in time. I actually thought I already had been removed and was surprised to learn that I was still classed as a beneficiary when a copy of the [Brisset Family Trust] deed was given to my solicitor in late May 2023.
8.I had been in numerous meetings over the years with my father, brother and at time the accountant on this matter where it was made clear to me that I had no interest to stay in or be a beneficiary of the [Brisset Family Trust]. I always knew it was not mine and was [Mr C]’s. I did nothing to manage or run the [Brisset Family Trust].
9.Several months before my brother initiated the sale of [J Pty Ltd], so sometime in 2016, I had yet another meeting with my brother and my father in the office at [J Pty Ltd] in [City N]. [Mr C] explained his plan for selling the business and we agreed yet again that it would involve me being removed from the [Brisset Family Trust] and [Mr C] keeping the [Brisset Family Trust] so that he could continue his own property development business.
…
14.I was aware of [Mr C]’s intentions to remove me completely from the [Brisset Family Trust]. I have been aware of this since soon after I became a director and shareholder of [H Company]. actually thought [Mr C] had already done that in 2018/2019 when [J Pty Ltd] sold and resigned as a director of the [Brisset Family Trust] trustee company.
15.I disagree that I am disadvantaged by the variation. As I see it I had no entitlement or expectation to anything more of the [Brisset Family Trust]. I had received "my share" which far exceeded what little I had done towards my family business and for that I am very satisfied.
16.I did not receive any distributions directly from the [Brisset Family Trust]. The only payment I have received was for the payout of the loan balance in the [Brisset Family Trust].
Mr Trezise submitted in his summary:
17.To borrow from the Full Court in ANZ v Harper, the evidence here is, with respect, less than ‘skimpy’. A close examination of the Applicant’s affidavit will see it confined to the expression of a ‘firm belief’ (paragraph [12]) and an expression of ‘suspicion’ (paragraph [30]). This is not even evidence. It seems to be no more than an appeal to the optics of a transaction which did no more than document the previous and the future foreseeable reality. The Applicant’s conjecture, speculation and supposition of no probative value whatsoever.
Mr McKenna countered that the dispositions were or are likely to defeat an anticipated order of this court — that is, that the Husband receive ‘at least 40% of the net property…’. He submitted in his summary:
54.Immediately prior to the Parties’ separation, [Ms Brisset] held a controlling role as a co-director and shareholder of the Corporate Trustee of the Trust.
55.In addition to her role with the Corporate Trustee, [Ms Brisset] was a General and Specific Beneficiary of the Trust.
56.After [Mr Frederic] raised his concerns about [Ms Brisset] and the Trust, the 16 June 2023 Deed was executed and declared [Ms Brisset] as a member of the “excluded class”.
57.The 16 June 2023 Deed and Declaration single [Ms Brisset] out.
58.[Mr C] specifically admits in his affidavit that [Ms Brisset] was singled out “ … due to [Mr Frederic] asserting” in these proceedings “that [Ms Brisset] had an interest in the [Trust].”
59.[Mr Frederic]’s assertion was correct. It was open to him to make it. The terms of the Trust Deed support him making that assertion.
60.At the very least, the Trust represented an important financial resource to [Ms Brisset]. The Trust Deed is clear in its intention and is supported by broad ranging powers vested in the Trustee who holds the Trust fund and property for its beneficial owners, the General and Specific Beneficiaries.
61.Where she once was a beneficiary, [Ms Brisset] is now excluded. Where she once had important equitable rights, she is now powerless. We submit it is open from the Court to conclude the sole reason for her exclusion is these proceedings.
62.We submit the circumstances at or about the time of separation and later giving rise to [Ms Brisset]’s exclusion as a General and Specific Beneficiary enlivens s106B FLA and brings that provision squarely into focus at the final hearing of the Parties’ competing property settlement applications.
In relation to the contention that the wife was ‘paid out’ upon the sale of J Pty Ltd, Mr McKenna submitted:
50.Neither [Mr C] nor [Ms Brisset] have sought to explain the exact terms of their agreement. At best we submit it is ambiguous. For example, it is not clear why the expiry of two years from the [J Pty Ltd] share sale is of relevance to the payment to [Ms Brisset] by the Trust that coincided with her cessation of involvement in the Corporate Trustee.
