Rigby & Kingston (No. 4)
[2021] FamCA 501
•9 July 2021
FAMILY COURT OF AUSTRALIA
Rigby & Kingston (No. 4) [2021] FamCA 501
File number(s): BRC 12882 of 2016 Judgment of: CAREW J Date of judgment: 9 July 2021 Catchwords: FAMILY LAW – PROPERTY – Whether it is just and equitable to make an order under s 79(1) of the Family Law Act 1975 (Cth) – Where the husband contends that it is not just and equitable to make an order where the entirety of the property pool has not been valued – Whether the wife’s rights as a discretionary beneficiary in various trusts and as a residuary beneficiary in a trust are property for the purposes of s 4(1) of the Family Law Act 1975 (Cth) – whether the wife’s rights as a shareholder in various companies are property for the purposes of s 4(1) of the Act – Whether the wife’s rights have any practical value – Whether an Umbrella Deed affects the nature of the legal and equitable interests of the wife in property Legislation: Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)
Cases cited: Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337
Bevan & Bevan (2013) FLC 93-545
Briese & Briese (1986) FLC 91-713
Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12
Emu Brewery Mezzanine Ltd (in Liq) v Australian Securities and Investment Commission (2006) 32 WAR 204
Fordyce v Ryan [2017] 2 Qd R 240
Gartside v Inland Revenue Commissioners [1968] A.C. 553
Hall v Hall (2016) 257 CLR 490
Harris & Dewell (2018) FLC 93-839
In the Marriage ofBest & Best (1993) FLC 92-418
In the Marriage of Crapp & Crapp (1979) FLC 90-615
In the Marriage of Duff and Duff (1977) FLC 90-217
In the Marriage of Evans (1991) FLC 92-223
In the Marriage of Goodwin and Goodwin Alpe (1991) FLC 92-192
In the Marriage of Hauff (1986) FLC 91-747
In the Marriage of W & W (1980) FLC 90-872
JEL and DDF (2001) FLC 93-075
Karllson & Karllson [2014] FamCA 571
Kennon & Spry (2008) 238 CLR 366
Lewis v Condon (2013) 85 NSWLR 99
Livingston v Commissioner of Stamp Duties (Q.) (1960) 107 CLR 411
Loxton v Moir (1914) 18 CLR 360
Marchant & Marchant (2012) FLC 93-520
Mullane v Mullane (1983) 158 CLR 436
Norman v Federal Commissioner of Taxation (1963) 109 CLR 9
Omacini & Omacini (2005) FLC 93-218
Pittman & Pittman (2010) FLC 93-430
Rigby & Kingston and Ors (No. 2) [2020] FamCA 695
Re Webster (1975) 132 CLR 270
Re Weir's Settlement Trusts [1971] Ch. 145
Sainsbury v Commissioners of Inland Revenue [1970] Ch. 712
Sand & Sand (2012) FLC 93-519
Simmons v Simmons (2008) 40 Fam LR 520
Stanford v Stanford (2012) 247 CLR 108
Waterman & Waterman (2017) FLC 93,762
Watson & Ling (2013) FLC 93-527
Hon Justice Brereton in The High Court and family law: Two recent excursions (2013) 3 Fam L Rev 63
Number of paragraphs: 159 Date of hearing: 13–15 April 2021 Place: Brisbane Counsel for the Applicant: Dr Ingleby Solicitor for the Applicant: Hopgood Ganim Lawyers Counsel for the Respondent: Mr Kirk QC Solicitor for the Respondent: Hartley Family Law Counsel for the Other Respondents: Mr Sullivan QC with Ms Minnery Solicitor for the Other Respondents: Hede Byrne & Hall ORDERS
BRC12882 of 2016 BETWEEN: MR RIGBY
Applicant
MS KINGSTON
Respondent
AND: MR F KINGSTON & ORS
Other Respondents
ORDER MADE BY:
CAREW J
DATE OF ORDER:
9 JULY 2021
THE COURT DIRECTS THAT:
1.The matter be listed for the pronouncement of orders on a date to be advised.
2.The husband’s application for spouse maintenance be listed for hearing on a date to be advised.
3.The parties are requested to confer about a convenient date/s for the pronouncement of orders and jointly inform the associate for the Honourable Justice Carew by email within 7 days.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Rigby & Kingston has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAREW J:
The dispute between Mr Rigby (“the husband”) and Ms Kingston (“the wife”) concerns property settlement and spouse maintenance. The wife’s two brothers, Mr F Kingston (“Mr F”) and Mr G Kingston (“Mr G”), and three corporate trustees of three trusts are also parties in the proceedings.
This is the second series of trial dates listed with the parties’ consent pursuant to r 16.04(c) and r 11.01 of the Family Law Rules 2004 (Cth) (“the Rules”). The first series of trial dates occurred over four days in June 2020 and did not involve the third party respondents. Factual findings were made after those trial dates, with the support of the wife and without opposition by the husband, and Reasons for those findings were delivered on 18 August 2020 and should be read with these Reasons.[1]
[1] Rigby & Kingston and Ors (No. 2) [2020] FamCA 695 (“Rigby & Kingston (No. 2)”).
Due to the unique circumstances of the dispute, the proceedings have progressed in a somewhat unorthodox way with the intention that the making of findings on significant factual matters would assist the parties to resolve their dispute. This approach was also intended to be a cost effective means of managing the dispute, particularly in so far as it involves respondents who are strangers to the marriage.
The dispute, in summary, concerns the husband’s application for a property settlement of 35% of the property of the parties or either of them pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”), and spousal maintenance pursuant to s 74. The wife resists the making of any property settlement order contending that it is not just and equitable to make any order (see s 79(2) of the Act). The wife also resists any order for spousal maintenance contending the husband has the capacity to support himself adequately (see s 72).
It is common ground that the wife’s property for the purposes of these proceedings, comprises at least property valued at about $7,000,000. The husband owns virtually nothing.
A major issue of contention relates to the nature of the wife’s interests in what has been referred to during the proceedings as the Kingston Group (a descriptor which has been used interchangeably with another). I will use the descriptor “the Kingston Group” in these Reasons.
The wife concedes ownership of shares in various entities within the Kingston Group and a right to due administration and due consideration as an eligible beneficiary of certain trusts within the Kingston Group, but argues that as she does not control the entities comprising the Kingston Group, her interests, on a practical level, represent at best, a financial resource. The husband argues that the wife’s interests represent a proprietary interest i.e. ownership, of one third of the Kingston Group and as such are property for the purposes of these proceedings. The husband contends that in addition to the estimated $7,000,000 of property the wife concedes, her interests in the Kingston Group are property and worth between $35,000,000 and $100,000,000. The wife concedes that if her interests in the Kingston Group equate to a proprietary one third interest then such property could be worth up to $50,000,000.
ISSUES
The four issues to be considered in this series of trial dates are, as agreed between the parties, as follows:
1)What are the wife’s existing legal and equitable interests in any property including in any companies and trusts comprising the Kingston Group as identified in Sch 1 to the Umbrella Deed dated 13 February 2014?
2)What is the effect, if any, of the Umbrella Deed on any existing legal and equitable interests of the wife?
3)Does the wife have a source of financial support, other than any property in which she has an existing legal or equitable interest, which she can reasonably expect will be available to her to supply a financial need or deficiency?
4)Is it just and equitable to make an order under s 79(1) of the Act? The husband contends the determination of this question is premature and can only be determined after valuations have been obtained for all property including the wife’s interests in the Kingston Group.
BACKGROUND
Although the Reasons provided at the conclusion of the earlier series of trial dates[2] provide some background, it will be convenient to restate and update the background while also incorporating the earlier factual findings.
[2] Rigby & Kingston (No. 2) (n 1).
The husband and wife married in 1991 and separated on 26 October 2015. The husband contends that prior to marriage, the parties lived in a de facto relationship from in or about 1986. The wife disputes the existence of a de facto relationship prior to marriage but nothing really turns on that dispute. It was a long relationship on any view.
The husband and wife were both born in 1965 and there is no suggestion that they are other than healthy.
There are two adult children born to the marriage in 1994 and 2001 respectively.
Prior to joining the Kingston Group in 1990, the wife worked as a professional. The Kingston Group was established by the wife’s father in 1939 and he was active in the Kingston Group until shortly prior to his death in 2008. The wife describes herself as a company director employed by Q Pty Ltd (an entity within the Kingston Group) with a weekly salary of $3,461 before tax. In addition, the wife deposes to other income and benefits of $76 per week.
The husband is a finance professional but is currently employed on a three month contract as a management consultant due to expire on 16 July 2021. The remuneration under the contract is a daily rate of $625 (plus GST) payable to the husband’s business, Rigby Consulting.
A spousal maintenance order was made in the husband’s favour on 13 November 2020 requiring the wife to pay $962 per week until 16 April 2021.
The Kingston Group, or rather, various entities within the Kingston Group, own multiple properties and operate multiple businesses across a range of areas including storage, retail, land, residential, commercial, building and accommodation.
Prior to the marriage, the wife’s father was determined to ensure that the husband did not benefit from the wealth that he had created and, in those circumstances, insisted that the husband sign a prenuptial agreement, which he did on 11 October 1991. There is no suggestion that the prenuptial agreement ousts the jurisdiction of this Court to make a property settlement order if it is just and equitable to do so. It is not a financial agreement that is binding on the husband and wife pursuant to Pt VIIIA of the Act.
