Pencious & Pencious and Anor
[2014] FamCAFC 171
•10 September 2014
FAMILY COURT OF AUSTRALIA
| PENCIOUS & PENCIOUS AND ANOR | [2014] FamCAFC 171 |
| FAMILY LAW – APPEAL – PROPERTY – where the husband appeals orders effecting a property settlement between the parties – where the husband contends the trial judge failed to give sufficient weight to various contributions of the husband – whether the trial judge so erred – where no error demonstrated – where the husband further submitted that the trial judge erred in the treatment of various loans alleged by the husband – where no error demonstrated – where the final challenge made by the husband was to the weight given by the trial judge to the wife’s interest in a discretionary trust – whether the trial judge so erred – where no error demonstrated – appeal dismissed – husband ordered to pay the wife’s and the intervener’s costs of the appeal. FAMILY LAW – APPEAL – COSTS – where the husband appeals an order that he pay the intervener’s costs – where the husband contends that the intervener chose to participate in the proceedings and its participation was not required – where the husband sought orders that directly affected the intervener – where it was proper for the intervener to participate in the proceedings – where no error demonstrated – appeal dismissed – husband ordered to pay the intervener’s costs of the appeal. |
| Family Law Act 1975 (Cth), s 79, s 75(2) |
| Albion Hotel Pty Ltd v Federal Commissioner of Taxation (1965) 115 CLR 78 |
| APPELLANT: | Mr Pencious |
| RESPONDENT: | Ms Pencious |
| INTERVENER: | Searle Pty Ltd |
| FILE NUMBER: | MLC | 11069 | of | 2008 |
| FIRST APPEAL NUMBER: | SOA | 36 | of | 2013 |
| SECOND APPEAL NUMBER: | SOA | 55 | of | 2013 |
| DATE DELIVERED: | 10 September 2014 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Thackray, Murphy and Tree JJ |
| HEARING DATE: | 2 July 2014 and written submissions filed 9 and 16 July 2014 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 28 May 2013 and 13 September 2013 |
| LOWER COURT MNC: | [2013] FamCA 375 [2013] FamCA 754 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Dickson QC |
| SOLICITOR FOR THE APPELLANT: | Altona Legal |
| COUNSEL FOR THE RESPONDENT: | Mr North SC |
| SOLICITOR FOR THE RESPONDENT: | Adrian Abrahams Family Lawyers |
| COUNSEL FOR THE INTERVENER: | Mr Flynn |
| SOLICITOR FOR THE INTERVENER: | Halperin & Co Pty Ltd Lawyers |
Orders
In respect of the appeal in SOA 36 of 2013:
(a)The appeal be dismissed;
(b)The appellant husband pay the respondent wife’s costs of and incidental to the appeal in an amount agreed in writing or, failing agreement, as assessed; and,
(c)The appellant husband pay the intervener’s costs of and incidental to the appeal in an amount agreed in writing or, failing agreement, as assessed.
In respect of the appeal in SOA 55 of 2013:
(a)The appeal be dismissed; and,
(b)The appellant husband pay the intervener’s costs of and incidental to the appeal in an amount agreed in writing or, failing agreement, as assessed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pencious & Pencious and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE |
Appeal Number: SOA 36 of 2013 and SOA 55 of 2013
File Number: MLC 11069 of 2008
| Mr Pencious |
Appellant
And
| Ms Pencious |
Respondent
And
| Searle Pty Ltd as trustee of the Searle Family Trust |
Intervener
REASONS FOR JUDGMENT
The husband appeals orders for settlement of property made by Benjamin J on 28 May 2013 pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). Those orders divided the parties’ interests in property in the proportion 57 per cent to the wife and 43 per cent to the husband. The parties had separated in 2008, about five years prior to the trial, after a marriage of about 20 years.
Searle Pty Ltd is also a respondent to this appeal. It is controlled by the wife’s parents. It is the trustee of the Searle Family Trust (“the trust”) and intervened in the proceedings below. Its role in the trial centred on a claim by the husband that the wife had a vested interest as a beneficiary of the trust. His Honour rejected that argument, describing the wife’s interest as “a mere expectancy”. On 14 August 2013, his Honour ordered the husband to pay the intervener’s costs of the trial. The husband also appeals that order.
The husband’s appeal against property orders (SOA 36 of 2013) will be called for convenience “the property appeal” and will be dealt with first.
The Property Appeal
At the outset of the appeal, Queen’s Counsel for the appellant husband abandoned 16 of the 26 grounds of appeal. As argued, the remaining grounds were said to embrace four central issues.
The first issue was described as “the $243,000 issue” and is said to relate to grounds 5 and 10. The second issue is “the $121,000 issue” and is said to relate to grounds 2 and 26. The third issue – the “money in Greece issue” – is said to pertain to ground 13 which, as pleaded, is in these terms:
…the learned Trial Judge failed to account [sic] into account that the respondent wife had made no contributions to the monies held in Greece when determining contributions of the parties.