Mr McKenna also queried why the Wife did not receive distributions from the Trust after the 2019 financial year, suggesting that the timing coincided with the Wife’s position as to the actual date of separation:
51.1. The Parties evidence demonstrates:
a.Distributions of taxable income to beneficiaries are reported on their tax return in the financial year the trustee resolves that a distribution is made.
b.The amounts are not reported on the beneficiary’s tax return when they actually received the money.
51.2. As to [Mr C]’s comments at [10] of his affidavit generally:
a.No explanation is provided as to why [Ms Brisset]’s assistance with tax minimisation was no longer needed in and after 2020.
b.If it was always [Mr C]’s intention to pay her the distributions, then how can her role be said to be “for legitimate tax minimisation”?
c.The 2020 income tax returns would have been due for lodgement in May 2021. This coincides with when [Ms Brisset] says the Parties’ separated.
d.If [Ms Brisset]’s role in the earlier years was purely to be a tax minimiser, no explanation is provided as to how the tax on those amounts get paid in those years when there were not monetary distributions to her. The terms of the Trust do, however allow for distributions to be made to her to pay tax subject to her not being part of the excluded class.
e.[Mr C] specifically refers to payments made “directly” to [Ms Brisset] and says no payments were made directly to her from 2020. It is not clear if [Mr C] intends to convey that indirect payments have been made. Such payments would be those to [Ms Brisset]’s related entities and that not reportable in her own personal tax returns.
52.It is submitted [Ms Brisset]’s tax returns would not show cash distributions made to her where such payments are not taxable income of the trust and, therefore, not taxable income in [Ms Brisset]’s hands, as a taxpayer. Such distributions could conceivably include:
a. Trust corpus.
b. Asset revaluation reserves.
c. Realised gain reserves.
d.Tax free capital gains (from the sale of assets acquired prior to September 1985).
e.Capital gain discounts (the 50% of a capital gain which is not taxable if the asset has been held for longer than twelve months).
During oral submissions, Mr McKenna submitted that the Wife’s removal as a beneficiary of the Trust deprived her of her right to compel the trustee to consider whether to make a distribution to her as well as a right to the proper administration of the Trust.[23] These rights could be considered as property of the parties even though it may difficult to put a value on either — though a valuation might not be beyond the actuarial arts in relation to the right to due consideration.[24] Consequently, the net property pool, of which the Husband seeks ‘at least 40%’, cannot be properly determined, thus preventing the court from undertaking its essential task of identifying the parties legal and equitable interests in property.[25] The Trust, it was contended, owns properties valued in the tens of millions.[26] The Wife received distribution from the Trust in the 2016-2019 years amounting to $1,532,636.[27] Consequently, the value of the Wife’s equitable rights (now lost) were likely significant.
[23] Spry v Kennon [2008] HCA 56, 74.
[24] Ibid 78.
[25] Stanford & Stanford (2012) 247 CLR 108.
[26] The figure of $22.5 million in real estate was referred to during oral submissions and I note the Husbands affidavit of 16 sept 22 [31] which referred to the sale of J Pty Ltd producing $36,000,000.
[27] Affidavit of Mr C, filed 18 September 2023 [10] (‘Mr C’s affidavit’).
To this last contention, Mr Trezise submitted that the Husband’s realistic expectations could be met from the existing identified property of the parties,[28] which the Husband claims to be worth 9.5 million.[29] As such, there is no need to try and bring in ‘property’ to which the Wife has no entitlement or, taking the Husband’s case at its highest, gives the Wife no more than a collection of rights that are not capable of being valued and will not provide her with any benefit. The dispositions were therefore unlikely to defeat an anticipated order.
[28] Mr C Summary of Argument (n15) [23].
[29] Husband’s affidavit (n7) [71].
Summary Dismissal –The Law
Section 45A(1) of the Family Law Act 1975 (Cth) (“the Act”) provides for the following in respect of summary decrees:-
(1)The court may make a decree for one party against another in relation to the whole or any part of the proceedings if:
(a)the first party is prosecuting the proceedings or that part of the proceedings; and
(b) the court is satisfied that the other party has no reasonable prospect of successfully defending the proceedings or that part of the proceedings.
Part 10(3) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”) and in particular, r 10.09 provides:
(1)A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:
(a) the court has no jurisdiction; or
(b) the other party has no legal capacity to apply for the orders sought; or
(c) it is frivolous, vexatious or an abuse of process; or
(d) there is no reasonable likelihood of success.
