MILLHOUSE & MULLENS

[2018] FamCA 1022

FAMILY COURT OF AUSTRALIA

MILLHOUSE & MULLENS [2018] FamCA 1022

FAMILY LAW – PROPERTY SETTLEMENT – Interim application - Where order sought for valuation of trust and its real property – Where application dismissed – Where prospect of trust being a relevant asset or financial resource in determination of substantive proceedings deemed remote.

FAMILY LAW – COSTS – Where Respondent seeks costs in relation to an interim application – Where such costs are sought on a party/party basis – Where such costs are to be paid within 14 days of making of a final order in the property settlement proceedings.

Family Law Act 1975 (Cth)

Family Law Rules 2004 (Cth)

Penfold & Penfold (1980) 144 CLR 311
Shaw & Shaw (1989) FLC 92-030

APPLICANT: Ms Millhouse

RESPONDENT: Mr Mullens

FILE NUMBER: BRC 10196 of 2013

DATE DELIVERED: 29 January 2018

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Carew J

HEARING DATE: 29 January 2018

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Galloway

SOLICITOR FOR THE APPLICANT: Jones Mitchell Lawyers

COUNSEL FOR THE RESPONDENT:	Mr Williams
SOLICITOR FOR THE RESPONDENT:	Barry.Nilsson Lawyers

Order

1. The wife’s Application in a Case filed 2 November 2017 be dismissed.

2. The wife pay the husband’s costs of and incidental to the Application in a Case filed 2 November 2017 fixed in the sum of $6,329.00 with payment to be made within 14 days of the finalisation of the property proceedings as between the parties.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Millhouse & Mullens has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 10196 of 2013

Ms Millhouse

Applicant

And

Mr Mullens

Respondent

EX TEMPORE REASONS FOR JUDGMENT

1. When this matter came before me this morning I made some observations about the proceedings generally including in relation to what was conceded by counsel for the wife as an ‘ambitious’ claim in her application for property settlement. I encouraged the parties to engage in discussions about the substantive claim while they were assisted by their respective experienced counsel. I also ascertained that the wife has expended in legal costs in excess of $200,000 in the family law proceedings to date and the husband has expended some $100,000.

2. The application requiring determination today is of short compass. The wife seeks orders in the following terms:

   i)That pursuant to Rule 15.46(c) of the Family Law Rules 2004, the single expert, L Ltd, be instructed to undertake a valuation report in respect of the Mr Mullens Trust.

   ii)That the respondent husband in his capacity as the Trustee and Principal of the Mr Mullens Trust, forthwith provide all documents necessary and as requested by L Ltd in order for the Mr Mullens Trust to be valued by them.

   iii)That pursuant to Rule 15.46(c) of the Family Law Rules 2004, the single expert, M Valuers, be instructed to undertake a valuation report in respect of all real properties held on trust for the Mr Mullens Trust.

3. The husband opposes the application and seeks its dismissal.

4. The following facts are not in contention:

   ·The parties were married in 2010 and separated on 27 August 2013.

   ·There are no children of the marriage but the husband has a child from a previous marriage, G, currently aged 14 and the wife has three children from previous relationships aged 18, 17 and 16.

   ·When the parties commenced their relationship the husband’s assets significantly exceeded those of the wife’s.

   ·The wife was not in employment during the marriage.

   ·The wife is 50 and not employed. The husband is 56 and employed as a senior manager at E Pty Ltd and is managing director of his own company F Pty Ltd.

   ·The proceedings were commenced by the wife on 22 November 2013 in which she sought, inter alia, 40 per cent of the property pool.

   ·In 2015 a financial agreement entered into between the parties in 2010 was set aside with the consent of the parties.

   ·On 20 November 2008 a trust was established for the purpose of managing gifts and inheritances received by the husband’s daughter, G. Prior to the husband’s father’s death in 2009, he gifted to each of his grandchildren a sum of money. As G was and still is a minor, the Mr Mullens Trust was established to receive and hold monies for her benefit.

   ·The original trustees were the husband and his mother. His mother died in 2013 and the husband’s company F Pty Ltd replaced him as the sole trustee of the trust.

   ·The husband is the principal of the trust and the beneficiaries of the trust are:

   ·Primary beneficiary is G;

   ·Secondary beneficiaries are the husband’s mother (now deceased) and any child or children of G; and

   ·Tertiary beneficiaries are the husband’s nephews.

   ·When the husband’s father died in 2010 G received an inheritance of $325,515 which was held on trust for her in the Mr Mullens Trust.

   ·When the husband’s mother died in 2012 G received a further inheritance of $154,925 also held on trust for her in the Mr Mullens Trust.

   ·The assets of the Mr Mullens Trust comprise two real properties and some cash. The trust has debts to Westpac in respect of the real property.