Whatever might be meant by the somewhat elusive terms of this ground, the arguments advanced by counsel for the husband bear little resemblance to it.
Despite, it might be said, some deftness of touch by counsel for the husband, there is considerable merit in the criticism by Senior Counsel for the wife that the husband did not address this ground at all. Ground 13 as pleaded might fail for that reason alone. The husband’s counsel in fact addressed a different challenge, namely that the contribution finding made by his Honour was not reasonably open on the evidence. Yet, counsel for the wife was, he conceded fairly, well able to meet the argument as ultimately made and, again fairly, consented to the argument proceeding without formal amendment to reflect the argument.
The fourth issue is described as “the trust issue”. It might be seen to refer to grounds 16 to 18 of the Notice of Appeal. The husband’s counsel told us, initially, that these grounds would be “recast”. In fact, they were, in reality, abandoned in favour of a redrawn ground that was the subject of a formal application for amendment.[1] That application was granted consequent upon giving the parties an opportunity to address any additional issues arising therefrom in written submissions which were filed subsequently. As eventually formulated, that ground, which we will call for convenience “ground 16A” so as to distinguish it from the original ground 16, is:
The Learned Trial Judge failed to properly take into account and adjust under s 75(2) for the wife’s likely future inheritance arising from her status as a Specified Beneficiary of the [Searle] Family Trust.[2]
[1] Trial transcripts, 2 July 2014, pp 34 -35, 38 and 40.
[2] Trail transcripts, 2 July 2014, p 40.
The premise for the new ground is entirely different to that which founds grounds 16 to 18 as pleaded; it is now accepted for the purposes of the challenge before us (contrary to the case maintained below) that his Honour was correct to find that the wife did not have an interest in the trust which constituted “property” for the purpose of s 79.
Before dealing in turn with each of the issues identified by counsel for the appellant, it is necessary to refer to central credit findings made by his Honour which are unchallenged and which provide a crucial background to the issues to be discussed and our ultimate rejection of the first three issues.
The Trial Judge’s Credit Findings
A number of findings were made by the trial judge significantly adverse to the husband’s credit (at [98], [101], [103], [123]-[126]). Among those findings are specific findings that the husband was “at times … plainly untruthful” (at [98]) and that “the husband is not a witness of truth” (at [123]).
No challenge is mounted to a number of specific factual findings made by his Honour contrary to sworn assertions made by the husband (at [104]-[112]). Many of those findings are relevant to three of the four central issues raised by the appellant’s counsel before us.
Further specific findings were made by his Honour that the husband had failed to make proper financial disclosure. Those findings, too, are not challenged and are important.
The “$243,000 Issue”
The sum referred to[3] stood to the credit of a bank account of a company which, it is conceded, is the “…alter ego of the husband and/or wife…” It is accepted that by the time of trial the money had been spent by the husband. His Honour included the sum as property in which the husband had an interest; that is, to use erstwhile common parlance, his Honour treated the sum as “an add back” as against the husband (at [133]).
[3] The precise amount is $243,779.
Stripped to its essentials, the appellant’s argument proceeds as follows. Five years had elapsed since separation. The husband had vacated the matrimonial home which the wife continued to occupy. He incurred living expenses which were not unreasonable during the five years post separation. He had, it was asserted, a limited income.
Against that background, it was asserted that it was for the wife to prove “some wanton-type expenditure” so as to justify the “add back” and that “…no analysis [was] undertaken by his Honour” of the relevant principles, which would have seen ordinary living expenses not added back against the husband. Counsel for the husband argues that the evidence established expenses met by the husband during the five years post separation totalling nearly $282,000 and that these expenses were not challenged as unreasonable at trial and nor does his Honour find them to be so. In further support of that argument it is contended that it was not open to his Honour to find (at [117]ff) that debts which the husband claimed he owed were in fact not debts at all.
In our view, counsel’s arguments ignore two crucial matters. First, his Honour did not believe the husband’s claims in respect of the debts and no challenge mounted by the husband suggests that his Honour was in error in so concluding. Secondly, the arguments fail to recognise his Honour’s finding that the sum of $243,779 was but a part of significant other funds available to the husband which, on the husband’s own case, were unilaterally dealt with by him, including for the meeting of claimed living expenses. Specifically, his Honour found the husband had available, in addition to the impugned $243,000:
·About $261,000 because his Honour rejected as false the husband’s assertion that he repaid loans owed to various individuals (none of whom were called to give evidence) (at [169], [171], [177] and [179]);
·The sum of $165,000 being one-half of the cash that was in the safe at the former matrimonial home (at [44]-[46]). His Honour’s finding rejecting the husband’s contention that the wife had taken all of that money is not challenged on this appeal;
·About $117,000 in compensation from Transport Accident Commission (at [113]);
·The sum of $295,000 arising from his Honour’s rejection of the husband’s argument that he advanced $295,000 to his cousin in Greece as an interest free loan (at [118], [122] and [126]);
·An amount of $176,000 resulting from his Honour’s finding that this sum, allegedly lent by the husband to a company which he controlled ([PP Pty Ltd]) had in fact been “spent or dissipated” by the husband (at [118]).