Particular facts of significance in this matter include the following:
(a)The wife’s wealth has been largely derived from her father and/or her mother either directly or indirectly, in the form of inheritances and distributions from the Kingston Group as the result of the establishment and expansion of the Kingston Group by her father and in addition to a salary for work undertaken by her;
(b)The husband and wife signed a prenuptial agreement purporting to protect their respective property at the time of their marriage, and future acquired individual property and expected inheritances, from any claim by the other;
(c)After their marriage in 1991 and until 2007, the husband and wife kept their finances separate and shared joint living expenses;
(d)After 2007, the wife assumed a greater than equal share of the joint expenses and there was some minimal intermingling of their financial arrangements;
(e)The sharing of joint expenses throughout the marriage did not include accommodation expenses which were met solely by the wife;
(f)The husband and wife never owned property in joint names nor operated bank accounts in joint names;
(g)The husband and wife maintained ledgers of their respective expenditure on joint expenses which were adjusted at regular intervals;
(h)The wife was employed throughout the marriage apart from short periods after the birth of each child;
(i)The husband’s financial contributions during the marriage were $1,198,924;
(j)The wife’s financial contributions during the marriage were about $10,558,434;
(k)There were significant periods throughout their marriage when the husband was underemployed or unemployed;
(l)Despite his greater availability, the husband’s contributions as homemaker and parent did not exceed those of the wife who remained the primary carer and homemaker; and
(m)The husband struggled with alcoholism and obesity in the latter stages of the marriage which adversely impacted, at least to some degree, on his ability to make contributions.
In recounting the above matters, I am referring to concessions, matters of common ground or factual findings made by me on 18 August 2020 as set out in the Reasons at [33], [38], [61]–[64], [88]–[89], [92], [94], [100]-[101], [104], [110]-[111], [118]-[119] and [121]-[123].[3]
[3] Rigby & Kingston (No. 2) (n 1).
Prior to his death, the wife’s father made it clear to her and her two brothers, Mr G and Mr F, that he did not want the wealth created by him over his lifetime to be distributed to any spouse of his children or grandchildren. The Last Will and Testament of Mr Kingston senior which was executed on 5 May 2005 (“the Will”) reinforced those intentions and the testamentary trust established by him (“the Kingston Testamentary Trust”) sought to protect that wealth in accordance with those stated intentions. The wife’s father died in 2008.
The wishes and intentions of the wife’s father do not of course oust the jurisdiction of this Court to make a property settlement order if it is just and equitable to do so.
The surviving trustees of the Kingston Testamentary Trust are the wife and her two brothers, their mother having passed away in 2013.
The third party respondents’ disclosure obligations have been stayed since the order made on 13 December 2019 pending the husband pleading his case against them. The husband has made various unsuccessful attempts to do so.
On 13 December 2019 the 6th and 10th respondents were removed as parties to the proceedings by consent (at that stage there was agreement that the J Pty Ltd ACN … and J Holdings Pty Ltd ACN … were incorrectly recorded in the Australian Securities and Investment Commission (“ASIC”) records as part of the Kingston Group, and that companies with the same name but registered offshore were the intended entities). On 28 February 2020 the husband filed an Amended Initiating Application in which he substituted the Australian J companies with the offshore companies i.e. J Pty Ltd registered number …/1996 and J Holdings Pty Ltd registered number …/1996.
On 26 May 2020, the 4th, 5th, 6th, 7th, 10th, 11th, 13th, 14th, 15th, 16th, 17th, 18th, 19th, 21st, 22nd, 24th, 25th, 26th, and 31st respondents were removed as parties in circumstances where it was found that they were joined for an improper purpose, namely, for the sole purpose of obtaining discovery. The relief claimed against 27th and 28th respondents was summarily dismissed and they were removed as parties to the proceedings.
On 22 March 2021 the 20th, 23rd, 29th and 30th respondents were removed as parties to the proceedings in circumstances where no order was sought against them and no contentions of fact or law were pleaded by the husband to justify them remaining as parties.
The issues already determined and as set out in Reasons dated August 2020[4] are as follows:
[4] Rigby & Kingston (No. 2) (n 1).
(1)Did the parties conduct their financial arrangements during the marriage in accordance with the pre-nuptial agreement of 1991 and/or the financial agreement between them that they keep their finances totally separate, with all expenses being referred to in (1) shared equally?
(2)If the parties did conduct their financial arrangements in accordance with the agreement was the husband overborne by the wife to do so?
(3)Did the husband make substantial contributions of any nature recognised by the Act to the improvement and conservation of property in the wife’s sole name over the years for which he was not recompensed?
(4)Was the husband underpaid for the work he did when employed as a contractor for the Kingston Group?
(5)Were the distributions made to the husband as a discretionary beneficiary of the Ms Kingston Trust made in order to minimise tax for the wife or the family constituted by the husband, the wife and their children or were the distributions made as a tax effective means of the husband repaying loans the wife had made to him?
(a)Were the “loans” described in (5) in truth made and did the husband agree to borrow?
(6)Did the husband commence part time employment and then later his own consultancy which afforded him the opportunity to work less than full time hours in 2007 in order to enable him to meet the needs of the children?
(7)Did the contributions of the husband as homemaker and parent exceed those of the wife as homemaker and parent and were there periods he fulfilled a role of primary homemaker and/or parent and thereby indirectly contributed to the financial contributions being made by the wife?
(8)What were the contributions by the wife to the Kingston Group and how was she recompensed for her employment?
(9)What were the financial contributions of the husband during the relationship?
(10)What were the financial contributions of the wife during the relationship?
As already indicated, findings were made on each of those issues as set out in the Reasons dated 18 August 2020.
Since the commencement of the proceedings, the wife has paid $944,956.61 in legal fees for herself and $217,095.73 for the husband. The wife has also advanced $345,673 to the husband since separation. In addition to the legal fees paid for the husband by the wife, the husband has paid $274,168.84 in legal fees. The husband’s outstanding legal fees total $363,263.83. The other respondents have paid $501,714.35 in legal fees.
I turn now to consider the particular issues identified for determination in this series of trial dates.
WHAT ARE THE WIFE’S EXISTING LEGAL AND EQUITABLE INTERESTS IN ANY PROPERTY INCLUDING IN ANY COMPANIES AND TRUSTS COMPRISING THE “KINGSTON GROUP” AS IDENTIFIED IN SCHEDULE 1 TO THE UMBRELLA DEED DATED 13 FEBRUARY 2014?
General principles
The significance of this first issue arises as a consequence of the principle in Stanford v Stanford[5] (“Stanford”) where the High Court of Australia (“the High Court”) said that “it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property” (emphasis in original).[6]
[5] (2012) 247 CLR 108 (“Stanford”).
[6] Ibid at 120, [37].
The determination of this issue necessarily involves the identification of what interests constitute property within the meaning of the Act. The husband urged the Court to adopt an approach that, in identifying the wife’s existing legal and equitable interests, the Court should look to the “totality” of the Kingston Group. However, in my view, the task necessarily involves an identification of the wife’s individual interests in each company and trust within the Kingston Group. The Kingston Group is not itself an entity recognised at law but rather a convenient descriptor for the various entities and trusts which are included in it. Of course, the inter-relationship between various entities and trusts within the Kingston Group is relevant to the determination of the nature of the wife’s interests.
It undertaking the task required, it is convenient to commence with section 4(1) of the Act which defines “property” as:
…
(a)in relation to the parties to a marriage or either of them – means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion; or
…
The Full Court of the Family Court of Australia (“the Full Court”) (May, Ainslie-Wallace and Kent JJ) in Marchant & Marchant[7] (“Marchant”) provides a helpful overview of the characterisation of property by reference to a number of authorities. From 86,669 the Full Court states:[8]
[7] (2012) FLC 93-520 (“Marchant”).
[8] Marchant (n 7) at 86,669-86,671, [56]-[68].
56.This definition is self-evidently a limited or partial definition in terms of identifying specifically the kinds of interests or entitlements that constitute “property” for the purpose of the Act. The jurisprudence that has developed in this Court as to whether a particular right or entitlement can or should be characterised as property for the purposes of s 79 reflects the statutory definition being a partial one, and that the kinds of rights or entitlements that are “property” for s 79 purposes are referenced to that jurisprudence.
57.As the Full Court (Nicholson CJ, Fogarty and Purvis JJ) observed in Perrett & Perrett (1990) FLC 92-101 (“Perrett”)at p 77,659:
The question of whether a particular right or entitlement can or should be characterised as property has been one of continual difficulty which has troubled courts on many occasions both under the Family Law Act and its predecessor and otherwise.
In order to determine the question, we think it necessary in each case to first examine and carefully identify the precise nature of the particular entitlement in question.
58.In Perrett, the Full Court determined that the husband’s entitlement to a defence force pension was no more than an entitlement to receive a series of fortnightly pension payments for the rest of his life, and that it was impossible to characterise that entitlement as a chose in action referable to some notional capitalised figure. The Full Court determined that it would be wrong to treat a notional lump sum as “property” for the purpose of the Act. That conclusion was so notwithstanding the Court’s observations to the effect that, once paid into the hands of the husband, the money constituted property.
