May & May
[2022] FedCFamC1F 227
•8 April 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
May & May [2022] FedCFamC1F 227
File number(s): MLC 13723 of 2020 Judgment of: WILSON J Date of judgment: 8 April 2022 Catchwords: FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – wife’s application for a part property settlement of $150,000 – wife previously received a part property settlement of $150,000 – husband opposed application – Verdon & Verdon considered – evidentiary elements in a part property settlement application defective – application dismissed. Legislation: Family Law Act 1975 s 79 Cases cited: Cao & Trong (No 2) [2019] FamCA 941
Dieter & Dieter [2011] FamCAFC 82
Ex Parte Gilchrist; Re Armstrong (1886) 17 QBD 521
Gartside v Inland Revenue Commissioners [1968] AC 553
Harris & Dewell (2018) 58 Fam LR 313
In the Marriage of Gabel (2008) 40 Fam LR 66
In the Marriage of Zschokke (1996) 20 Fam LR 766
Kennon v Spry (2008) 238 CLR 366
Marvel v Marvel (2010) 43 Fam LR 348
Polland & Nordberg [2019] FamCAFC 361
Public Trustee v Smith [2008] NSWSC 397
Re Smith [1928] Ch 915
Redmond & Redmond [2014] FamCAFC 155
SS & AH [2010] FamCAFC 13
Stanford v Stanford (2012) 247 CLR 108
Stein & Stein (1986) 11 Fam LR 353
Verdon & Verdon (2020) 62 Fam LR 573
Division: Division 1 First Instance Number of paragraphs: 34 Date of hearing: 2 March 2022 Place: Melbourne Counsel for the Applicant: Ms M. Vohra SC Solicitor for the Applicant: CE Family Lawyers Counsel for the First Respondent: Mr L. Glick QC Solicitor for the First Respondent: Isakow Lawyers ORDERS
MLC 13723 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS MAY
Applicant
AND: MR MAY
First Respondent
C PTY LTD ACN …
Second Respondent
B PTY LTD ACN … (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
WILSON J
DATE OF ORDER:
8 APRIL 2022
THE COURT ORDERS THAT:
1.The wife’s application for payment of the sum of $150,000 by way of interim part property settlement is dismissed.
2.If either party wishes to make submissions on costs, submissions must be filed by 4:00pm on 22 April 2022.
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 the pseudonym May & May is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WILSON J
By application in a proceeding dated 21 January 2022, the wife sought orders for the husband to provide her with $150,000 by way of partial property settlement.
The husband opposed the wife’s application, seeking orders for its dismissal and that the wife pay his costs.[1]
[1] Husband’s response to an application in a proceeding dated 31 January 2022.
In essence, the wife argued that the parties were in a relationship for about 25 years, that the wife is entitled to half of the former matrimonial home, the net equity value of the former matrimonial home is $2.37 million, she is likely to become entitled to an order for the payment to her of half of that sum and that the amount she seeks of $150,000 is within her entitlements.[2] Senior Counsel for the wife indicated that pursuant to consent orders made on 17 May 2021, the wife had received an earlier part property payment of $150,000.
[2] Transcript, 15 March 2022 T5 L39-44.
On behalf of the husband, Mr Glick QC argued that the wife had failed to discharge the evidentiary burden of demonstrating that it is just and equitable to make the orders sought, in the circumstances of this case, according to authorities such as Verdon & Verdon[3] and Cao & Trong (No 2).[4]
[3] (2020) 62 Fam LR 573.
[4] [2019] FamCA 941.
This proceeding is in the Major Complex Financial Proceedings List in Division 1 of the Federal Circuit and Family Court of Australia. The trial before me is fixed for 9 May 2022.
These reasons explain why in my view the wife’s application must be refused.
Having regard to the husband’s opposition to this application on the basis of inadequate or insufficient proof of the justice and equity of the wife’s application, it is necessary to descend to the detail of her evidence on this application.
THE WIFE’S EVIDENCE
The wife swore an affidavit on 21 January 2022. In prècis form, she deposed to the following –
(a)she has received $150,000 in part-property payments to date;
(b)in order to comply with orders previously made the wife must file updated evidence in chief, reply evidence and a case outline along with contentions of fact and law on her joinder application;
(c)her solicitor has told her that she may incur costs and disbursements up to $185,000;
(d)she only has $35,000 left from sums previously paid by way of part property amounts;
(e)she earns casual income from work with an advertising agency; and
(f)in January this year the parties’ solicitors corresponded in relation to the wife’s request for a further part property payment of $150,000 and the husband responded highlighting his unwillingness to borrow funds to meet the wife’s request.