Counsel for the wife argues, we consider correctly, that his Honour’s finding was not, ultimately, based upon a contention that the husband had been reckless or profligate in the sense described in, for example, Kowaliw and Kowaliw (1981) FLC 91-092 or Townsend and Townsend (1995) FLC 92-569. Rather, it is argued, the specific findings just referred to (and the rejection of the husband’s evidence and credibility more generally) saw the sum being “added back” because his Honour could not be satisfied about what had become of the other very substantial funds just referred to.
That submission derives considerable force from the manner in which his Honour concluded his discussion of this issue:
255.I have elsewhere in these reasons discussed the alleged loans and invoices and the concern I have as to their veracity. The husband had control of that sum of $243,779 and has not frankly, properly or adequately explained how this relatively large sum was applied.
256.As such I have accepted the submission of counsel for the wife on this issue and will add back the $243,779.
That ultimate conclusion is based upon the series of findings earlier referred to. No sustainable challenge is mounted to those findings. Those findings are, in turn, informed by his Honour’s rejection of the husband’s credit. No challenge is mounted to that finding (or series of findings to that effect).
No error is demonstrated. There is no merit in “the first issue” and grounds 5 and 10 fail accordingly.
The $121,000 Issue
The books of account of the trust reveal a loan of $121,677 owing by the trust to the husband. The husband deposed that he had paid that sum to the trust through a corporate vehicle which he controlled. He says that the money is represented by the total paid through that vehicle to the trust, via the wife’s father, over a three-year period during the mid to late 1990s. The book entry was the only documentary evidence of the existence of any loan or, indeed, any payment.
The central argument on behalf of the husband is that the evidentiary effect of the book entry is analogous to the evidentiary effect of the skid mark in Fox v Percy (2003) 214 CLR 118. That is, it is contended that the book entry is an incontrovertible fact that admits of no other logical explanation other than that the debt is owed.
This argument should be rejected.
First, a book entry is not an incontrovertible fact in the sense in which that expression is used in Fox v Percy. His Honour was, with respect, correct in finding that “…a journal entry or recording of a loan account in a financial statement is not determinative and does not constitute the verification of the transaction” (at [233] and [235], citing Albion Hotel Pty Ltd v Federal Commissioner of Taxation (1965) 115 CLR 78 at 92 and Lend Lease Corporation Ltd v Commissioner of Taxation (1990) 95 ALR 427 at 438 per Hill J).
Secondly, the situation in Fox v Percy was the opposite of that which pertains here. There, other evidence supported the conclusion drawn primarily from the skid marks. In addition, evidence contrary to the conclusion to be drawn from the skid marks, together with other evidence, was “unconvincing” (Fox v Percy, per Gleeson CJ, Gummow and Kirby JJ at 130-131). By way of contrast, here, as his Honour found for reasons explained in the judgment, the book entry itself was unconvincing as evidence of the transaction said to underpin it. That is, in stark contrast to the position in Fox v Percy, his Honour determined that the book entry was the least convincing piece of evidence from which a conclusion in respect of the alleged loan should be drawn. No error has been demonstrated in his Honour’s conclusion in that respect.
Thirdly, his Honour found that other evidence did not support any inference that might otherwise be drawn from the book entry. In the context, again, of adverse findings as to the husband’s credit generally, his Honour, found for example that:
·The evidence of the wife’s mother that the book entry was an accounting error should be accepted; she was not aware of any loans made by the husband and, further, that the evidence of the wife that the husband never raised the alleged loan with her should also be accepted (at [212] and [237]);
·Despite specific directions having been made for the husband to provide particulars and documentation in respect of the alleged loan, his particularisation was “vague and unsatisfactory” and when given the opportunity to “set out the basis of his claim”, the husband provided material which “…was inadequate and lacked detail” (at [222]);
·Despite seeking an order against the wife’s parents, the husband did not seek reimbursement for the alleged loan (at [217]); the husband made no reference to any such debt in his Financial Statements (at [218]); there was no objective evidence of demand having been made until after the trust disclosed financial records during the course of the proceedings (at [215]); and, that despite the loan allegedly having been made through the husband’s company and him asserting that documents were extensive, he produced no such documents (at [223]);
·The husband’s claim “…for the alleged debt [was] of recent invention” (at [217]).