59.The term “property” has been generally given a wide meaning. Lord Langdale MR in Jones v Skinner (1835) 5 LJ Ch 87 at page 90 stated that it is:
...the most comprehensive of all terms which can be used in as much as it is indication and description of every possible interest which the party can have.
60.This quote was cited with approval by the Full Court of this Court in Duff and Duff (1977) FLC 90-217 (“Duff”), where it was held that at p 76,131:
...the Act is to be read and construed widely and liberally with words and expressions being given their ordinary meaning...
61.The Full Court in that case identified that “property” included real and personal property as well as choses in action, and specifically held that shares in a family company could constitute property within the meaning of the Act.
62.It follows from Duff that there is no doubt that “property” includes both real and personal property and that a chose in possession or a chose in action, including both an equitable and a legal chose in action, can be “property” for the purpose of s 79. In Duff, shares in a limited liability company were held to be property.
63.In Duff, the meaning of the words, “...whether in possession or reversion”, was held to be an expression of an adverbial phrase which qualifies the verb, “...entitled...” and that it is not intended to limit the kind of property with which the Act can deal. The Court held at p 76,133:
The phrase means that the entitlement to the property may be either in possession or reversion, i.e. the phrase is descriptive of the entitlement and not of the property and it removes any fetter upon the Court in dealing with property under this Act by limiting the nature of the entitlement thereto to entitlement in possession.
64.Cases subsequent to Duff have confirmed many types of rights or entitlements as “property” within the meaning of the Act. For example, an interest in a partnership (Cordell & Cordell (1977) FLC 90-322); moneys due under a verdict (In the Marriage of Debs (1978) 4 Fam LN 48); a vested interest in an estate, even though postponed during a life estate (In the Marriage of White[1979] FamCA 40; (1979) FLC 90-682); an interest under contract (In the Marriage of Nelson(1977) 30 FLR 573); and the interest of a beneficiary in a deceased estate (In the Marriage of Rickaby(1995) FLC 92-642 at 82,481).
65.However, whereas at common law some future and contingent interests have been characterised as property, many cases decided with reference to the Act and s 79, particularly the so-called “superannuation cases” prior to the relevant amendments as to the treatment of superannuation interests, established that “property” for the purpose of the Act does not include contingent interests.
66.One of the most notable examples is the oft-quoted statement of Fogarty J in Crapp & Crapp (No 2) (1979) FLC 90-615 (“Crapp”) at 78,176 as follows:
An order can only be made... under s 79 where a party has a present or future interest in a particular item of property. Clearly where a party has a present interest no difficulties arise, and by “future interest” in the above sense, I take it to mean a situation where a party has an established interest in an item of property but the date of receipt is postponed to some future time. That is different from the case where a party may become entitled to an interest in property in the future, provided that certain events occur and/or that certain disqualifying events do not occur in the meantime...
67.Cases such as W & W[1980] FamCA 63; (1980) FLC 90-872 (“W & W”) and Crapp have long settled the principle that an expectation of future income, however real or imminent, does not constitute property under the Act. In W & W, work in progress was held to not amount to property within the meaning of s 79(1)(a).
68.It is also important to emphasise in this context that, quite apart from rights or entitlements capable of being “property” within the meaning of the Act, the power under s 79 is to make orders, “...altering the interests of the parties to the marriage in the property.” In Mullane & Mullane [1983] HCA 4; (1983) 158 CLR 436, the High Court said at p 445:
In our opinion, therefore, s. 79 on its proper construction refers only to orders which work an alteration of the legal or equitable interests in the property of the parties or either of them. An interest in property is a right of a proprietary nature, not a mere personal right: Stowe v Mineral Holdings(Aust) Pty Ltd[1979] HCA 30; (1977) 51 ALJR 672 at p 679; Ex parte Meneling Station Pty Ltd (unreported, delivered 8/12/82, pp. 14 and 28)…
In relation to a party’s interest in a trust, the Full Court, In the Marriage of Goodwin and Goodwin Alpe,[9] made what was described as an “unremarkable proposition” by French CJ in Kennon & Spry,[10] namely:[11]
…[T]he question whether the property of the trust is, in reality, the property of the parties or one of them … is a matter dependent upon the facts and circumstances of each particular case including the terms of the relevant Trust Deed.
[9] (1991) FLC 92-192 at 78,273 (“Goodwin”).
[10] (2008) 238 CLR 366 at 389, [57] (“Kennon & Spry”); see also Harris & Dewell (2018) FLC 93-839.
[11] Goodwin (n 9) at 78,273 quoting Reynolds v Reynolds (Full Court of the Family Court, Simpson, Strauss & Smithers JJ, 27 April 1990) at 30.
In Kennon & Spry the assets of a trust were held to be property of the parties or either of them in circumstances where: the legal title to the assets was held by the husband; the wife had equitable choses in action to consideration as an object of benefaction of the trust and to due administration of the trust; the husband had the power to distribute the assets of the trust to the wife; and the assets of the trust were acquired by or through the efforts of a party or parties during their marriage.[12] The origins of the acquisition of the trust assets was an important factor in that case with French CJ observing that “[t]he assets would have been unarguably property of the marriage absent subjection to the Trust”.[13] It was also important in that case that “[t]he question of a trust involving a combination of purposes and family and extraneous assets does not arise”.[14]
[12] Kennon & Spry (n 10) at 411, [137] (Gummow and Hayne JJ).
[13] Ibid at 391, [66] (French CJ).
[14] Ibid at 392, [69].
It was recognised in Kennon & Spry that the rights of a discretionary beneficiary to due consideration and due administration are “in the nature of equitable choses in action”[15] as are the rights of a residuary beneficiary to due administration in an unadministered deceased estate whose benefits have not vested.[16] French CJ noted the analogous rights of a member of a superannuation fund and the rights of a residuary beneficiary, both of whom have a “real expectancy of an interest in the property”.[17] However, in the context of proceedings brought pursuant to s 79 of the Act (“s 79 proceedings”), French CJ noted the Full Court’s description of such rights in, In the Marriage of Hauff[18] (“Hauff”) as “an empty present right of no relevance”[19] and in In the Marriage of Evans[20] (“Evans”), that such rights offered “no solution as to how realistically to make practical orders under s 79 about that ‘property’ until it is in fact received”.[21] At 394, French CJ went on to say:[22]
77The beneficiary of a non-exhaustive discretionary trust who does not control the trustee directly or indirectly has a right to due consideration and to due administration of the trust but it is difficult to value those rights when the beneficiary has no present entitlement and may never have any entitlement to any part of the income or capital of the trust.
[15] Ibid at 393, [75].
[16] Ibid.
[17] Ibid at 394, [75].
[18] (1986) FLC 91-747 (“Hauff”).
[19] Kennon & Spry (n 10) at 394, [75] quoting Hauff (n 18) at 75,443.
[20] (1991) FLC 92-223 (“Evans”).
[21] Kennon & Spry (n 10) at 394, [76] quoting Evans (n 20) at 78,548.
[22] Ibid at 394, [77].
The plurality in Kennon & Spry held that the wife’s right to consideration as an object of benefaction of the trust, and to due administration of the trust, was property of the wife for the purposes of the Act.[23] In agreeing with that proposition, French CJ acknowledged, “consistently with the observations of the Full Court in Hauff and Evans, that it is difficult to put a value on either of these rights though a valuation might not be beyond the actuarial arts in relation to the right to due consideration”.[24] French CJ also added that while the power of the husband to apply the assets of the trust to the wife coupled with her equitable choses in action, could be treated for the purposes of the Act as a “species of property … albeit subject to the fiduciary duty to consider all beneficiaries”,[25] the power and rights were “meaningless” without the husband’s legal title to the trust assets.[26] The rights to due consideration “could also be taken into account in determining whether it was just and equitable to make an order under s 79 on the basis that the assets of the [t]rust were property of the marriage”.[27]
[23] Ibid at 408, [126] (Gummow & Hayne JJ).
[24] Ibid at 394, [78] (French CJ).
[25] Ibid at 394, [79]
[26] Ibid at 395, [79].
[27] Ibid at 395, [80].
In relation to a party’s interest in a company, it is important to acknowledge that while shares in a company are treated as property for the purposes of s 79 proceedings,[28] such ownership does not necessarily equate to an interest in the assets of the company. As Barwick CJ said in Re Webster at 287:[29]
…under the general law it is well established that a shareholder does not have any legal or equitable interest in the assets… of the company. Even where a shareholder owned almost all the shares of a company, he had no legal or equitable right or interest in the company’s assets…
(Citations omitted)
[28] In the Marriage of Duff and Duff (1977) FLC 90-217 at 76,134.
[29] (1975) 132 CLR 270 at 287.
However, in s 79 proceedings, control of the company by a party to the marriage as well as majority shareholding may lead to the treatment of the assets of the company as assets of a party to the marriage. In Ascot Investments Pty Ltd v Harper Gibbs J (as his Honour then was) said from 354-355:[30]
The position is, I think, different if the alleged rights, powers or privileges of the third party are only a sham and have been brought into being, in appearance rather than reality, as a device to assist one party to evade his or her obligations under the Act. Sham transactions may always be disregarded. Similarly, if a company is completely controlled by one party to a marriage, so that in reality an order against the company is an order against the party, the fact that in form the order appears to affect the rights of the company may not necessarily invalidate it.
Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it.
…
[30] (1981) 148 CLR 337 at 354-355 (“Ascot Investments”).