The wife swore a further affidavit on 9 February 2022. That affidavit was mostly responsive to the husband’s affidavit made 31 January 2022.
The wife’s solicitors made affidavits in support of the wife’s application for interim property orders. Ms M made two affidavits and Mr L made an affidavit on 2 March 2022. Each affidavit related to costs.
THE HUSBAND’S EVIDENCE
The husband made two affidavits, the first on 31 January 2022 and the second on 9 February 2022. In his 31 January 2022 affidavit, the husband deposed to the following matters –
(a)he met the wife in 1996, they moved in together in 1997 and married in 1998;
(a)they have two adult daughters;
(b)he and his sister (the fourth respondent) are co-directors of C Pty Ltd and B Pty Ltd;
(c)he and his sister are co-shareholders in B Pty Ltd and B Pty Ltd is the sole shareholder in C Pty Ltd (those companies being collectively termed “The May Group”);
(d)he received distributions as a beneficiary of discretionary trusts within The May Group;
(e)he is a director of H Pty Ltd;
(f)he is a director of and 50% shareholder in J Pty Ltd;
(g)the wife owns and controls K Pty Ltd;
(h)the wife is the sole trustee and sole specified beneficiary in the N Trust;
(i)the wife owns and controls G Pty Ltd; and
(j)the husband is the sole owner and controller of E Pty Ltd.
The companies described above make up the matrimonial pool of assets.
He deposed to owing debts to The May Group of over $10 million. No details of that indebtedness were given, especially the nature of the loans, the terms, the breach and steps taken to enforce them, if any.
He said he is indebted to the extent of $323,310 to C Pty Ltd to meet legal costs to date. He also stated that the P Trust (I infer he meant that the trustee of that trust) had met almost $100,000 of the wife’s legal fees to date.
In his 31 January 2022 affidavit the husband devoted a number of paragraphs to his contention that the wife had a variety of options to fund her future needs in relation to legal fees. He pointed out that –
(a)the wife presently has $35,000 in funds not presently exhausted;
(b)G Pty Ltd has available to it a redraw facility of $36,391;
(c)the wife could take out a second mortgage on the former matrimonial home;
(d)litigation funders, such as R Company, S Company and T Company provide loans to be applied towards the payment of a party’s legal costs;
(e)the wife has not deposed to making any enquiries about the availability of litigation funding from lenders such as those three;
(f)the wife could alternatively sell the former matrimonial home; and
(g)he does not have access to $150,000 to meet the wife’s claimed sum.
RESOLVING CONFLICTING EVIDENCE
It is as well to point up at this juncture that authority binding on me[5] cautions against my making findings of fact on disputed evidence in the determination of an interlocutory application such as this. I decline to express findings of fact except insofar as they are uncontroversial.
[5] Marvel v Marvel (2010) 43 Fam LR 348, Redmond & Redmond [2014] FamCAFC 155, Dieter & Dieter [2011] FamCAFC 82, SS & AH [2010] FamCAFC 13 and Polland & Nordberg [2019] FamCAFC 361.
Further, on an interlocutory application evidence even of a hearsay nature is admissible.
THE WIFE’S SUBMISSIONS
Ms Vohra SC contended that the wife should not be compelled to borrow in order to generate funds to meet her anticipated legal fees. Ms O contended that the husband receives $520,000 per annum by way of distributions. Mr Glick QC took issue with that submission arguing that it was without any evidentiary foundation.[6]
[6] Transcript of hearing 1 March 2022 T9 L23.
Ms Vohra SC submitted that the amount her client seeks by way of interim part property settlement is well within her entitlement,[7] even on the husband’s case, and as such she does not need to show “compelling reasons”[8] (her words) justifying an order being made in the terms sought by the wife. She submitted that her client wishes to retain the Suburb Q property, unencumbered on a final basis and as such does not wish to sell the property in order to meet her legal fees.[9]
[7] Transcript of hearing 2 March 2022 T41 L18
[8] Transcript of hearing 2 March 2022 T41 L38.
[9] Transcript of hearing 2 March 2022 T46 L18-23.
Ms Vohra SC also addressed the husband’s contention that he also owes his own solicitors $180,000 in legal fees, despite which his solicitors continue to act for him as they are “prepared to be paid at the end”.[10] Ms Vohra SC submitted that the same assumption should not be made of her client, as the husband has greater financial resources and as such will be able to pay his solicitors “at the end” irrespective of the outcome. I do not accept that submission. The ultimate outcome of the wife’s s 79 application is yet to be heard and determined. The trial of this proceeding is listed to commence on 9 May 2022. I decline to act on assumptions about the likely outcome of that application until all evidence has been presented before the Court.
[10] Transcript of hearing 2 March 2022 T46 L36.