There was no evidence before his Honour from the trust’s accountant or bookkeeper. However, counsel for the husband conceded before us that the husband’s trial counsel raised no point before his Honour relating to, or arising from, that omission.
No error is demonstrated. There is no merit in “the second issue” and grounds 2 and 26 fail accordingly.
The Money in Greece Issue
The husband claimed that an amount of $295,000 which had been held in an account in his name in Greece had been lent to a cousin. This claim was rejected by the trial judge. His Honour included this sum among the property in which the husband had an interest and, thus, subject to the ultimate orders made by his Honour. No challenge is mounted to any of those findings.
However, it is said that if this sum is treated in this way, it is a significant direct financial contribution made by the husband and, had it been properly taken into account as such, the contribution finding made by his Honour cannot stand as a reasonable exercise of discretion. Stripped to its essentials, the error is said to emerge from an asserted failure by the trial judge to compare the direct financial contributions found to have been made by the wife of between $120,000 and $170,000, with the $295,000 contribution made by the husband constituted by the money in Greece.
We accept the submission by counsel for the wife that the argument just described ignores the entirety of the contribution findings made by his Honour. We accept the submission that his Honour’s reasons, particularly at [279]-[284], examine properly and adequately the nature, form and characteristics of all contributions of all types made by each of the parties as s 79 requires, and that a comparison confined to monetary amounts does not do justice to the breadth of considerations properly taken into account in assessing contributions.
Once the totality of the contribution findings is considered, the argument on behalf of the husband in our view does no more than assert that a conclusion as to contributions different to his Honour’s might reasonably have been arrived at, including by us. That is not sufficient to demonstrate the asserted error.
There is no merit in “the third issue”; ground 13 fails accordingly.
The Trust Issue
The trust was settled in 1977, some 11 years prior to the commencement of the parties’ marriage. The wife’s parents are the sole directors and shareholders of the corporate trustee. They are the “Guardian” of the trust. The Trust Deed was subject to a Deed of Variation executed on 1 September 1984 (that is, some four years prior to the parties’ marriage). A further Deed of Variation was executed on 4 March 2005. It is accepted for the purposes of this appeal that this later deed is invalid.
The interpretation of the terms of the trust, and of the 1984 Deed of Variation, was the subject of significant argument before us. For reasons about to be explained, the significance of those arguments diminish dramatically by reason of the terms of the ground as now drafted and the consequent abandonment of the husband’s challenge to the finding that the wife had a “mere expectancy’ in the trust. It is, however, necessary to examine the relevant terms of the trust and the arguments in respect of their interpretation and of the 1984 Deed of Variation in order to understand the central thrust of the husband’s arguments in respect of the amended ground.
The Terms of the Trust and Deed of Variation
In broad terms sufficient for the purposes of this appeal, it can be said that the Trust Deed gives to the Guardian of the trust (the wife’s parents) ultimate control over the entitlement of beneficiaries to income or capital. For example, while Clause 10 provides that, “…every discretion vested in the Trustees shall be absolute and uncontrolled and every power vested in them shall be exercisable at their absolute and uncontrolled discretion…” the discretion given to the Trustees is caveated significantly in the succeeding provisions of the same clause:
(b) where a Guardian is named in the schedule –
(i)the Trustees shall not make a nomination or declaration of exclusion pursuant to Clause 1(b) hereof nor exercise any power contained in Clauses 6(a), 6(b), 7(v), 7(w), or 18 hereof, except with the consent of the Guardian;
(ii)on and after the death of the person described as Guardian in the Schedule or the death of the last named of such persons the Trustees shall not have power to make any nomination or declaration of exclusion pursuant to Clause 1(b) hereof nor shall the Trustees exercise the powers referred to in the last preceding sub-paragraph in a manner calculated to impair or diminish the expectations of the Specified Beneficiary or Specified Beneficiaries or any person or persons on whom pursuant to any appointment of Guardian pursuant to Clause 4 hereof the Trust Fund is to devolve upon the Vesting Day;
(c)the Guardian may at any time by instrument in writing, declare that henceforth the Trustees shall not be obliged to obtain the consent of the Guardian as a condition precedent of the making or revocation of a nomination or declaration of exclusion…
In a similar vein, Clause 4 of the Trust Deed provides relevantly:
4.AS from the Vesting Day the Trustees shall stand possessed of the Trust Fund and the income thereof in trust for such of the General Beneficiaries for such interest and in such proportions and for one to the exclusion of the other or others as the Trustees may with the consent of the Guardian (if any) by instrument in writing revocable before the Vesting Day appoint provided always that the Trustees shall not without such consent revoke any revokable appointment and provided further that if there is no Guardian, the Trustees shall have such power of appointment free from any consent…
Four matters significant to the appeal as argued should be observed:
·The Guardian of the trust (specified in the Schedule as the wife’s parents) are not, and cannot be, General Beneficiaries of the Trust. The General Beneficiaries are the wife and her siblings (by reason of them being the Specified Beneficiaries defined in the Schedule to the trust) together with, potentially, a broader class of family members (Clause 1 definitions);
·The Trustees’ relevant discretions and powers – including, importantly, which of the beneficiaries shall ultimately receive a benefit and the amount and proportion of any such benefit – are subject to the consent of the Guardian;
·Any written consent given by the Guardian is revocable before the vesting day; and
·There was no evidence before the trial judge probative of either of the wife’s parents lacking capacity.