   ·As at 30 June 2016 the balance sheet for the Mr Mullens Trust discloses net assets of $587,000 or thereabouts.

   ·Valuations have been obtained for real property owned by the husband at Suburb I, A Town and N Town and the gross value for those properties total about $8,700,000.

   ·The wife does not own any real property.

5. The basis for the wife’s application rests on what is argued is what may become a financial resource of the husband if he acts in accordance with certain powers granted to him under the Mr Mullens Trust, namely under Clause 6.24 of the trust under heading ‘Powers of Trustee’:

   6.24To perform all acts of alienation and hypothecation and other acts of ownership to the same extent and with the same effect as might have been done if this Trust had not been made and the decision and action of the Trustee whether actually made or taken in writing or implied from the acts from the Trustee is conclusive and binding on all Beneficiaries;

6. And Clause 10:

   10.      Variation of Trusts

   The Trustee may by deed revoke, add to, release or vary all or any of the trusts declared or any trust declared by any variation, alteration or addition made 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 but so that the Trustee does not have any power to revoke, add to or vary any of the trusts so that:

   a)the Settlor may acquire a beneficial interest in the Trust Fund or any part of it;

   b)the beneficial entitlement of any Beneficiary to any amount applied to him prior to the date of revocation or alteration is changed;

   c)the Primary Beneficiary or the membership of the Tertiary Beneficiaries is changed;

   d)clause 4.1 is changed.

   Upon the exercise of any release and revocation under this clause, the power so released and revoked is absolutely and irrevocably determined.

7. Clause 4.1 provides:

   4.        Capital of the Trust Fund

   4.1The Trust Fund and the Trust must terminate and vest absolutely on the Vesting Date. Upon the termination and vesting that part of the Trust Fund comprising capital must be held by the Trustee UPON TRUST to pay the whole to or for the Primary Beneficiary where the Primary Beneficiary is then living but if the Primary Beneficiary has died prior to that date then for such one or more of the Secondary Beneficiaries as shall then be living and, if more than one, as tenants in common in equal shares but if there are then no such Secondary Beneficiaries then for:

   4.1.1the advancement of scientific research generally and research related to the nature, prevention, diagnosis, treatment and incidence of disease and other health problems;

   4.1.2the founding, endowing or assisting any existing scientific institutions or any scientific institution which may hereafter be founded;

   4.1.3the cure, treatment and rehabilitation of sickness, disease and suffering in humans.

8. It is argued that as the husband controls the trust he is able to sell or mortgage the property of the trust, his “undoubted power over its assets is arguably proprietary” and as the husband has power to vary the trust he is “not barred from providing himself with a beneficial interest by deed and taking at least income distributions”.

9. Further it is submitted that the acquisition by the trust in 2013 of the Suburb O property has “the appearance of the movement of a valuable asset from the husband’s personal control to the attempted protection of a trust”.

10. The evidence in relation to the purchase of the Suburb O property is set out in the husband’s affidavit at paragraph 7 and there is nothing in that evidence which supports the wife’s suggestion. The submission made on her behalf seems nothing more than mere conjecture which in my view is not supported by any evidence.

11. As to the purchase of the Suburb P property it is submitted that it may be inferred that the husband has “unilaterally enriched the trust with what might otherwise have been a matrimonial asset”.

12. The evidence in relation to the purchase of this property is set out in the husband’s affidavit at paragraph 6 and again there is nothing in that evidence which supports the wife’s inference.

13. It is conceded on behalf of the wife that the husband has no interest as a beneficiary in the trust but it is argued that he potentially could have an interest if he chose to exercise what are suggested as powers that entitle him to make himself a beneficiary. While I remain unconvinced that the trust deed can be interpreted in the way suggested on behalf of the wife, even if I am wrong, I am not persuaded that there is any evidence that would support the likelihood of the husband acting in such a way as to ignore the purpose of the trust, i.e. to protect the gifts and inheritances received by his daughter until she is at an age when she can claim those assets. The argument about what might happen if his daughter dies before that occurrence is entirely too remote in my view to warrant an order as sought.

14. In addition to those matters, the rules empowering the appointment of a single expert is subject to the caveat that there needs to be a significant issue in dispute[1] and, in considering whether to make an order, the Court should consider among other things whether expert evidence on a particular issue is necessary.[2]

    [1] See Rule 15.42 Family Law Rules 2004 (Cth)

    [2] See Rule 15.45 Family Law Rules 2004 (Cth)

15. Here the husband has disclosed the balance sheets for the trust from which the parties can identify the assets and liabilities of the trust. I do not consider the appointment of a firm of accountants as necessary to value what is apparent on the face of the balance sheet.