THE HUSBAND’S SUBMISSIONS
On the husband’s behalf Mr Glick QC advanced a collection of propositions. They included the following –
(a)this is an exercise of a s 79 power;
(b)it is incumbent on the wife to discharge the evidentiary and legal burden of demonstrating that it is just and equitable to disturb the prima facie position of there being one and only one property adjustment;
(c)all elements of s79 must be considered;
(d)on the facts, the wife had failed to descend into the detail required by s 79 by identifying contributions she asserted were applicable;
(e)the wife simply deposed to the length of her marriage, that she owns a house and that various trusts are involved in this litigation;
(f)according to Stanford v Stanford[11] no prima facie assumption exists that it is just and equitable to make orders for the division of assets; and
(g)on the facts of the case, the evidence did not support the wife’s contention that her solicitors would not act for the wife unless the wife puts money into her solicitors’ account.
[11] (2012) 247 CLR 108.
In his written submissions made on 25 February 2022 Mr Glick QC submitted that the wife had an obvious source of funds to meet the amount of money she needs, namely the former matrimonial home, owned by G Pty Ltd which in turn is owned and controlled by the wife.
Mr Glick QC argued that the wife could easily grant a charge over the former matrimonial home in favour of her solicitors and adequate equity in that home existed to support such an arrangement. Mr Glick QC argued that it is not just and equitable for the husband to be required to incur further debt in order to confer upon the wife a part property settlement. That was in circumstances where the husband does not control the May Group nor the discretionary benefits received from the May Group. The husband’s evidence revealed payments to him of almost $175,000 in fees associated with this litigation.
In a separate document styled “response to the wife’s contentions as to fact and law”, the husband recorded his contentions in relation to a variety of propositions of law. Those included the following –
(a)the wife contends that the husband has a 50% interest in one or more trusts and that such an interest constitutes “property” within the meaning of s 79 of the Family Law Act;
(b)the wife’s contention that the husband holds a 50% interest in a discretionary trust is misconceived;
(c)an object of a discretionary trusts does not hold a share of a specific percentage amount in the corpus of the trust;
(d)a discretionary trust does not have beneficiaries (in the same way as does an express trust) whose interests together aggregate the beneficial ownership of the trust property;
(e)instead, a class of persons exists described in wide terms, who are the objects of a power of appointment of income or corpus or both;
(f)they do not have a proprietary legal or equitable interest in the trust fund and no beneficial interest in the trust property;[12]
(g)a difference exists between “power” and “property’ as was explained by Fry LJ in Ex Parte Gilchrist; Re Armstrong;[13]
(h)on the facts of this case, the husband has no power to effect a distribution of income or capital to himself unless his sister joins in any such distribution so the wife’s contentions are erroneous when she asserts that the question whether a person controls a trust is purely a question of fact;
(i)it is competent for B Pty Ltd, as trustee of the B Trust, to resolve over successive financial years to distribute income in equal amounts to the husband and his sister yet the trustee of the B Trust is entitled, in the exercise of its discretion, to resolve to make distributions to other eligible objects in a particular financial year and it is equally entitled to resolve in the exercise of its discretion to make disproportionate distributions to the husband and his sister in future distributions;
(j)other eligible objects of the relevant trusts cannot be ignored;[14]
(k)s 79 will be enlivened in respect of the corpus of a trust only where control over the corpus of the trust equates to ownership;[15] and
(l)the facts of this case stand apart from the ratio decidendi in Stein & Stein.[16]
[12] Re Smith [1928] Ch 915 and Gartside v Inland Revenue Commissioners [1968] AC 553.
[13] (1886) 17 QBD 521.
[14] Harris & Dewell (2018) 58 Fam LR 313.
[15] Public Trustee v Smith [2008] NSWSC 397.
[16] (1986) 11 Fam LR 353.
From that brief recital of the propositions advanced on behalf of the husband it is immediately apparent that a live issue in this litigation will be whether the husband’s interests under one or more of the various trusts can properly be characterised as “property” within the contemplation of Stanford v Stanford and of Kennon v Spry.[17]
[17] (2008) 238 CLR 366.
It is well established by authority binding on me[18] that consideration must be given to the reversibility of any partial property settlement. In this case I am in real doubt about the reversibility of even the modest sum of $150,000 the wife seeks. The balance sheet is in a state of immense fluidity. The wife is of the view that the husband’s interests under a collection of discretionary trusts is “property” whereas that must be determined at trial after a fully contested debate on both fact and law. It may transpire that the wife’s contentions are correct. Conversely, the husband’s propositions about the nature and effect of rights under discretionary trusts may hold sway. It is too early to tell.