The last of the matters just enumerated was, ultimately, the subject of a concession by counsel for the husband. Initially, in argument before us, counsel contended that, because there were two guardians and the powers given to “the Guardian” under the Trust Deed had to be exercised jointly, “there is no realistic prospect of … consent being forthcoming for any change or for any revocation because of the evidence that the father is currently suffering from dementia”. [4] However, whatever else may have been said about evidence before his Honour as to that condition, counsel ultimately conceded that it could not be said on that evidence, or any other evidence before his Honour, that the wife’s father lacked capacity.[5]
[4] Trial transcript, 2 July 2014, p 27, lines 24-25.
[5] Trial transcript, 2 July 2014, pp 57-58 and 83.
There is little doubt that the 1984 Deed of Variation was effective, by Clause 1, to bring forward the date of vesting of the trust. The vesting date, by reference to that clause, is the date of death of the last to die of the wife’s parents. However, Clauses 2 through 4 of that deed are significantly more problematical.
Those clauses founded, essentially, the argument below that the wife had an interest that should be treated as “property” for s 79 purposes. In broad terms, Clauses 2 and 3 provide that, respectively, the “…net income of the Trust Fund for the last Accounting Period…” and “the Trust Fund” be, respectively, “…divided between, set aside for, and henceforth absolutely belong to…” and “…be distributed … absolutely…” to the wife and her two siblings in one-third shares.
The Role of the Trust’s Terms in these Proceedings
Counsel for the trustee company submitted below and submits before this Court, that Clauses 2 through 4 of the Deed of Variation should be severed. The plain intention of the Deed of Variation, it is argued, is to alter the vesting date and, because Clause 1, without more, achieves that purpose, the clauses are surplus to that intention. In the alternative, it is argued that the clauses, on their proper construction, effect the specified distribution upon the death of the last of the father and the mother. If so, no material alteration is made to the curtailment of the Trustees’ discretions provided for in the Trust Deed and nor, crucially, are revokable decisions pursuant to that Trust Deed rendered irrevocable.
The resolution of those matters had the potential to be very significant if the grounds remained those which were pleaded and the contention was that, contrary to his Honour’s finding, the wife has a current vested interest in the corpus of the trust. However, those challenges are – correctly, in our view – not pursued.
Similarly, the interpretation of the terms of the Trust Deed and the meaning and effect of the Deed of Variation have the potential to be very important if it is contended that, even if not entitled to an interest which can be said to be vested now, the wife has a form of irrevocable entitlement to receive a distribution in the future. If that situation pertained, even if it could not be said that the wife’s interest was an interest in property for s 79 purposes, the irrevocability of an expectancy might be seen in appropriate circumstances to be a very significant “s 75(2) factor”. The weight which might properly be accorded to it as one of the relevant factors pursuant to that section could be seen to be enhanced by the fact that irrevocability removes significant potential contingencies (for example, that the wife could potentially receive nothing).
However, crucial to the arguments advanced on behalf of the husband in respect of the ground pertaining to “the trust issue” as now drafted, his counsel conceded that the potential benefit is “not literally irrevocable”. Rather, the argument put on behalf of the husband can be seen in this exchange:
COUNSEL:…if , for instance, [the wife’s] mother had passed away, but her father was still alive, but not capable, then it would be the AV & VC type issue,[6] where no guardian, therefore no prospect of a change of trustees, and therefore, specified beneficiaries – with or without this deed – specified beneficiaries have as good as an irrevocable entitlement; it is not going to change. It’s not quite as high as that [in this case] but it’s not terribly far off, and in circumstances where you’ve got the [wife’s] mother’s evidence that’s unequivocally, “Yes, they [the wife and her two siblings] get it when we die. They get a third each”, that’s the intention. … in law [the parents] literally, in the right setting and if the cards fell the right way and [the wife’s mother] could revoke it … true it is, okay, but it’s not going to happen.