Uncontentious property
It is not in contention that the following legal and equitable interests of the wife should be treated as property for the purposes of s 79 of the Act:
(a)Bank accounts in wife’s name;
(b)1,671 GG Bank shares;
(c)885 CP Company shares;
(d)5,451 CS Company shares;
(e)1 CR Bank share;
(f)Bitcoin and Ethereum investments;
(g)Motor vehicle 3;
(h)Motor vehicle 4; and
(i)Minimal jewellery, personal effects, clothing, chattels, furniture.
In addition, the wife is the sole director and shareholder of E Pty Ltd which is the corporate trustee for the Ms Kingston Family Trust. The wife is also the sole director of D Pty Ltd whose shares are 100% owned by E Pty Ltd as trustee for the Ms Kingston Family Trust. The wife is the appointor and a beneficiary of the Ms Kingston Family Trust. In circumstances where the wife controls the trustee, and is a beneficiary of the Ms Kingston Family Trust, it is not in contention that the assets of the companies and the trust are to be treated as property of the wife for the purposes of these proceedings. Included as an asset of D Pty Ltd, as at 30 June 2019, is a loan owed by Q Pty Ltd of $1,291,690. Included as an asset of the Ms Kingston Family Trust, as at 30 June 2019, is a loan owing by the Kingston Group Trust of $654,464.77 and unpaid present entitlements in the Kingston Testamentary Trust of $240,000.
Further, it is not in contention that the wife’s member benefits of the Kingston Pty Ltd Superannuation Fund and the Kingston Group of Companies Superannuation Fund are to be treated as property pursuant to s 90XC of the Act.
Other interests
The area of dispute arises in relation to the nature of the wife’s other legal and equitable interests. The wife’s company shareholdings and interests in trusts are set out in the table below:
100 C Class shares (33% of the total C class shares) in S Pty Ltd. The company has five different classes of shares. The wife is one of three directors with her two brothers. The wife became a director on 31 October 2002. The shares owned by the wife have no voting rights, no control and no right to surplus assets on winding up. The shares were transferred to wife on 9 August 2007. 100 B Class shares (100% of all B Class shares) in T Pty Ltd. The company has six different share classes. The wife is one of three directors with her two brothers. The wife became a director on 31 March 2002. The shares owned by the wife have no voting rights, no control and no right to surplus assets on winding up. The shares were transferred to wife on 9 August 2007. T Pty Ltd is the trustee for the Kingston Group of Companies Super Fund, the U Unit Trust, the V Unit Trust and the Kingston Pty Ltd Superannuation Fund. 22 Cumulative Preference Shares (30.55% of the total preference shares) in Kingston Holdings Pty Ltd. The company has three different share classes. The wife is one of three directors with her two brothers. The wife became a director on 31 October 2002. The shares owned by the wife have voting rights and the right to receive paid-up capital, arrears of dividends and the right to participate in surplus assets after repayment of paid-up capital on winding up. The shares were transferred to the wife on 9 August 2007. 60,000 K class shares (35.71% of the total K class shares) and 155,000 ordinary shares (36.29% of the total ordinary shares) and 1 X class share (held jointly with her two brothers) and 1 Y class share (held jointly with her two brothers) in Kingston (NSW) Pty Ltd. The company has seven different classes of shares. The wife is one of three directors with her two brothers. The wife became a director on 31 October 2002. The K class shares owned by the wife have no right to participate in the profits on winding up. The ordinary shares owned by the wife have a right to participate in profits on winding up. The X class share is held jointly with her two brothers on trust for the Kingston Testamentary Trust. The K class, ordinary and X class shares were transferred to the wife on or about 9 August 2007. The Y class share is held jointly with two her two brothers and is beneficially owned and was transferred to the wife in 2013 as part of her inheritance from her mother. 1 share in N Pty Ltd The wife is one of three directors with her two brothers. The wife became a director on 31 October 2002. The 1 ordinary share is held jointly with her two brothers as trustee for O Pty Ltd. 5 A class shares in Kingston Consolidated Pty Ltd The wife is one of three directors with her two brothers. The wife became a director on 31 March 1992. The shares are held jointly with her two brothers on trust for the Kingston Testamentary Trust. Kingston Consolidated Pty Ltd is the trustee of the Kingston Group Trust. 7 ordinary shares in J Pty Ltd The wife is one of three directors with her two brothers. The shares are held jointly with her two brothers on trust for the Kingston Testamentary Trust. 7 ordinary shares and 1750 B class shares in J Holdings Pty Ltd The wife is one of three directors with her two brothers. The shares are held jointly with her two brothers on trust for the Kingston Testamentary Trust. 1 ordinary share in L Pty Ltd The wife is one of three directors with her two brothers. The wife became a director on 31 October 2002. The 1 share is held jointly with her two brothers on trust for the Kingston Testamentary Trust. 1 ordinary share in M Pty Ltd The wife is one of three directors with her two brothers. The wife became a director on 31 October 2002. The 1 share is held jointly with her two brothers on trust for the Kingston Testamentary Trust. 2,499 ordinary shares in H Pty Ltd The wife is one of three directors with her two brothers. The wife became a director on 31 October 2002. The shares are held jointly with her two brothers on trust for the Kingston Testamentary Trust. The wife is one of a class of beneficiaries of the Kingston Family Trust The Trust was settled on about 1 July 1973. It is a discretionary trust. The wife is one of three directors with her two brothers of the corporate trustee of the trust, K Pty Ltd. Given the age of the trust deed it is not clear whether there is a power of appointment. The wife does not own any shares in K Pty Ltd. The trustee has a broad discretion to distribute the income and capital of the trust among the beneficiaries. The wife has never received a distribution from this trust. The husband is not and has never been a beneficiary. The wife is one of a class of beneficiaries of the Kingston Group Trust The Trust was settled on 2 August 1991. It is a discretionary trust. The wife is one of three directors with her two brothers of the corporate trustee, Kingston Consolidated Pty Ltd. The power of appointment rests with the trustee. The trustee has a broad discretion to distribute the income and capital of the trust among the beneficiaries. There is no default income distribution clause in the deed. If the trustee does not make a distribution of income to particular beneficiaries in a particular year, the income accumulates. The husband is not and has never been a beneficiary. The wife is one of a class of beneficiaries of the Kingston Special Trust The trust was settled on 18 February 1986. It is a discretionary trust. The wife is one of three directors with her two brothers of the corporate trustee of the trust, K Pty Ltd. The wife does not own any shares in K Pty Ltd. The principal of the trust is the wife and her two brothers. The trustee has a broad discretion to distribute the income and capital of the trust among the beneficiaries. There is a default income distribution clause in the trust deed that provides for an equal distribution among ‘primary beneficiaries’ at 30 June each year in default of distribution. Currently there are 15 living family members within that definition including minors. The wife has never received a distribution from this trust. The husband is not and has never been a beneficiary. The wife is one of a class of beneficiaries of the Kingston Testamentary Trust and one of three residuary beneficiaries on the vesting date, 2 November 2026 The trust was established under the Will and commenced upon the wife’s father’s death in 2008. It is a discretionary trust. The wife is one of three remaining trustees of this trust with her two brothers. The trust fund is the wife’s father’s residuary estate and any income or capital added from time to time. The trustees have a broad discretion to distribute the income and capital of the trust among the beneficiaries with some limitations. The various classes of beneficiaries include the wife and her two children and the wife’s two brothers and their children and approved related entities. The wife’s mother, the wife and her two brothers were trustees until her mother died on 12 January 2013. The husband is not and has never been a beneficiary. The wife is a residuary beneficiary in estate of Ms CT The wife is the executor of the estate yet to be administered but refers to a sum of $29,000 as her “share”.
Save for the last item in the above table, the wife’s interests relate to entities and trusts within the Kingston Group.
For completeness, given the husband’s argument about the nature of the wife’s interests in the Kingston Group, the remaining entities of the Kingston Group in which the wife has directorships but no shareholding are as follows:
Q Pty Ltd The wife is one of three directors with her two brothers. The wife has no shareholding. O Pty Ltd The wife is one of three directors with her two brothers. The wife has no shareholding. Kingston Pty Ltd The wife is one of three directors with her two brothers. The wife has no shareholding. Kingston Constructions Pty Ltd Wife is one of three directors with her two brothers. Wife has no shareholding. Kingston Developments Pty Ltd The wife is one of three directors with her two brothers. The wife has no shareholding. Kingston Group Pty Ltd The wife is one of three directors with her two brothers. The wife has no shareholding. K Pty Ltd The wife is one of three directors with her two brothers. The wife has no shareholding. R Pty Ltd The wife is one of three directors with her two brothers. The wife has no shareholding.
According to the ASIC public records, J Holdings Pty Ltd ACN … is the ultimate holding company of R Pty Ltd, T Pty Ltd, Kingston Constructions Pty Ltd, S Pty Ltd, Kingston Developments Pty Ltd, L Pty Ltd, Kingston Pty Ltd, O Pty Ltd, N Pty Ltd, Kingston Holdings Pty Ltd, Q Pty Ltd, K Pty Ltd and M Pty Ltd.
However, as earlier noted, J Holdings Pty Ltd ACN … is not the company by that name which is part of the Kingston Group and was removed as a party by consent on 13 December 2019. J Holdings Pty Ltd registered number …./1996 is an offshore company and was substituted for the Australian company by that name in these proceedings at that time.