The Full Court confirmed the approach to summary dismissal applications in Curtain & Curtain [2022] FedCFamC1A 134:
15.In Ritter & Ritter and Anor [2020] FamCAFC 86; (2020) FLC 93-957, an appeal from a summary dismissal of an application pursuant to s 79A of the Act, to which the primary judge referred in her reasons for judgment at [30], the plurality of the Full Court said:
48.... That a case is said to be weak is insufficient to justify its summary dismissal (see Coe v The Commonwealth [1979] HCA 68; (1979) 24 ALR 118; Wickstead v Browne [1992] NSWCA 272; (1992) 30 NSWLR 1).
16. Further, the plurality said:
66.The determination of the issue must only take into account the material on which the respondent seeks to make out the case, or as often expressed takes the respondent’s case “at its highest” unless the respondent’s version is inherently incredible or unreliable (see Munnings v Australian Government Solicitor [1994] HCA 65; (1994) 68 ALJR 169 at 171; Bigg & Suzi [1998] FamCA 14; (1998) FLC 92-799; Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598 at 608). ...
17.The primary judge at [53] also correctly referred to and cited from the judgment of Kirby J in Lindon v Commonwealth (No 2) [1996] HCA 14; (1996) 136 ALR 251 at 255–256, where his Honour set out the approach to be taken in applications for summary relief, namely:
1.It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against government and other powerful interests. This is why relief, whether under O 26, r 18 or in the inherent jurisdiction of the court, is rarely and sparingly provided.
2.To secure such relief, the party seeking it must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious.
3.An opinion of the court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination. Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment.
4.Summary relief of the kind provided for by O 26, r 18, for absence of a reasonable cause of action, is not a substitute for proceeding by way of demurrer. If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts.
5.If, notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe its pleading. A question has arisen as to whether O 26, r 18 applies to part only of a pleading. However, it is unnecessary in this case to consider that question because the Commonwealth's attack was upon the entirety of Mr Lindon's statement of claim.
6.The guiding principle is, as stated in O 26, r 18(2), doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit. (Footnotes omitted)
…
19.In Wood v Glaxo Australia Pty Ltd [1993] QCA 114; [1994] 2 Qd R 431, an appeal against a refusal to order an extension of the period of limitation within which an action might be instituted, Macrossan CJ relevantly said at 434:
…It is nevertheless recognised as wrong to place potential plaintiffs in anything like a situation where they must on the probabilities show that it is likely they will succeed in their actions. A judge may harbour a feeling that there is a strong chance that particular applicants will fail at trial but, in my opinion, he should not act on the basis of this impression both because that is a question reserved for another occasion and because he cannot know and should not insist on being able to see in all of its ramifications the full strength of the case which will eventually be presented at trial.
…
21.A similar approach is to be taken in applications for summary dismissal. The Court does not undertake a preliminary trial, nor is a detailed hearing of the case on its merits required. (emphasis added)
Consideration
The Husband contends, in essence, that the Wife and Mr C took action, at the time of separation and after, to distance her from the Trust and the significant benefits she derived from its assets prior to separation. Mr C, it was argued, confirmed as much in his affidavit when he stated his reason for removing the Wife as a beneficiary of the Trust:
3.I refer to paragraph 10 of [Mr Frederic]’s affidavit. The Deed of Variation to the [Brisset] Family Trust Trust Deed was prepared to confirm and to provide written evidence of the family agreement previously reached in relation to the control and ownership of the assets of the [Brisset Family Trust]. This was unfortunately required only due to [Mr Frederic] asserting in an affidavit that [Ms Brisset] had an interest in the [Brisset Family Trust]. This was and is obviously not the situation. The Deed of Variation clearly indicates that [Ms Brisset] is no longer a beneficiary of the [Brisset Family Trust] and that she will not receive any future benefits from the [Brisset Family Trust].
The removal of the Wife as a beneficiary may have formalised an existing understanding between her and Mr C. Yet the Wife had received distributions from the Trust amounting to $1,532,636 for the financial years 2016-2019.[30] Mr C claims they were made for tax minimisation purposes prior to the sale of J Pty Ltd,[31] — which is plausible —however, those distributions also give rise to the possibility that the Wife (until removed as a beneficiary) did expect to benefit from the Trust in the future.
[30] Mr C’s affidavit (n27) [10].
[31] Ibid.