TREE J: But it’s your point [that] it’s possible but unlikely? …
COUNSEL: Extremely unlikely. Extremely unlikely.[7]
[6]A reference to the decision of this Court in AC and Ors & VC and Anor (2013) 49 Fam LR 276 where there was “…an unchallenged finding that the husband and the wife, as specified beneficiaries of the trust, each had a fixed and irrevocable entitlement to a share of the trust fund upon vesting. This entitlement existed, as appeared to be common ground, because of the absence in this case of an Appointor or Guardian for the trust” (at 297).
[7] Trial transcript, 2 July 2014, p 30, lines 5-18.
The argument advanced on behalf of the husband is, then, that while it is accepted that the wife has “a mere expectancy” as distinct from a vested interest, the likelihood of receipt of a prospective substantial benefit is so great, and the likelihood of the (controlling) Guardian(s) changing their mind is so remote, that justice and equity demands that it be treated as a matter of real significance in the assessment of “the s 75(2) factors”.
Thus, as now formulated, the error is said to be one pertaining to the attribution of weight.
The Appellant’s Challenge in Context
The true gravamen of the submissions is that there is error in failing to attach more weight to one set of predictions (that an interest of the wife will vest, that it will vest soon, that it will vest without substantial depletion of the corpus or alterations to what is said to be a likely prospective entitlement) than to an alternative set of predictions that may see a significantly different and much less favourable outcome for the wife.
The findings made by his Honour central to this challenge as now pleaded and argued are:
345.The other issue raised by the husband’s counsel in final submissions was the question of an adjustment in his favour, a consequence of the wife having a financial resource arising out of the trust. I have already held that the trust is not included in the pool of property. The trust is such, that if both of the wife’s parents passed away under the current iteration of the trust, there is likely to be a vesting. However, the guardians of the trust are still in place and as such the vesting date can be changed, the general beneficiaries (including the wife) can be excluded, the corpus can be increased or diminished. There is no essential difference between this trust (as it now stands) and having parents with assets who are of full legal capacity. The wife’s interest in the trust is a mere expectancy and a proportion of the corpus of the [trust] may, or may not pass to the wife. It was submitted to me that the trust would need to be valued and the husband ought to receive five per cent. The precise nature of what the five per cent related to was not specified. In the context of the s 75(5) [sic] factors it could not relate to treatment of the corpus of the trust as property and could only have related to the parties [sic] property.
346.I have not treated the corpus of the trust as a financial resource as it is similar to an anticipated inheritance from a family member who retains legal capacity, it is a mere expectancy. However, the wife’s parents have, from time to time, assisted their children (including the wife) with small loans from the trust. This is not an unusual scenario in many families. The particular loans made to the wife and her siblings over the last 10 years were relatively minor. It is likely that the assistance provided by the wife’s parents to fund the building of the matrimonial home had been provided through the trust, in whole or part. The advances made to the wife by the trust from 2000 to 2011 are not great and having regard to the jurisprudence set out in the Full Court of this Court in Essex & Essex [2009] FAMCA FC 236 which dealt with anticipatory income or benefit from a trust it is a factor I should consider. In Essex, the trust to which the husband was particularly interested enabled payment of income to him (subject to his mother’s entitlements – she being alive at the relevant time) although no payments (other than one small amount) had been paid to the husband. The reasoning in Essex was by the majority and a dissenting judgment was delivered by Faulks DCJ, who was troubled by the majority approach. This decision has also been the subject of some comment by learned authors, but I am bound by the majority Full Court authority.
347.As such, in the circumstances where the wife received small amounts from the [Searle] Family Trust and this being a financial resource, I have determined that there ought to be an adjustment. Having regard to the advances to the wife from the trust, from time to time, I have determined that an adjustment of two per cent in favour of the husband is appropriate. This will amount to an overall four (4) per cent difference.
(Footnotes omitted)
His Honour found (at [137]) that “[t]he trust has assets the value of which could total ten million dollars or more.”[8] The imprecision of that finding as to value arises because his Honour decided that the parties would not be put to the expense of obtaining formal valuation evidence unless it was determined that the wife had a proprietary interest in the corpus of the trust, or that it comprised a financial resource of hers. His Honour said:
8.In the event that I determined that the wife did have a legal and/or equitable interest in the trust which had some monetary value, or I needed that value for purposes of determination of financial resources pursuant to s 75(2) of the Family Law Act, I would relist the matter and inform the parties. I would then have taken evidence as to the particular value of the assets of the trust. As it was the Court and the parties had some indication of the property contained within the trust from the affidavit of [Mrs S] (the wife’s mother) filed 15 March 2013.
9.For the reasons set out below, I am satisfied that the trust is a mere expectancy of the wife, akin to a possible inheritance and there is no value in her possible entitlement under the terms of the trust. In the circumstances of my findings, I do not need to have the trust valued for the assessment of the s 75(2) factors.