The shares in J Holdings Pty Ltd are held jointly by the wife and her two brothers on trust for the Kingston Testamentary Trust (see [44] and Exhibit 10).
The wife’s shares in L Pty Ltd and M Pty Ltd are held jointly with her two brothers on trust for the Kingston Testamentary Trust. Her shares in Kingston Pty Ltd and Kingston Holdings Pty Ltd are legally and beneficially held by the wife. The wife’s share in N Pty Ltd is held on trust for O Pty Ltd in which the wife holds no shares. The wife owns no shares in Q Pty Ltd or in K Pty Ltd (see in [44]).
There are four unit trusts within the Kingston Group, namely, U Unit Trust, V Unit Trust, P Unit Trust and the Kingston Finance Unit Trust. Kingston Pty Ltd holds 100% of the units in the U Unit Trust. The units in the V Unit Trust are held by the Kingston Family Trust. The units in the P Unit Trust are held by the Kingston Special Trust. The units in the Kingston Finance Unit Trust are held by the U Unit Trust (2%) and N Pty Ltd (98%).
The terms of the Kingston Testamentary Trust (as set out in the Will) assumed some importance during the trial. Accordingly, it is convenient to set out relevant provisions of the Will at this point.
The Kingston Testamentary Trust
The terms of the Kingston Testamentary Trust as set out in the Will include the following provisions for the trustees:
(a)To set up a fund consisting of the residuary estate of Mr Kingston snr and any income or capital added to the fund from time to time (cl 3(a));
(b)To invest the fund (cl 3(b));
(c)Subject to certain provisions, pay all or any part of the income and all or any part of the capital to any one or more of:
(i)The wife and her two brothers;
(ii)The children of the wife and the children of her two brothers;
(iii)Any company in which any of the above is a shareholder; and
(iv)The trustee of any trust of which any of the above is an eligible beneficiary.
And, subject only to one limitation, make such payments in the shares and amounts as the trustees in their discretion think fit without any obligation to make payments for all of the persons or companies within the class listed above or to ensure equality among those to whom payments are made (cl 3(c));
(d)Subject to certain provisions, ensure that equal amounts are received by each one of the following classes of beneficiaries (cl 3(d)):
(i)The Mr F Kingston beneficiaries defined in cl 4(a) as not only Mr F but also his children and any company approved of by Mr F in which any of them is a shareholder and any trustee of any trust approved of by Mr F in which any of them is a beneficiary;
(ii)The Ms Kingston beneficiaries defined in cl 4(b) as not only the wife but also her children and any company approved of by the wife in which any of them is a shareholder and any trustee of any trust approved of by the wife in which any of them is a beneficiary; and
(iii)The Mr G Kingston beneficiaries defined in cl 4 (c) as not only Mr G but also his children and any company approved of by Mr G in which any of them is a shareholder and any trustee of any trust approved of by Mr G in which any of them is a beneficiary.
(e)When the wife, Mr F and Mr G, have all turned 60 (which will occur on 2 November 2026), divide the balance of the fund equally among the wife, Mr F and Mr G, (or their children if the wife or Mr F or Mr G die before then) without regard to the payments already made to each of them (cl 3(e)).
Any restriction contained in cl 3(d) of the Will does not apply to any distribution made pursuant to cl 3(c) if made with the consent of the trustees (cl 3(f)).
Clause 5 of the Will provides the trustees with wide powers to transfer any asset forming part of the estate to any one or more of the beneficiaries in such shares as they deem fit without any obligation to ensure equality among those to whom assets are transferred.
Clause 6 of the Will is in the following terms:
6. I DECLARE that in making this my Will it is my desire that the benefit of my estate should pass to my children and/or grandchildren and that it is my express desire that no entitlement should accrue to any present or future spouse of my children or grandchildren particularly if such entitlement were to disadvantage my children or grandchildren or the continuity of any of the businesses which are conducted by the group of companies controlled by me.
Clause 7 of the Will permits any decision of the trustees to be made by majority.
Clause 10(g) of the Will permits the trustees to distribute the estate in kind.
Clause 11 of the Will permits the trustees by Deed, subject to limitations in relation to certain beneficiaries, to revoke, add to or vary all or any of the trusts, powers, terms and conditions contained in cl 3 to cl 10 of the Will and declare new or other trusts, powers, terms and conditions concerning the whole or any part of the residuary estate.
Husband’s argument
The husband’s primary argument is that the wife’s interests in the Kingston Group comprise a one third legal and equitable interest in the entirety of the Kingston Group comprising all entities and trusts listed in Exhibit 12 (the Kingston Group diagram). It is submitted by the husband that the wife has choses in action which are property and whether it is the “Pittman analogy”[31] or the “partnership analogy”[32], (these analogies will be discussed by reference to the authorities relied upon by the husband later in these Reasons) she “owns a third of the Group”. It is further argued that as a residuary beneficiary in the Kingston Testamentary Trust, the wife has a vested interest in the trust assets subject to postponement analogous to a life estate.[33] Further, it is submitted by the husband that “there is no cogent evidence of any factual or legal circumstance which will lead to the wife not realising one-third of the whole group”. It is argued by the husband that any attempt to “catastrophise” the risk to the wife’s interests is unsupported by any evidence from the wife or her two brothers.[34]
[31] Pittman & Pittman (2010) FLC 93-430 (“Pittman”).
[32] In the Marriage ofBest & Best (1993) FLC 92-418 (“Best”).
[33] Reliance is placed upon Marchant (n 7) at 86,670, [64].
[34] Reliance is placed upon JEL and DDF (2001) FLC 93-075 at 88,340 where the Full Court found on the particular facts of that case, the risks to property interests faced by a party were more illusory than real.
It is nevertheless conceded by the husband, that the wife cannot currently “put her hand on money in the testamentary trust” but it is argued that she has more than a “right to due administration, because she is a trustee”.
It seems to be conceded by the husband that it is possible that upon the vesting date of the Kingston Testamentary Trust on 2 November 2026, there may be no assets remaining in the testamentary trust, given the powers of the trustees to act in majority and distribute the fund prior to the vesting date to beneficiaries other than the wife. In those circumstances it is argued that the wife “still has a right, but it’s just not worth anything”. The husband submits that the fact that the wife’s rights are difficult to value does not mean they are not property. The husband concedes that while “theoretically” the Kingston Testamentary Trust assets could be distributed to the wife’s sons – “they cannot wipe her out because of the umbrella deed” which provides at cl 2(1)(c) that “all members will be paid an equal minimum annual dividend” and the definition of “dividend” in the umbrella deed means “any distribution or payments emanating from the Kingston Group other than income-related matters”.
The husband also argues that the (alleged) failure of the wife to comply with her duty of disclosure, more easily enables the Court to find that her interest in the Kingston Group equates to a one third legal and equitable interest in the entirety. Reliance is placed upon the statement by Smithers J in Briese & Briese[35] and recently approved of by the Full Court in Waterman & Waterman[36] in which his Honour said from 75,180:[37]
…I believe that a person in the position of the husband in this case has a positive obligation to set out at an early stage his financial position in a clear and comprehensive manner. The Regulations, and now the Rules, are not intended as a vehicle to mask the true position, or as an aid to confusion, complexity or uncertainty. They are not intended as the outer limits of the obligation of financial disclosure, but as providing avenues towards disclosure. The need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance. Unless each party adopts a positive approach in this regard delays will ensue with the consequent escalation of legal, accounting and other expenses, always assuming that a party has the strength to continue the struggle for information and understanding.
(As per the original)
[35] (1986) FLC 91-713 (“Briese”).
[36] (2017) FLC 93,762 at 77,077, [32] (“Waterman”).
[37] Briese (n 35) at 75,180-75,181.
It is submitted by the husband that the wife cannot rely upon his failed application against her in 2017 to obtain further and better disclosure. The husband contends that there is nothing clear and comprehensive about the wife’s evidence in relation to the Kingston Group which the wife concedes is complex. The husband submits that the handwritten amendments made to Exhibit 12 (the Kingston Group diagram) support his contention that the wife has failed in her disclosure obligations. In particular, the husband submits that “reason for the manuscript changes” (this is a reference to the handwritten amendments to Exhibit 12) and in particular. the crossing out of J Holdings Pty Ltd ACN … as the ultimate holding company of a number of the companies in Exhibit 12, was something the husband was “completely” unaware of. The husband further argues that the wife and her two brothers were obliged to adduce evidence on the effect of the Umbrella Deed on the wife’s interests in the Kingston Group, and that the failure to do so amounts to a “serious non-disclosure”. The elements of non-disclosure are said to include the following:
(a)The failure of the wife to call her accountant to explain the Kingston Group;
(b)The failure of the wife to annex the Kingston Group diagram (Exhibit 12) to her affidavit of evidence in chief (a document that the husband concedes he has had possession of since 2017 save for recent amendments);
(c)The provision of an incorrect vesting date for the Kingston Group Trust which did not become apparent to the husband until receiving a copy of the trust deed from the other respondents shortly before the second series of trial dates (as a result of the husband issuing a subpoena to the trustee);
(d)The wife’s failure to check Exhibit 12 for accuracy which led to amendments being made during or shortly before the second series of trial dates by reference to ASIC searches and Exhibit 10 which has resulted in ambiguity;
(e)The wife failed to disclose a personal guarantee provided by her to the National Australia Bank in the order of $36,000,000; and
(f)The wife failed to provide a full description of the circumstances leading to equal divisions between the three siblings represented by the distributions since 2004.