Further, until she was removed as a beneficiary, the Wife held personal property in the form of equitable choses in action, being the right to consideration and due administration. The right to consideration can conceivably be valued — particularly if there has been a history of distributions from the relevant trust. This concept was recently examined by Harper J in Wheeler & Loggins [2023] FedCFamC1F 66, where the Wife unsuccessfully sought to value the assets of certain discretionary trusts to which the Husband was a beneficiary:
30.In relation to both the U and V Trusts, the husband accepted that, as a discretionary object of these non-exhaustive discretionary trusts, he owns personal property in the form of equitable choses in action, being the right to compel the trustee to consider whether or not to make a distribution to him or her and a right to the proper administration of the trust; this property falls within the definition of “property” in s 4(1) of the Act and the wording “the property of the parties to the marriage or either of them” in s 79: Kennon v Spry [2008] HCA 56; (2008) 238 CLR 366 (“Kennon”) at [48], [74]–[75], [79], [126], and [126].
31.These equitable choses in action have historically raised some difficult questions, both as to their character as property and for the purpose of valuation. But in my view, since Stanford and Kennon, their status as property requiring identification for the purposes of s 79, cannot now be doubted. Any issue of alienability, and the ultimate just and equitable division of the parties’ property pursuant to s 79 are separate questions which do not deny the need to identify the choses in action as property: see also the extensive discussion of authority by Watts J in Tomaras & Tomaras [2021] FedCFamC1A 82; (2021) 64 Fam LR 237 at [171]–[250], especially [189]–[195].
32.In this regard, in Dovgan & Dovgan [2021] FamCA 306, I made the following observations, to which I adhere, about a discretionary object’s relationship to the underlying trust assets and the question of valuing their equitable choses in action:
299.It is usually, and correctly, said an individual object of an exhaustive or non-exhaustive discretionary trust cannot claim any part of the trust fund or its income because they are not entitled to any interest in it unless and until the trustees exercise their discretion in their favour; in that sense discretionary objects are in competition with each other for due consideration and “what the trustees give to one is his alone”: [Richstar Enterprises Pty Ltd and Others; Australian Securities and Investments Commission v Carey (No 6) [2006] FCA 814; (2006) 153 FCR 509] at 517 citing Gartside v IRC [1986] AC 553 at 617.
300.... The difficulty of valuing a discretionary object’s equitable chose in action is well known. In R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1992) 10 WAR 59 at 79 Owen J held that the expectancy (or spes) which a beneficiary has that the trustee might appoint capital of the trust fund in his or her favour lacked the requisite aspect of ‘value’ to enable it to be regarded as an asset. In Richstar at [28] French said this view had general application and at [36] he doubted that the beneficiary of a non-exhaustive discretionary trust enjoyed anything other than an expectancy, rather than a contingent proprietary interest in trust assets. In the context of Part VIIIAA, in Simmons at [106] Watt J was satisfied each object of the relevant discretionary trust had no present entitlement to a proprietary interest in the assets of the trust; and therefore suffered no “pecuniary loss from the orders of the Court under Part VIIIAA. But, despite the statement about value from Owen J in R & I Bank, in Kennon French CJ said at [78]: “a valuation might not be beyond the actuarial arts in relation to the right to due consideration”. In Simmons at [122] after referring to Kennon, Watt J accepted the possibility of such a valuation saying, “the existence of a longstanding scheme of distributions to beneficiaries such as the husband and his siblings provides a useful starting point in the valuation process”. This allows for the possibility that a discretionary object’s equitable chose in action, including the “spes” or expectancy to due consideration, has value and not only can, but certainly after Kennon, should be regarded as an asset. Such a valuation is analogous to the valuation of a chance and looks to the possibility that after due consideration, the trustee’s discretion will be exercised in an object’s favour. ... See also Woodcock & Woodcock [2021] FedCFamC1F 88; (2021) 64 Fam LR 489 at [78]–[81].
33.In the context of possibly valuing a discretionary object’s equitable choses in action, the authorities have therefore focussed on a past pattern of distribution in favour of the discretionary object, or in other words, a pattern of exercise of discretion to the benefit of a particular discretionary object. The underlying trust assets, on the other hand, could bear at best no more than indirectly upon the value, if any, of those choses in action: Dovgan at [301].