16. The wife also applies for the appointment of a single expert to value the real property owned by the trust. It is said on her behalf that although she does not apply for it she would seek the husband to pay for the costs of the valuations at first instance. This was news to the husband and would be opposed by him if such an application were made because:

    a)he has no legal or beneficial interest in the property;

    b)he will argue in the substantive proceedings that it is not just and equitable to make any order; and

    c)if the wife says she has no funds to pay for valuations he may be prejudiced by being unable to recover any money paid by him.

17. It is further argued on behalf of the husband that if at best the husband has a potential financial resource that may have relevance to the property proceedings there is no need for a valuation and cites in support of that contention the decision of the Full Court in Shaw & Shaw (1989) FLC 92-030 (“Shaw”) at in particular at page 77,420:

    As we have previously noted his Honour made no finding as to the value of the Trust or the husband's interest therein, nor did he find that the Trust was the husband's alter ego or his ``puppet''. If he was correct in not making the latter finding, then we think he did not err in failing to assign a value to the husband's interest in the Trust. In the absence of such a finding, the husband's only ``property'' in relation to the Trust was his right as a beneficiary to enforce the due administration of the Trust, and there is, in our view, a degree of artificiality about attempting to assign a monetary value to such an intangible species of property. In that circumstance, what the parties and the Court ought to have been concerned to ascertain was whether the Trust and, indeed, the husband's shareholding in Edess, were significant financial resources of the husband. If they were, there would be no need to attempt to value them as if they were property, but only to gain an appreciation of the extent to which the husband might reasonably expect to receive benefits from them in the future, this being a factor proper to be taken into account by the Court in exercising its wide discretion under sec. 79 by virtue of the direction in sec. 79(4)(e) to have regard to the relevant matters referred to in sec. 75(2). 

18. It is submitted on behalf of the wife that the reference to Shaw impermissibly conflates the argument in this case with trial findings in Shaw.

19. In the current case there are balance sheets which set out the value of the trust which provide evidence about the potential (if there is one) of the husband’s financial resource. Accordingly, I am not persuaded that the order sought for the appointment of a valuer for the real property is necessary nor that it relates to a significant issue in dispute. The prospect of the trust being a relevant asset or financial resource in the determination of the substantive proceedings is in my view remote.

20. I propose to dismiss the wife’s Application in a Case.

costs

1. The husband seeks costs of and incidental to the unsuccessful application made by the wife. The application for costs is opposed by the wife. In this jurisdiction, parties are generally required to bear their own costs. However, where justifying circumstances exist, s 117(2) of the Family Law Act 1975 (Cth) (“the Act”) empowers the Court to make such order for costs as the Court considers just.

2. In the exercise of that discretion, regard must be had to the factors set out in s 117(2A) of the Act, so far as they are relevant. Those factors are as follows:

   a)the financial circumstances of each of the parties to the proceedings;

   b)whether any party to the proceedings is in receipt of legal aid;

   c)the conduct of the parties to the proceedings in relation to the proceedings, including without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;

   d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the Court;

   e)whether any party to the proceedings has been wholly unsuccessful;

   f)whether either party to the proceedings has made an offer in writing to the other party in the proceedings to settle the proceedings and the terms of any such offer; and

   g)such other matters as the Court considers relevant.

3. No one factor has more weight than any other, nor is it necessary for more than one factor to be present. When discussing subparagraphs in s 117, the High Court in Penfold & Penfold (1980) 144 CLR 311 at 315 said:

   It is an accurate description of s. 117(1) to say that it expresses a general rule, provided that it is firmly understood that the subsection is not paramount to s. 117(2). As sub-s (1) is expressed to be subject to sub-s (2), the former must yield whenever a judge finds in a particular case that there are circumstances justifying the making of an order for costs.

   Sub-section (2) requires a finding of justifying circumstances as an essential preliminary to the making of an order.  Beyond this there is nothing in the subject matter or in the interrelationship of the two provisions which imposes any additional or special onus on an applicant for an order for costs. 

4. When considering what specific order to make, rule 19.18 of the Family Law Rules 2004 (Cth) (“the Rules”) empowers the Court to make an order:

   a)of a specific amount;

   b)as a assessed on a particular basis;

   c)to be calculated in accordance with the method stated in the order; or

   d)for part of the case or part of an amount assessed in accordance with schedule 3.

5. In considering what specific order should be made, the same rule provides that the Court may consider any of the following factors:

   a)the importance, complexity or difficulty of the issues;

   b)the reasonableness of each party’s behaviour in the case;

   c)the rates ordinarily payable to lawyers in comparable cases;

   d)whether a lawyer’s conduct has been improper or unreasonable;

   e)the time properly spent on the case or in complying with pre-action procedures; and

   f)expenses properly paid or payable.