Wife’s argument
The wife submits that she does not own one third of the Kingston Group and that her legal and equitable interests are represented by the rights she has as a minority shareholder in various companies, which she does not control, and as a discretionary beneficiary in a number of trusts which she does not control.
According to the wife, while her interests as a beneficiary in the various trusts are choses in action and therefore property for the purpose of s 79 proceedings, her interests are “effectively valueless”. The wife distinguishes Kennon v Spry on its facts, in that in the current case, the wife does not control the trustee and cannot distribute the assets of the trust to herself or the husband. Reliance is also placed upon Karllson & Karllson[38] where Dawe J said at [28]:
28.The Hon Justice Brereton neatly summarises the position in The High Court and family law: Two recent excursions (2013) 3 Fam L Rev 63 at 64:
...the only property that a trustee has in the assets of a discretionary trust is the bare legal title, which is of no practical value; and the only property that a potential beneficiary has is the right of due administration which – although it is property, in the sense that it is a chose in action – is also of no practical value. This means that, without more, the interest of a trustee or potential beneficiary in a discretionary trust, although they might be within the wide definition of “property”, are of little practical worth when it comes to matrimonial property adjustment. They do not equate to an interest in trust assets...
[38] [2014] FamCA 571 at [28] (“Karllson”).
In response to the husband’s reliance on cl 2.1(c) of the Umbrella Deed which provides for the payment to all members of an equal minimal annual dividend, the wife submits that the clause does not override the terms of the Kingston Testamentary Trust which is apparent by cl 2.1(b) which requires the members to administer the Will i.e. the testamentary trust, according to its terms.
The wife rejects the contention that she has failed to comply with her disclosure obligations and points to the husband’s failed attempt to obtain further and better disclosure in 2017.
Other respondents’ argument
The other respondents submit that the wife has no current legal or equitable interest in one third of the Kingston Group. In particular, the wife has no present entitlement in the Kingston Testamentary Trust. The wife is a discretionary beneficiary of the Kingston Testamentary Trust and has at most a right to due consideration and due administration and therefore a chose in action. However, her two brothers (as the other two trustees) can act by majority to distribute to beneficiaries other than the wife. The wife cannot compel any distribution to herself. The wife has a separate chose in action as a residuary beneficiary to receive one third of the residual capital of the trust on the vesting date being 2 November 2026, but that right does not equate to one third of the capital of the Kingston Testamentary Trust as it exists at the current time.
Reliance is placed upon the discussion by Coleman J (sitting as a single judge of the Full Court) in Sand & Sand[39] where his Honour said from [46]:
[39] (2012) FLC 93-519 at 86,655-86,657, [46] and [52]-[53] (“Sand & Sand”).
46.As the High Court’s judgment in Mullane v Mullane (1983) 158 CLR 436 makes clear, not everything appearing to be a “chose in action” could be regarded as “property” for the purposes of s 4 of the Act. Pursuant to orders of the Matrimonial Causes Division of the Supreme Court of New South Wales made under the Matrimonial Causes Act, which the Family Law Act replaced in 1975, the wife and the children of the marriage had occupied the former matrimonial home of the parties for fifteen years, after the parties had separated. The High Court, at 445, said:
In our opinion, therefore, s. 79 on its proper construction refers only to orders which work an alteration of the legal or equitable interests in the property of the parties or either of them. An interest in property is a right of a proprietary nature, not a mere –personal right: Stow v. Mineral Holdings (Aust.) Pry. Ltd.; Reg. v. Toohey; Ex parte Meneling Station Pty. Ltd. It does not exclude every interest which is not assignable or transferable (cf. per Mason J. in Meneling Station). Thus an order under s. 79 may give rise to an interest in property which is defeasible on assignment or transfer to a third party, or on the occurrence of some other event, or which the holder is enjoined from assigning or transferring.
It follows, then, that s. 79 does not authorize a mere modification of a liberty to enjoy property. An order which merely excludes one spouse from the enjoyment of property, albeit for many years, in order to permit its better enjoyment by the other does not alter an interest in that property, though a spouse acquiring an interest in property under a s. 79 order may be entitled, in virtue of that interest, to exclude the other from its enjoyment. Where the section refers to a settlement of property, it should be understood as using that expression in a sense which is closely related to the meaning which the expression bears in the law of real and personal property. (Footnotes omitted)
…
52.To the extent that the respondent might assert that the decision in Spry assists her in this appeal, the Court cannot accept that to be so. With respect to the learned Federal Magistrate, and for commendable reasons, his Honour’s orders related to property which, as he correctly found, was not then available. His Honour’s orders applied to property which may come into existence in the future, as and when it did so. Whilst the assets of the trust in Spry had not vested, in the wife, and could only do so in the future upon the happening of further events, the “property” was in existence. It is tempting to think that Spry would have been decided differently had the husband lacked the legal ability to vest trust property in the wife, thereby leaving the wife with no more than a mere expectancy, and right to due administration of the trust, but the Court need not speculate about that.
53.Whilst, as is the case of a reversionary or remainder interest, present entitlement to possession of the property to which a legal or equitable estate or right relates is not necessary for the entitlement, interest or right to be “property”, the authorities suggest that the entitlement, interest or right must presently exist. It is improbable that an “expectation”, or right to “due administration” of a trust or estate which might in the future result in the vesting of “property” in a party to a marriage, in the absence of any legal entitlement by a party to facilitate such vesting could enliven the jurisdiction to make orders for settlement of property pursuant to s 79 of the Act. For a Court to have jurisdiction to make orders pursuant to s 79 of the Act property must be in existence when the jurisdiction to do so is sought to be exercised. If “property” (using the term in the extended sense discussed above) which has not come into existence cannot found jurisdiction under s 79 of the Act, it is difficult to see how “property” which no longer exists could do so.
Further, it is argued by the other respondents that, “an expectation of future income, however real or imminent, does not constitute property under the Act”.[40]
[40] Reliance is placed upon: In the marriage of Crapp & Crapp (1979) FLC 90-615 at 78,176; In the marriage of W & W (1980) FLC 90-872; and Marchant (n 7) at 86,671, [67].
The other respondents submit that an additional reason for distinguishing Kennon v Spry (other than those raised by the wife) is that the trust, in that case, had been built up through the marriage by the parties,[41] which is not the case here. Mr Kingston snr was a stranger to the marriage and left his property in trust to be administered in accordance with his Will.
[41] Kennon & Spry (n 10).
The other respondents argue that there is no clause in the Umbrella Deed which purports to vary the terms of the Kingston Testamentary Trust or any other trust within the Kingston Group. To the contrary, it specifically obliges the parties to the Umbrella Deed to administer the Will in accordance with its terms.
In relation to the other three trusts (Kingston Family Trust, Kingston Special Trust and the Kingston Group Trust), those trustees are not parties to the Umbrella Deed.
The other respondents submit that the parties to the Umbrella Deed cannot contract in a way which would be contrary to their fiduciary duties to consider classes of beneficiaries from time to time. Each of the beneficiaries have a right to due consideration and due administration in accordance with the terms of the individual trusts.
The other respondents highlight that the Kingston Group includes two superannuation trusts, four unit trusts and four discretionary trusts. They each have their own individual classes of beneficiaries. They are not all identical. Some are wider than others. All were set up well before the Umbrella Deed and well before the death of Mr Kingston snr. There is no suggestion that any of the trusts are shams. The trustees remain obligated by their fiduciary duties to administer the trusts in accordance with the terms of the trusts. Even if a person or persons have historically acted inconsistently with the trust, the fiduciary obligations remain. In Fordyce v Ryan[42] Jackson J, quoting Leeming JA, said from [39]:
“… A trust once validly constituted does not change in nature because the trustee and some beneficiaries subsequently choose no longer to abide by the obligations of the trust relationship. …”
In my view, that reasoning applies here. Having accepted that the trusts were validly created, it is not open to the applicant to contend that the interests of the bankrupt as a beneficiary were altered because of his actions or influence in causing the trustee to make distributions of income to himself.
(Emphasis omitted) (Citations omitted)
[42] [2017] 2 Qd R 240 at 248-249, [39]-[40] (“Fordyce”) quoting Lewis v Condon (2013) 85 NSWLR 99, 116-117, [80]-[81] (Leeming JA).
The other respondents submit that even under the Umbrella Deed there is no absolute right to be paid income. Clause 2.1(c) which refers to the payment to members of an equal minimum annual dividend includes additional words of limitation - “if and whenever determined”. Likewise with cl 2.1(d)(ii) which provides for active members being entitled to be paid a share of net profits, such rights are tempered by the words as “determined from time to time” and cl 3.1(b)(ii) includes the limitation - “whether an annual Dividend will be paid and if so”.
Contrary to the husband’s submissions, the other respondents submit that as evidenced by the financial statements for the Kingston Testamentary Trust, there has not been equality of distribution among the beneficiaries. For instance in the 2018 financial year, each of the sons of the husband and wife received $30,000 and the Ms Kingston Family Trust received $60,000. In 2019 one son of the husband and wife received $36,000 and the Ms Kingston Family Trust received no distribution. Further, as the balance sheet for the Kingston Testamentary Trust demonstrates, the assets of the trust do not represent the assets or the interests of the Kingston Group.