34.It was the tenor of the husband’s argument that this personal property either could not be valued or had no value. Either contention may be correct, but it is unnecessary to express a view for present purposes. The wife does not seek to value any equitable chose in action owned by the husband. She made no argument that in the circumstances of this case such a valuation could be justified by reference to any past pattern of distributions from either the U or V Trusts to the husband, in the exercise of the trustees’ discretion. Indeed, as pointed out, the evidence showed there have never been such distributions. There seems to be an absence of a basis to value the choses in action and thus any need for such a valuation. Rather, the wife seeks a valuation of underlying trust assets, specifically, B Venue and G Venue. The wife made no submission to the effect that the value of these trust assets could affect any valuation of the husband’s equitable choses in action in the circumstances of this case.
35.There is also no basis to conclude, at an interlocutory stage, that any assets of either the U or the V Trusts were arguably property “of” the husband, because, for example, he controlled the trustee and held the power of appointment: see Public Trustee v Smith (2008) 1 ASTLR 488; Harris & Dewell [2018] FamCAFC 94; (2018) FLC 93-839 at [53]; Conrad & Conrad [2019] FamCA 106 at [77].
36.Similar considerations lead to the conclusion that in the circumstances of this case, the husband’s equitable choses in action in the U and V Trusts may not be properly understood as a financial resource. In Hall v Hall [2016] HCA 23; (2016) 257 CLR 490, the High Court said, approving the definition in Kelly (above):
54....The requirement that the financial resource be that "of" a party no doubt implies that the source of financial support be one on which the party is capable of drawing. It must involve something more than an expectation of benevolence on the part of another. But it goes too far to suggest that the party must control the source of financial support. Thus, it has long correctly been recognised that a nominated beneficiary of a discretionary trust, who has no control over the trustee but who has a reasonable expectation that the trustee's discretion will be exercised in his or her favour, has a financial resource to the extent of that expectation.
55.Whether a potential source of financial support amounts to a financial resource of a party turns in most cases on a factual inquiry as to whether or not support from that source could reasonably be expected to be forthcoming were the party to call on it.
37.The present evidence, even for interlocutory purposes, does not establish objectively that the husband has a reasonable expectation that the relevant trustee’s discretion will be exercised in his favour or would be forthcoming if he called for it.
38.Accordingly, I am not satisfied that the wife has demonstrated, for the purposes of the present application, that there is sufficient reason to conclude that the husband has an interest in any of the disputed items which may be capable of specific valuation so as to ultimately form part of the balance sheet at final hearing. Similarly, I am not satisfied the wife has demonstrated any of the disputed items can be relevantly understood as a financial resource of the husband. (emphasis added)
The Full Court in Barrett & Winnie [2022] FedCFamC1A 99 also referred to the importance of there being evidence of past distributions to the purported beneficiary, when determining if property — in the form of equitable rights to consideration and due administration — should be included in the asset pool for division:
154.We accept, as appropriately conceded by the respondents, that the right of a beneficiary of a discretionary trust can, depending upon the particular facts of the case, be an interest that falls within the particular definition of property as defined in s 4 of the Act. However, the acceptance of that proposition is not determinative of the outcome. This is because of the difficulties associated with attempting to place a value on such an interest. In Kennon v Spry, French CJ noted that difficulty at [77], stating:
The beneficiary of a non-exhaustive discretionary trust who does not control the trustee directly or indirectly has a right to due consideration and to due administration of the trust but it is difficult to value those rights when the beneficiary has no present entitlement and may never have any entitlement to any part of the income or capital of the trust. (Emphasis added)
155.In the present case, there was no evidence presented to the primary judge as to what the value of such a right to “due consideration and due administration” would be.[6] In the absence of evidence of any such value of the interest held by the first respondent, the primary judge, appropriately, in our view, excluded the trust property from the property pool but had regard to the trust assets as being a significant financial resource available to the first respondent. No error has been demonstrated on the part of the primary judge in taking that approach. In that respect, in Shaw and Shaw (1989) FLC 92-030 at 77,420, the Full Court said there was “a degree of artificiality about attempting to assign a monetary value” to a financial resource in circumstances where it was not possible to identify future events or decisions that would result in the financial resource being accessed by the party. A similar view was expressed by Aldridge J in Raine & Creed [2013] FamCA 362 at [33].