[8]The trust’s primary assets are real properties. Exhibit H11 before his Honour contained, inter alia, tax returns and financial statements for the trust. It also contained appraisals of various properties owned by the trust. The letter containing those appraisals became Exhibit 3 before this Court. Reference to that document reveals an approximate estimate of the “value” of corpus of the trust of “something like” $7.5 million ( Appeal transcript, 2 July 2014, p 80).
The reference by his Honour in that passage and also (at 346) to the distinction between a “financial resource” and a “mere expectancy” might be seen to mirror the distinction drawn, for example, in White and Tulloch v White (1995) FLC 92-640 at 82,459 in respect of a future expectancy under a will. Indeed, as has been seen, his Honour compared the wife’s expectancy here to that of “…an anticipated inheritance from a family member who retains legal capacity…” In De Angelis & De Angelis (2003) FLC 93-133 this Court held that justice and equity might require such an expectancy to be taken into account pursuant to s 75(2)(o), however it remains a matter of discretion, informed by the particular facts of each case.
It should be accepted that the possible value of a potential entitlement might have some impact upon the weight – if any – attached to the expectancy as a relevant discretionary matter; a potential to receive $10 million might be seen to carry more weight than the potential to receive $10. So, too, the number and type of the contingencies that may impact upon the potential receipt of a benefit might be seen to impact upon any attribution of weight. So much is in our view clear as a matter of logic, but is also consistent with authorities where predictions as to future events might be properly considered.[9] Those factors can be seen to be symbiotic: a high degree of probability will likely matter little if the potential benefit is very small and a very considerable benefit may matter little if the number and type of contingencies makes receipt extremely unlikely. What remains as a result, is an exquisitely difficult exercise of discretion.
[9]See, for example, expectancies under a will where a testator retains capacity (De Angelis); the potential impact of capital gains tax not yet crystallised (Rosati & Rosati (1998) FLC 92-804 at 85,043); and, indeed, non-vested entitlements as the beneficiary of a discretionary trust (for example, Kelly & Kelly (No 2) (1981) FLC 91-108 at 76,803).
Once it is accepted that the husband’s challenge is one of weight directed to but one of a number of factors (s 75(2)(a) to (q)), informing, in turn, but one of the matters required to be considered pursuant to (s 79(4)), the difficulties confronting an appellant asserting error become manifest.[10] The specific circumstances here highlight that difficulty.
[10]See, for example, Gronow v Gronow (1979) 144 CLR 513 and Norbis v Norbis (1986) 161 CLR 513 at 540.
First, once it is accepted that the wife’s interest is a “mere expectancy”, it remains just that. The amount to be received – indeed, the receipt of anything at all – is and remains uncertain by reason of it being subject to a number of different contingencies (for example, that the wife might pre-decease her parents; that the corpus or a significant proportion of it might be distributed other than to her; or that the terms of the trust might change by reference to a further variation of the trust). Further, the quantum of the corpus of the trust, while the subject of some imprecise evidence at trial, could vary markedly over time, by reference to market changes, tax liabilities upon realisation of assets or other like factors, all of which are largely imponderable. The fact that one or more contingencies might be seen to be more or less likely to occur than others does not render the expectancy more certain; likelihood is not the same as certainty.
Secondly, as we have already mentioned, a consideration of an uncertain future expectancy is but one of a number of relevant factors to be considered by reference to s 75(2) and a determination of the weight to be accorded to it is quintessentially discretionary.[11]
[11]In the context of the analogous future expectancy under the will of a testator with full capacity used by the trial judge, see, for example, De Angelis at 78, 246.
Thirdly, while it might be possible to accord an approximate current “value” to the corpus of the trust, the assumed receipt of a proportional amount of that corpus does not represent the “value” of the expectancy and nor does any such amount so derived provide any necessary connection to the percentage, or amount, of any adjustment that might be considered appropriate by reference to the totality of the relevant “s 75(2) factors”. In any event, there is no challenge by this appeal to the finding below at [9] that the wife’s mere expectancy had no value.
Fourthly, his Honour was mindful of both the capital and income (albeit the latter derived from loans or gifts) aspects of the wife’s expectancy; he in fact made an adjustment to take account of the prospect of further loans or gifts derived from the trust. He was not persuaded to make any such adjustment for the prospect of some future capital distribution to her, which is unsurprising given his Honour’s unchallenged finding that the interest under consideration was akin to a possible inheritance. So much is plain from paragraphs [9], [345], [346] and [347] of the reasons quoted above.
Any of us may have accorded greater weight to the wife’s “mere expectancy” than did his Honour. But, that is not sufficient to establish appealable error. We are not persuaded that his Honour erred whether by only giving weight to the income aspect of the trust, or in the attribution of weight to that matter, as reflected in the 2 per cent adjustment. Nor are we persuaded that his Honour’s assessment pursuant to s 79(4)(e) was “wholly wrong”.