The other respondents distinguish the facts in Pittman & Pittman (“Pittman”)[43] as relied upon by the husband, submitting that the husband in that case had irrevocable rights to income and capital which the wife does not have in the present case. Further, it is submitted by the other respondents that the partnership analogy is misplaced.
[43] Pittman (n 31).
Discussion
At general law, the beneficiaries of a discretionary trust do not have equitable interests in the assets of the trust.[44] As the trustees of a discretionary trust have no duty to make a distribution to a particular beneficiary, the rights of discretionary beneficiaries are limited to requiring the trustees to consider whether or not to make a distribution in their favour, and to ensuring the proper administration of the trust.[45] A mere right to consideration as an object of benefaction and to due administration is not in general law recognised as property.[46] Residuary beneficiaries do not have vested equitable interests in specific property before administration is complete and their equitable rights are limited to compelling the proper administration of the estate.[47]
[44] Gartside v Inland Revenue Commissioners [1968] A.C. 553 at 617-618 (Lord Wilberforce) (“Gartside”); Simmons v Simmons (2008) 40 Fam LR 520.
[45] Gartside (n 44); see also: Re Weir's Settlement Trusts [1971] Ch. 145; and Sainsbury v Commissioners of Inland Revenue [1970] Ch. 712.
[46] Fordyce (n 42) at 247, [36] (Jackson J).
[47] Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12.
Whether or not the wife’s rights and interests in this case are a “species” of property for the purpose of the s 79 proceedings depends upon a number of factors including the nature of her rights as a beneficiary and shareholder, what control she has over the entities and trusts, what powers she has to distribute benefits to herself or the husband and the source of the assets held within the entities and trusts.
In this case, the wife has a right to consideration as an object of benefaction as a discretionary beneficiary in each trust included in the Kingston Group and a right to due administration of the trusts.
The wife also has a right to due administration as a residuary beneficiary of the Kingston Testamentary Trust. Contrary to the submissions of the husband, the wife’s entitlements as a residuary beneficiary do not vest until late 2026, when the youngest child of her father reaches 60 years. The wife’s rights as a residuary beneficiary are not analogous to one subject only to a life interest because, under the terms of the testamentary trust, the assets of the trust can be distributed to other beneficiaries prior to the vesting date and as such, the wife’s rights may be worth nothing.
The wife also holds various shareholdings in entities in the Kingston Group as set out in the table at [44], many of which are held on trust with her brothers. The wife has a legal but not a beneficial interest in those shares. To the extent that the wife holds minority shareholdings in her own right, the wife has a legal and beneficial interest in those shares.
The wife has contractual rights as a party to the Umbrella Deed which will be discussed in greater detail later in these Reasons.
It does not seem to be in contention that the nature of the wife’s rights as a beneficiary in various trusts, as a shareholder in companies and as a party to the Umbrella Deed are or may be choses in action.
A chose in action is a “personal right of property which can only be claimed or enforced by action as distinct from taking physical possession”.[48] It is an existing legally enforceable right whether vested or contingent as opposed to a mere expectancy or possibility of a future proprietary right.[49]
[48] Emu Brewery Mezzanine Ltd (in Liq) v Australian Securities and Investment Commission (2006) 32 WAR 204 at 214, [31] (McLure JA) citing Loxton v Moir (1914) 18 CLR 360 at 379 (Rich J).
[49] Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 26 (Windeyer J).
While certain statements made by the plurality in Kennon v Spry may seem to have extended the meaning of “property” in s 79 proceedings to include a mere expectancy or possibility of a future proprietary right,[50] I respectfully agree with the effect of the observations made by Coleman J in Sand, i.e. that the statements need to be read in the context of the particular circumstances of that case,[51] and that “as the High Court in Mullane v Mullane[[52]] makes clear, not everything appearing to be a “chose in action” could be regarded as “property” for the purposes of s 4 of the Act”.[53]
[50] Kennon & Spry (n 10) at 395, [78] (French CJ) and 408, [126] (Gummow & Hayne JJ).
[51] Sand & Sand (n 39) at 86,656, [52].
[52] (1983) 158 CLR 436 at 445.
[53] Sand & Sand (n 39) at 86,655, [46].
In Kennon & Spry, the treatment of the assets of the trust as property of the parties or either of them, arose as a result of a combination of factors including control, legal title, powers of distribution and the source of the trust fund. Those factors do not exist in this case. Here, the wife does not control any of the trusts. Legal title is held either jointly with her two brothers or by a corporate trustee in which the wife is one of three directors. The wife alone cannot make decisions to distribute trust funds to herself. Further, the source of the trust fund in the Kingston Testamentary Trust was from a stranger to the marriage. In relation to the other discretionary trusts, the wife was eight years old when the Kingston Family Trust was established, 21 years old when the Kingston Special Trust was established and 26 years old when the Kingston Group Trust was established. The wife’s father was the original appointor or principal of the Kingston Group Trust and the Kingston Special Trust. The property settled upon the trusts was not acquired through the efforts of the wife or the husband but by the wife’s father.
In relation to the companies listed in [44] in which the wife has shareholdings in her own right, she is but one of three directors. The wife does not control the companies.
In seeking to enhance the nature of the wife’s rights, the husband places significant reliance on the case of Pittman[54] in which the Full Court held that the trial judge was wrong to treat the husband’s interests in a trust as a financial resource rather than property.[55] The property identified by the trial judge was valued at $8,638,079 and the financial resource valued at $62,750,000. The wife was awarded 80% of the property and the husband retained the balance. In Pittman, the husband had an irrevocable entitlement not only to income but also to a share of the capital to be divided equally among such of the four beneficiaries that were living on the vesting date.[56] While acknowledging a theoretical possibility that the husband’s one quarter share might be diluted by the appointment of other beneficiaries, the Full Court said the husband would still be entitled to some share in the capital which might even increase upon the death of one of the four beneficiaries. The Full Court noted that the value of the trust property may change between the time of the proceedings and eventual realisation, but said that “[u]ncertainty of ultimate value cannot provide a reason for not categorising an item of property”.[57] The husband’s lack of control, being one of four trustees, was rejected as a reason not to include his interests as property because “that fact does not affect his irrevocable entitlements to a quarter of the income of the trust and to a share of the capital”.[58]
[54] (n 31).
[55] Ibid at 84,661, [67].
[56] Ibid at [63].
[57] Ibid at 84,661, [64].
[58] Ibid at 84,661, [65].
Pittman is distinguishable because the husband in that case had “irrevocable entitlements” not only to income but also to capital.[59] In other words the discretionary trust had been converted into a fixed trust in which the husband had absolute entitlements, although the quantum of those entitlements might change. The wife in this case does not hold irrevocable entitlements to either income or capital. For example, the trustees of the Kingston Testamentary Trust retain the discretion as to whom distributions are made and in what sum. The wife can be entirely excluded.
[59] Ibid.
I accept the husband’s submission that parties to s 79 proceedings have a positive obligation to set out, at an early stage of proceedings, their financial position in a clear and comprehensive manner.[60] In my view the wife has done her best to do so. In particular, the wife provided Exhibit 12 (Kingston Group diagram) to the husband in 2017 (save for the handwritten amendments). There is no doubt that the wife’s interests in the Kingston Group have some complexity but I am not persuaded that the matters raised by the husband amount to serious non-disclosure. Significant criticism was made by the husband of the handwritten amendments to Exhibit 12, it being suggested that the husband was completely unaware of why the amendments were made. I have some difficulty accepting that submission. In so far as Exhibit 12 crosses out reference to J Holdings Pty Ltd ACN …, the reason for this should have been immediately apparent and it should have been immediately apparent that the ASIC searches incorrectly reference J Holdings Pty Ltd ACN … as a holding company for a number of companies within the Kingston Group. This is because the husband was aware on 13 December 2019 that J Holdings Pty Ltd ACN … was not a company connected to the Kingston Group. That company and J Pty Ltd ACN … were removed as parties by consent on that date and the husband filed an amended Initiating Application substituting the offshore companies of the same name as the 6th and 10th respondents. I am not persuaded that the handwritten amendments evidence a serious non-disclosure by the wife or indeed by the other respondents whose disclosure obligations were stayed pending the husband properly pleading a case against them.
[60] Waterman (n 36) at 77,077, [32] approving Briese (n 35) at 75,180 - 75,181.
While some criticism of the wife’s ongoing disclosure may be warranted, in that she failed to disclose a contingent liability arising under a guarantee provided by her for borrowings of about $36,000,000, her failure in that regard cannot create property interests that do not otherwise exist.
The Court “must take the property of a party to the marriage as it finds it”[61] and “cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it”.[62]
[61] Ascot Investments (n 30) at 355 (Gibbs J).
[62] Ibid.