156.For completeness, we make it clear that this case is not analogous to the facts of Kennon v Spry and we caution against giving the principles adumbrated in that case a legend beyond what were described as the “unusual circumstances” of that case (per Kiefel J at [237] and French CJ at [62]). (emphasis added)
Mr McKenna also argued that the dispositions resulted in the Wife losing a financial resource. In Kerr & Christie [2021] FedCFamC1F 313, Riethmuller J considered whether objections to several subpoenas seeking information from the trustee of an investment trust should be allowed. His comments have relevance to the inquiry courts undertake when considering whether a beneficiary to a discretionary trust has a financial resource:
22.The relevant consideration for the purpose of s 79 property settlement proceedings requires the identification of the property of the parties, and in this case their financial resources. In this case, the claim by the husband is that the wife’s interests with respect to the trust are a ‘financial resource’. Thus, an assessment of the likelihood that the wife may receive further distributions from the Trust into the future is the central issue. Whether she is likely to receive any sums (whether on the basis of an ongoing support provided to the wife and her siblings or to assist her to re-establish herself after her property settlement proceedings) is a matter for assessment by the trial judge. The documents that will bear upon this, however, are those that show the actual distributions that have been made from the Trust in recent times.
23.The identity of the beneficiaries who have received distribution from the Trust, and the size of those distributions, must be considered significant evidence in determining what weight, if any, should be placed upon the likely future benefits to the wife of being a discretionary beneficiary or object of the Trust.
24.The trustee of the Trust argues that such information should be limited to distributions to the wife and not others. However, this overlooks the reality that in many cases where couples’ marriages ground upon rocky shoals, distributions from trusts such as this cease at least until after the property settlement proceedings. One strong indicator of the likely benefits that a person may receive distributions in the future is the distributions made in the past and the distributions made to beneficiaries in a similar category, in this case there being the clear category of children of the wife's mother. Not all distributions for the benefit of a person are made directly to that person but sometimes to other entities for the benefit of the person (such as companies or trusts). Proper inquiry and assessment of the identity of the various recipients of distributions must be made in order to determine whether, in fact, distributions have been made for the practical benefit of the wife or her siblings. Similarly, the amounts distributed bear upon the determination of the likelihood of future distributions of amounts that may be significant to the exercise of the discretion under s 79 of the Act, at the very least because parents commonly distribute equally to children and in this case have done so in the past. (emphasis added)
In this case, there is evidence of substantial distributions, exceeding 1.5 million dollars, from the Trust to the Wife. The second dispositions that removed the Wife as a general and specific beneficiary of the Trust, occurred after the Husband claimed that she had an interest in the Trust. The corporate trustee was able to make the second dispositions because the Wife had transferred her share in H Company to Mr C. Mr McKenna raised legitimate questions regarding the dispositions, including why is it that Mr C’s sister, Ms O, remains a general and specific beneficiary of the trust even though she gets nothing from the trust.[32] The appropriate time to examine those questions is at a trial. Those questions go the fundamental requirement for the Court to identify the property and financial resources of the parties.
[32] Husband’s Summary of Argument (n15) [34].
Taking the Husband’s case at its highest, the Wife’s lost right to be considered as a potential recipient of benefit by the trustee, may have been capable of valuation and could have been considered as property or alternatively as a financial resource. Her lost right to due administration of the Trust was also undoubtedly ‘property’. It is arguable that the history of distribution from the Trust that the Wife has received, establish that she had more than a mere ‘expectation’[33] to receive benefits from the Trust at the time she was excluded as a general and specific beneficiary. That history of distribution, and the significant value of the Trust’s assets, may result in her past equitable rights having considerable value — potentially adding to the overall value of the property pool. It follows that it is arguable that the second dispositions were likely to defeat an anticipated order and as such the second dispositions could be set aside. That position is not doomed to fail and as such should not be summarily dismissed.
[33] Hall v Hall [2016] HCA 23.
Similarly, the Wife’s action in transferring her share in H Company to Mr C, may also be a disposition that should be set aside. It could be argued that this disposition enabled the corporate trustee to ultimately remove the Wife as general and specific beneficiary of the Trust, as well as potentially influencing any decision to distribute income to her from the Trust and otherwise ensure that the trustee acts in good faith.[34] As such that disposition may arguably (combined with the second dispositions) be likely to defeat an anticipated order. It might be said that this argument, on the face of it, is not as strong as that relating to the second dispositions. A weak case is, however, not enough to justify a summary dismissal.
[34] Husband’s Summary of Argument (n15) [37] & [38].