6. The order sought on behalf of the husband is for a fixed sum calculated on a party and party basis, which comprises total solicitor’s fees of $7,390.10 and counsel’s fees of $1,939.14. Included in the solicitor’s figure is an amount of $3,826.46 for reading the wife’s affidavit filed on 2 November 2017. That affidavit comprises 41 paragraphs over 10 pages and the balance of the document, (which is not paginated but is considerable), annexes a number of documents, including a number of copies of the same document, namely, the trust deed for the Mr Mullens Trust.

7. Annexed to the husband’s affidavit are copies of the same trust deed. The submissions made in support of an order for costs are as follows:

   ·    firstly, that the wife has been wholly unsuccessful;

   ·    secondly, that the wife has been on notice since at least December 2017 that the husband has no interest in the Mr Mullens Trust and the reasons for the value attributed to that trust;

   ·    thirdly, that the wife agreed in or about June of 2017 to delete the reference to the Mr Mullens Trust in the request to the single expert to value it, subject to certain disclosure being made in relation to the trust;

   ·    fourthly, the husband has made significant disclosure in relation to the trust; and

   ·    fifthly, that both prior to and subsequent to the actual filing of the wife’s application in a case on 2 November 2017, the husband has agitated for the wife to discontinue the application on the basis that it had no prospects of success.

8. It is conceded on behalf of the husband that his financial position is superior to that of the wife and he is a person of some wealth, but it is submitted that the application should not have been brought.

9. There is little evidence before me in relation to the wife’s financial circumstances, although it is submitted on behalf of the husband that at least as at August 2015, the most recent occasion when the wife has provided information formally as to her financial circumstances, she did have assets standing to her name.

1. Reference is also made to a previous application made by the wife seeking specific disclosure, in which she was unsuccessful, and that led to a costs order against her on 27 January 2017. 

2. Finally, it is submitted that applications of this nature effectively need to be discouraged and that a costs application should be acceded to. 

3. Mr Galloway, on behalf of the wife, resists any order for costs.

4. He quite rightly submits that costs do not follow the event in this jurisdiction, but I do not take anything from Mr Williams’ submission to suggest to the contrary. 

5. Mr Galloway submits that his client’s circumstances are quite parlous. He notes the concession made on behalf of the husband in relation to his superior financial circumstances.

6. He submits that the husband’s assertion that he had no interest in the trust could not be taken at face value.

7. He submits that the wife offered to delete reference to the trust in communications with the joint expert on condition that certain disclosure was made.

8. It is conceded that disclosure has been made and there is no criticism of the husband in relation to the extent of that disclosure.

9. Mr Galloway reiterates that the wife does not press, at this point at least, for the assets of the Mr Mullens Trust to be included in the property pool.  This was an application brought solely for the purpose, it would seem, of the wife clarifying what the value of a potential financial resource might be in the hands of the husband, or indeed an asset, if the husband acted, at some future time, in accordance with what were asserted to be powers that he had under the trust deed.

10. In the event that I am minded to make a costs order, Mr Galloway also urged that I fix a sum, but that I should delete entirely the amount claimed on behalf of the husband for reading the wife’s affidavit, a sum of $3,826.46. 

11. This is a case, in my view, where the circumstances justify an order for costs.  The wife has been wholly unsuccessful. Whilst the wife’s circumstances are said to be parlous, that is not a reason of itself that would preclude a costs order being made.

12. I have found that the prospect of the husband’s potential interest in the Mr Mullens Trust to be remote and even if I am wrong in relation to that, that the Rules do not lead to the necessity for a single expert to be appointed in this case because the issue about which the wife is agitating is not, in my view, significant in the context of the circumstances of this case, nor indeed necessary for the reasons that I have given. Accordingly, I propose to make an order for costs. Mr Galloway urges upon me that, if I were minded to do so, I should also make it in terms similar to that which Hogan J was persuaded in January last year, where Her Honour ordered that such costs are to be paid within 30 days of making a final order in the property settlement proceedings.

13. I am persuaded that an order for a fixed amount is appropriate. I am not persuaded that the amount sought on behalf of the husband is a just amount. In particular, given the sum claimed of $3,826.46 relates to one item, namely, the reading of the wife’s affidavit, which I have already referred is not a particularly lengthy affidavit of itself, but attaches to it a number of annexures. Whilst I accept that it would be necessary for a perusal of the entire document for the reasons outlined by Mr Williams, I am not persuaded that a detailed word for word reading of each and every document, including where there are copies of the same document, is warranted, and I do not propose to allow the full amount of that claim for that item.

14. I propose to fix the costs payable by the wife in the sum of $6,329.00 and to allow her time to pay from the time the property proceedings are finalised.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Carew delivered on 29 January 2018.

Associate:

Date:  09/02/2018