[18] In the Marriage of Zschokke (1996) 20 Fam LR 766 and In the Marriage of Gabel (2008) 40 Fam LR 66.
Further, even on the hearing of an interim partial property settlement application, certain evaluations must be made by the trial judge. Those were synthesised by me in Verdon v Verdon[19]. It is as well to restate them –
[19] (2020) 62 Fam LR 573, 595 (at [88]).
[88] In Cao v Trong (No 2) I distilled the relevant principles mostly from Strahan. They were as follows —
34. In relation to interim property orders, certain guiding principles are applicable to the facts of this case. They include the following —
a)the majority of the court in Strahan held that when consideration is being given to the appropriateness of an order being made for an interim property settlement order, more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party;
b)balance must be given to the risks of unduly limiting the final orders that can be made against the circumstances said to show that it is just and equitable to make interim orders;
c)in Strahan it was held that the first stage of any consideration of an application for a partial property settlement order requires a determination of whether the interests of justice require the exercise of power under s 79 and s 80(1)(h) on an interim basis;
d)compelling circumstances need not be shown by an applicant for a partial property settlement order, as was held in Strahan;
e)ordinarily an order under s 79 is made once only after a final hearing, as was held in Strahan at [132];
f)consideration must be given to the reversibility of the order, as was held in In the Marriage of Zschokke and Gabel;
g)in addition, a court entertaining an application for a partial property settlement should consider the need for and effect of interim orders weighed against the risks that the exercise of the power on an interim basis will interfere with the power of the court to make just and equitable orders on a final basis;
h)further, a court entertaining an application for a partial property settlement order should consider whether the order is just and equitable according to at least a preliminary view of the likely range of outcomes;
i)further, a court entertaining an application for a partial property settlement order should balance the risks by considering not only the quantum of the orders but also the risk of unduly limiting the final orders that can be made or even potentially defeating parties’ claims; and
j)a court entertaining an application for a partial property settlement should take into account that a party should not be denied the ability to liquidate assets where there are real needs for those resources such as meeting debts due to creditors.
Of those considerations mentioned immediately above several warrant careful consideration on the determination of this application. They include –
(a)more is required than the mere fact upon a final hearing that the applicant will receive the property settlement sought;
(b)on the hearing of an application for partial property settlement, a determination must be made on whether the interest of justice require the exercise of power under s 79 on an interim basis;
(c)ordinarily, an order under s 79 is made once only after a final hearing; and
(d)a court must consider whether the order is just and equitable according to a preliminary view of the likely range of outcomes.
So far as the requirement that a court must consider whether a partial property settlement is just and equitable is concerned, I am very much at a disadvantage on this application because the wife’s material says next to nothing on important issues. She does not address contributions. She proceeds on the basis that the former matrimonial home was worth a particular amount, 50% of which was the husband’s. She ultimately owns the former matrimonial home. His trust entitlements and beneficial distributions were discretionary, for the most part.
It seemed to me that Mr Glick QC was correct when he contended that the wife made no endeavour to set out the factual matters that would enable me to assess, at least on a preliminary basis, that it was just and equitable to make an order under s 79. Put differently, having regard to the observations in Stanford v Stanford to the effect that a court should decide whether interests in property should be otherwise than they are, I am not persuaded on the material presented before me that it is just and equitable to make an interim property order. The wife was required to go beyond merely asserting that she needed money to pay her solicitors. She needed to, but failed to, demonstrate that an order under s 79 was likely to be made. She encountered considerable difficulties in showing that the husband’s interest under an array of discretionary trusts amounted to “property”. That issue will stand over for another day when I can have the benefit of detailed, comprehensive and highly learned submissions.
At present, I am not persuaded that the parties’ interest in property should be otherwise than as they presently appear. I decline to make a further partial property settlement order in the manner advocated by the wife.
THE LEGAL COSTS DEBATE
Having regard to my findings about the fate of the wife’s further partial property settlement application, the submissions that consumed the parties about the legal fees to be charged are essentially otiose. Suffice it to say, a debate emerged about whether legal fees were properly chargeable if those fees were incurred in non-compliance with appropriate legislative provisions. Detailed argument was advanced by the husband in that regard. It became unnecessary to address that issue having regard to my view that the wife’s application failed on other grounds.
CONCLUSION
The wife’s application for payment of the sum of $150,000 by way of interim part property settlement must be dismissed.
If either party wishes to make submissions on costs, submissions must be filed by 4:00pm on 22 April 2022.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wilson. Associate:
Dated: 8 April 2022
SCHEDULE OF PARTIES
MLC 13723 of 2020 Respondents
Fourth Respondent:
MS F MAY AS APPOINTOR FOR EACH OF THE C TRUST AND THE B TRUST
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