Given this, the Husband’s application to set aside the dispositions cannot be said to have no reasonable likelihood of success or is ‘doomed to fail’. Consequently, Mr C’s and the Wife’s application to summarily dismiss paragraphs 1-3 of the Husband’s Amended Initiating Application, must be dismissed.
The Husband’s application to join Mr C and the corporate trustee.
Mr McKenna submitted that both Mr C — as the sole director and shareholder of the corporate trustee — and the corporate trustee are necessary parties and must be joined to the proceedings:
43.It is submitted as relief is sought under section 106B FLA, rule 3.01 of the FCFCOA Rules mandates adding of the Proposed Respondents.
44.It is submitted in relation to the Proposed Respondents and by reference to rule 3.01 of the FCFCOA Rules:
44.1 The Proposed Respondents "may be directly affected by an issue in a proceeding".
a.[Mr Frederic] seeks to set aside the 16 June 2023 Deed of Variation and Resignation.
b.[Mr Frederic] seeks to set aside [Ms Brisset’s] share transfer. The owner of that share is presently [Mr C].
c.Both [Ms Brisset] and [Mr C] hold a belief the Trust is solely [Mr C’s]. [Ms Brisset] refers to the Trust as "his Trust" (ie. [Mr C]'s Trust). [Mr C] says the Trust "has always been my entity" and says he "treated it as such". Such a view runs contrary to the purpose of the Trust and its terms noted in preamble to the Trust Deed at (A).
44.2The Proposed Respondents "participation in this proceeding is necessary" for the court to determine all issues in dispute in the proceeding because if the Proposed Respondents are not joined, they will not be bound by the outcome determined by the Court. Put another way, if not a party, the Proposed Respondents are free to disregard whatever Order is made by this Court after trial.
Mr Trezise countered:
21.Taken at its very highest, the Respondent’s former interest in [Brisset Family Trust] was a ‘financial resource’. Her brother will, on any outcome here, retain sole control of [Brisset Family Trust] and will continue to distribute income from [Brisset Family Trust] at his absolute and unfettered discretion. He cannot be compelled to do otherwise. The joinder of the Proposed Respondents is therefore unnecessary for the protection on of their rights. Moreover, their participation as a party will not serve to address or advance any ‘issue’ which may conceivably arise from this. That can still be the subject of evidence made available under the usual and extensive disclosure processes mentioned in Wayne & Dillon and examined in the course of the trial to be conducted between the principal parties. Indeed, to the extent that it might be considered prudent, the Respondent’s brother could be called by one of the principal parties to give evidence as a witness.
22.It is submitted that the joinder of the Proposed Respondent’s would therefore needlessly and unnecessarily embroil them in this litigation with all of the attendant obligations (professional and otherwise), devotion of time and legal expense that that would entail. This is unlikely to be adequately compensated by an order for costs against the Applicant at the conclusion of the proceedings.
Joinder - The Law
Section 79(10)(b) of the Family Law Act 1975 (Cth) states:
10.The following are entitled to become a party to proceedings in which an application is made for an order under this section by a party to a marriage (the subject marriage):
…
b.any other person whose interests would be affected by the making of the order.
The Federal Circuit and Family Court of Australia (Family Law) Rules 2021 - R 3.01 states:
3.01. Necessary parties
A person whose rights may be directly affected by an issue in a proceeding, and whose participation as a party is necessary for the court to determine all issues in dispute in the proceeding, must be included as a party to the proceeding.
Harper J, in Jordan & Sutton (No2) [2022] FedCFamC1F 850, looked at the question of joinder under the general law:
38.In John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 (“John Alexander's Clubs”) the High Court stated the well settled position under the general law concerning joinder:
131.Walker Corporation submitted that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined. That submission is correct. The Court of Appeal...erred when it held to the contrary.
132.In News Ltd v Australian Rugby Football League Ltd the Full Federal Court ...said (127):
Where the orders sought, establish or recognise a proprietary or security interest in land, chattels or a monetary fund, all persons who have a claim or interest in the subject matter are necessary parties. This is because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest.
39.It does not matter whether a proposed party wishes to participate in a proceeding: Arida v Arida [2015] NSWCA 170, per Sackville AJA at [19] (with Bell P and Macfarlan JA agreeing).