Conclusion as to the Trust Issue
We are not persuaded of error in respect of “the fourth issue”. The amended ground (“ground 16A”) fails.
While we have found that counsel’s amended ground, rather than being a “recasting” of grounds 16 to 18 of the Notice of Appeal, is an abandonment of them, we would, for the sake of completeness – noting that no formal abandonment occurred – formally hold that grounds 16 to 18 of the Notice of Appeal fail as having no merit.
Conclusion
The property appeal fails.
Costs of the Property Appeal
As is customary, despite not knowing the result of the appeal, we sought submissions from all parties in respect of the costs of the property appeal in the event of alternative outcomes.
The appeal having failed, it is conceded on behalf of the husband that the respondent wife’s application for costs cannot be resisted.
The husband should pay the wife’s costs of and incidental to the property appeal in an amount agreed in writing or failing agreement as assessed.
The intervener similarly applies for costs. Similar considerations apply to those referable to the wife. In addition, it is pointed out that the grounds of appeal as filed challenge the trial judge’s finding that the wife did not have a current vested interest in the trust. That contention was abandoned effectively on the morning of the hearing of the appeal in favour of the argument as earlier referred to in these reasons.
The husband should pay the intervener’s costs of and incidental to the property appeal in an amount agreed in writing or failing agreement as assessed.
“The Costs Appeal” SOA 55 of 2013
His Honour’s reasons for judgment in support of an order that the husband pay the intervener’s costs of the trial proceedings and the costs of the costs application are brief. So, too, are the submissions before this court by counsel for each of the husband and the intervener.
Counsel for the husband recognised at the outset the difficulty confronting him by reference, for example, to what was said by this Court in Prantage & Prantage (2013) Fam LR 197:
107.In Harris & Harris (1991) FLC 92-254 this Court said at 78,711:
orders for costs are peculiarly a matter which are within the discretion of the trial Judge and it is only in the rarest of cases that the Full Court should interfere with a costs order.
108.Although this may state the proposition …at its highest… (Browne v Green (2002) FLC 93-115), this Court is usually most reluctant to interfere with a decision of a trial judge in relation to costs (Robinson & Higginbotham (1991) FLC 92-209).
In essence, counsel for the husband argues that the trust was not joined as a party but, rather, intervened on their own account. Consistent with that theme, it was argued that they were not bound to participate in the proceedings as no order for payment was being sought from the trust and could just as readily have had their submissions dealt with in their absence (for example by way of written submissions) or, alternatively, could have allowed the proceedings to run their course given that no order was sought binding the trust.[12]
[12] See, for example, trial transcript, 2 July 2014, pp 93.
Leaving aside the merit of the latter submission given the husband’s contention at trial that the wife had a vested interest in the trust[13], no argument that the intervener’s involvement was unnecessary was made before his Honour in respect of the husband’s application for costs. Indeed, it was submitted before his Honour by counsel for the husband in response to the intervener’s application for costs that:
– it was the application of the intervener to make themselves a party to the proceedings. We didn’t bring them. They made the application, which your Honour, quite properly, granted … with no objection.[14]
Appropriately, counsel for the husband effectively conceded before us that no such argument was put.[15]
[13] See, trial transcript, 2 July 2014, pp 94-95.
[14] Trial transcript of proceedings before Benjamin J, 31 July 2013, p 35, lines 21-23 (emphasis added).
[15] Trial transcript, 2 July 2014, p 95.
We accept the argument by counsel for the trust that orders were sought by the husband which, if made, could have had a significant impact upon the trust’s interests, such that those interests properly required protection via its involvement in the proceedings.
We see no merit in the challenge to his Honour’s costs orders. The appeal will be dismissed.
Costs of Appeal SOA 55 of 2013
The respondent intervener has been wholly successful in the costs appeal. No arguments of substance were raised by the husband. The husband seeks to agitate an issue not raised below.
We are of the view that there are justifying circumstances such that an order for costs ought be made in favour of the intervener.
We are conscious that we have already indicated that an order for costs will be made as against the husband in respect of appeal SOA 36 of 2013 and that, as a result, there exists the possibility of duplication with the costs incurred in respect of this appeal. Nevertheless, we consider that some costs (for example the preparation of a discrete written outline of argument) are likely to have been incurred specifically in respect of this appeal. The potential for unjustified “double dipping” between the two appeals can be avoided by agreement between the parties or, failing agreement, within the assessment process.
In those circumstances a separate order for costs in favour of the trustee of and incidental to appeal SOA 55 of 2013 is justified, and we so order.
I certify that the preceding seventy-six (76) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Thackray, Murphy and Tree JJ) delivered on 10 September 2014.
Associate:
Date: 10 September 2014
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