40.It is well settled that, applying these principles, it can be appropriate to join third parties to a marriage to proceedings in this Court, for example, to bind them in respect of declarations as to property interests pursuant to s 78 or as ancillary to the exercise of discretion in s 79 or s 106B to set aside dispositions: Valceski v Valceski[2007] NSWSC 440; (2007) 70 NSWLR 36 at [31]–[33]; Khalif & Khalif (No 2)[2021] FedCFamC1F 308 at [37]. Clearly, according to these principles, the existence of claims for orders affecting the rights or interests of third parties proposed to be joined usually compels the conclusion that those parties are “necessary”. Such joinder is, nonetheless, an exercise of the Court’s discretion. (emphasis added)
49Campton J, in Gormley & Gormley [2023] FedCFamC1F 296, considered the meaning of ‘necessary’:
31.Rule 3.01 reflects longstanding jurisprudence that a party may only be joined to proceedings if they are directly relevant to the outcome of the matter.
32.The word “necessary” for the purposes of a predecessor of the r 3.01 was described by Warnick J in Wayne & Dillon & Anor [2008] FamCAFC 204, as meaning:
...something more than “useful” or “expeditious”. In my view, if there are available alternative means to joinder to the substantive proceedings, of obtaining from a third person or someone already a party what is needed to allow an applicant for joinder to establish an identified “case”, joinder is unlikely to be “necessary”.
However, if a cause of action, recognisable at law, against a “third person” is particularised, then it is at least highly likely that joinder will be “necessary for the court to completely and finally determine all matters in dispute.”
33.In Hancock Family Memorial Foundation Ltd v Fieldhouse [No 3] [2010] WASC 223, Le Miere J helpfully referred to relevant authorities and articulated, in precise terms, why it is necessary for a party seeking to join a third party to litigation to establish an arguable case, in the following terms:
27.The applicant on a joinder application must show that there is an arguable case sufficient to resist the entry of summary judgment by the parties sought to be joined. It would be futile to order that a person be joined as a defendant if the material before the court disclosed that if the person, having been joined as a defendant, applied for summary judgment the application would succeed. (Citations omitted)(emphasis added)
34.The Full Court in B Pty Ltd and Ors & K and Anor [2008] FamCAFC 113; (2008) FLC 93-380 held as follows:
52.We do not accept that it is proper to allow joinder of third parties merely upon the formulation of a paragraph in, or to be added to, an application, on the basis that at trial facts to support the application may be asserted and proved. Sufficient facts must be asserted to demonstrate that, if proved, the law arguably provides the relief sought.
Consideration
The Husband argues that the Wife holds valuable property in the form of equitable choses in action — being the right to compel the trustee to consider whether to make a distribution to her from the Trust and a right to the proper administration of the Trust. Taking the Husband’s case at its highest, the Wife’s rights may have been terminated by virtue of the second dispositions, as aided by the first disposition. As stated, the Husband has an arguable case in relation to his s106B applications to set aside the first and second dispositions. Those applications, coupled with the Husband’s ultimate claim to ‘at least 40% of the net property’, affect the rights of the corporate trustee, whose sole office holder and shareholder is Mr C. Sufficient facts have been asserted by the Husband to demonstrate that, if proved, the law arguably provides the relief that he seeks pursuant to s106B. Those applications challenge resolutions made by the corporate trustee and ultimately Mr C. The rights of both are thereby affected by the anticipated orders, noting that the Husband also seeks orders requiring them to undertake certain tasks:
3.Subject to the Court making an Order in terms of paragraph 1 and/or 2 of these Orders, [Mr C] in his capacity as sole director/secretary of [D] Proprietary Limited do all things necessary including, but not limited to, signing all documents and provide all consents necessary to give effect to paragraph 1 and/or 2 of these Orders
In my view, both Mr C’s and the corporate trustee’s participation as parties is necessary for the Court to determine all issues in dispute in the proceeding. As such, they should both be joined. I note that it remains open for both to be released as parties prior to trial, if it becomes clear that their involvement is no longer necessary. Further, costs orders may follow if the Husband’s s106B applications are ultimately unsuccessful.
This matter is currently listed for trial on 12 December 2023 (as a back-up), although Mr Trezise hinted that the matter may need to adjourn if his clients are joined as parties. Trial Directions have been made, although they will have to be amended to accommodate the new parties.[35] I will make the orders set out at the commencement of these Reasons.
[35] Orders of Judge Turnbull in Frederic & Brisset (Federal Circuit and Family Court of Australia, LNC600/2022) 3 May 2023.
I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Turnbull. Associate:
Dated: 10 October 2023
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