Findings
I make the following specific findings in relation to the first issue:
(a)The wife’s existing legal and equitable interests in property comprise the non-contentious items set out in [41] - [43];
(b)The wife has a minority shareholding in various entities within the Kingston Group as set out in [44]. The wife does not control any of the entities and does not thereby have an interest in the assets of the entities. A number of the shares owned by the wife hold no voting rights or entitlements to share in distributions on winding up;
(c)The wife has a bare legal title to shares in various companies held on trust as particularised in [44];
(d)The wife’s rights to consideration as an object of benefaction as a discretionary beneficiary and to due administration of the Kingston Family Trust, the Kingston Special Trust and the Kingston Group Trust may well be choses in action but the wife does not control the trusts and as such the assets of the trusts are not a “species” of property of wife for the purposes of s 79 proceedings;
(e)The rights that the wife has are of little practical worth and, in the absence of control, do not equate to a proprietary interest in the assets of the trusts;[63]
[63] Karllson (n 38) at [28] quoting the Hon Justice Brereton in The High Court and family law: Two recent excursions (2013) 3 Fam L Rev 63 at 64.
(f)In relation to the Kingston Testamentary Trust, I make the following additional findings:
(i)As a discretionary beneficiary, the wife has no proprietary interest in the trust assets;
(ii)The wife has a right to due consideration and due administration which are choses in action;
(iii)As a residuary beneficiary the wife has no proprietary interest in the trust assets until the vesting of the trust on 2 November 2026;
(iv)The entirety of the trust assets can be distributed to beneficiaries other than the wife prior to the vesting date;
(v)In those circumstances her interest as a residuary beneficiary would be worthless;
(vi)Given cl 6 of the Will, such a decision would be entirely consistent with the purpose of the trust, created by a stranger to the marriage, that none of his property should benefit a spouse of his children;
(vii)As the wife does not control the trust, being one of three trustees, the fact of her being a trustee does not enhance her rights;
(viii)The wife has no irrevocable rights to income or capital of the trust;
(ix)The rights that the wife has are of little practical worth and, in the absence of control, do not equate to a proprietary interest in the assets of the trusts; and
(x)To the extent that the husband contends that transactions giving effect to such decisions might be amenable to attack under s 106B of the Act,[64] I reject that contention in circumstances where the assets of the trust are not and were not property of the wife but rather of her late father and the wife has no and had no irrevocable rights to income or capital. Section 106B cannot be utilised to create rights that did not otherwise exist.
WHAT IS THE EFFECT, IF ANY, OF THE UMBRELLA DEED ON ANY EXISTING LEGAL AND EQUITABLE INTERESTS OF THE WIFE?
[64] s 106B of the Act empowers the Court, in proceedings under the Act, to set aside an instrument or disposition which is made to defeat an existing or anticipated order or which irrespective of intention is likely to defeat any such order.
There has already been some discussion about the Umbrella Deed earlier in these Reasons which I take into account when considering what effect, if any, the Umbrella Deed has on any existing legal and equitable interests of the wife.
The Umbrella Deed was entered into between the wife and her two brothers on 13 February 2014. They are the only parties to the deed which is described as a deed for the “operation of the Kingston Group”. The relevant terms of the Umbrella Deed are set out below.
The Umbrella Deed
The Umbrella Deed recites that:
(a)The wife and her two brothers are the remaining trustees appointed under the Will (their mother having passed away on … 2013) (Recital A);
(b)Each of them work in the business/es of the Kingston Group and are entitled to share in any income or capital distributions made under the Will (Recital B);
(c)They wish to set out their intentions in regards to:
(i)Their ongoing entitlements as continuing members (being active members for whom no trigger event has occurred e.g. retirement) until the cessation date (i.e. 30 June 2040) (Recital C(a));
(ii)The ongoing entitlements of an outgoing member from the trigger date e.g. retirement, to the cessation date in the event of a trigger event (Recital C(b)); and
(iii)The ultimate winding up of the business/es on the cessation date (Recital C(c)).
The Kingston Group, for the purposes of the Umbrella Deed, is defined by reference to Sch 1 to the Umbrella Deed and specifically excludes the entities including trusts referred to in Sch 2 (in the case of the wife, E Pty Ltd as trustee for the Ms Kingston Family Trust and D Pty Ltd are excluded).
The High Court in Stanford makes it clear that consideration of whether or not it is just and equitable to make an order must be the subject of separate consideration and is not to be conflated with the considerations the Court must take into account when considering what order, if any, it should be made (s 79(4)).[73] Importantly the High Court stressed that “[t]o conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act” (emphasis in original).[74]
[73] Stanford (n 5) at 120, [35].
[74] Ibid at 121, [40].
Husband’s argument
The husband submits that a consideration of whether or not it is just and equitable to make an order under s 79 is not one that can occur until the property of the parties or either of them has been valued. This proposition is said to be supported by the Full Court in Omacini & Omacini[75] (“Omacini”) where the four step process in any s 79 proceeding was said to commence with the requirement to “identify and value the net property of the parties” (emphasis added).[76] It is argued by the husband that “[t]there is no proper basis to submit that the requirement to value has been altered by Stanford. On the contrary, it has been strengthened”.
[75] (2005) FLC 93-218 (“Omacini”).
[76] Ibid at 79,619, [46].
The husband further argues that the determination of this issue is not a “threshold issue but rather one permeating the entire process”[77] and that the findings made after the first series of trial dates “do not seriously advance the case”.
[77] Bevan & Bevan (2013) FLC 93-545 at 87,234, [86].
It is submitted by the husband that the wife has sought to “cherry pick” particular sentences in Stanford to advance her case. In any event, it is argued that a finding that it is not just and equitable to make an order would not be made in this case for the following reasons:
(a)The pre-nuptial agreement is not determinative of anything. It did not govern the parties relationship and cannot be elevated to the level of a financial agreement binding under the Act;
(b)Not all of the wife’s interest in the Kingston Group derives from inheritances;
(c)The wife stayed in the marriage as long as she did in the hope of avoiding a claim by the husband for property settlement; and
(d)The Court cannot determine whether any outcome is just and equitable absent evidence of the value of the parties’ interests in property.
The wife’s argument
The wife submits that while she initially sought to have the Stanford issue determined as a discrete issue at an earlier time and failed, the case has significantly advanced since then in that findings of fact on crucial matters have been made. It is no longer a question of it being a “threshold issue” as “[a]part from a precise value assessment of the pool, there is little left to be done”. The wife further argues that “[w]hether the Wife has “property” of $7 Million or $50 Million ought have no impact on the Stanford issue”.
It is submitted by the wife that Stanford makes no mention of a requirement for property to be valued before determining whether it is just and equitable to make an order. At [37] of the judgment the plurality said:[78]
37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to "altering the interests of the parties to the marriage in the property" (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
[78] Stanford (n 5) at 120, [37].
The wife further submits that while acknowledging s 79 confers a broad power, the High Court cautioned that the power is not to be exercised in an unprincipled fashion and that there must be a principled reason for interfering with the existing legal and equitable interests of the parties.[79] Emphasis is placed by the wife on the three steps identified by the High Court at [37]–[40] of the judgment.[80] The relevant paragraphs of Stanford are reproduced later in these Reasons.
[79] Stanford (n 5) at 121-123, [39] and [41].
[80] Ibid at 120-121, [37]-[40].
It is argued by the wife that it is not just and equitable to make an order in this case for the following reasons:
(a)By the pre-nuptial agreement and the many property transactions over 23 years of marriage, the parties expressly considered how their property interests should be arranged;
(b)As to stated assumptions (a reference to [41] of Stanford), the starting point is the pre-nuptial agreement in 1991 which records the purpose being a “wish to set down in writing before their marriage what they are agreeing to as to how certain aspects of their financial relationship with each other following the marriage should be regulated” and, as to future inheritances, it was agreed to “remain his or her own separate property and the other shall have no claim for any share or part thereof at any future time”;
(c)What actually occurred after marriage was that the properties in which the parties lived were acquired in the name of the wife and funded entirely by her. When mortgages were required they were taken in her name and paid off by her. At no time did the husband request to be involved, or was involved. Further, the conservation properties[81] were acquired by entities which the wife caused to be created and which she controlled entirely. When the husband did work on those properties it was on a commercial basis and he was suitably recompensed;
(d)The husband conceded that “if [he] wanted to marry [the wife], [the wife’s father] required that [he] sign the [pre-nuptial agreement] he had prepared”;
(e)The husband in a handwritten note at the time wrote – “In contract law you are bound by what you sign - is it different in family law?” The husband was a finance professional at the time and a business operator. He knew what he was agreeing to and did nothing in the years that followed to undo what had been done before;
(f)As to the unstated assumptions about property, it is submitted by the wife that the husband was conscious of the existing arrangements as demonstrated by his (alleged) parting pledge to the wife: “[w]ell now you can support me for the rest of my life”. The husband made no suggestion that they sit down and work out a property settlement because he always knew that he had no entitlement because of the way they had arranged their financial affairs and all he had was a spousal maintenance claim;
(g)There is no principled reason to interfere with the way the parties agreed to structure and did structure their property ownership and other financial dealings;
(h)In response to the husband’s anticipated refrain that to leave the property entitlements as they are is ‘unfair’, the wife contends that he knew and accepted the arrangements and had the benefit of accommodation at no cost for 23 years and when he struck hard times, the wife devised a means for him to contribute to the costs of the family, while maintaining their agreement as to property ownership.
[81] Rigby & Kingston (No.2) (n 1) at [50]-[64].
Other respondents’ argument
The other respondents made no submissions on this issue.
Discussion
Omacini, of course, predates Stanford where the High Court held that “[f]irst, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property” (emphasis in original).[82] The High Court further held that “[b]ecause the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties’ rights to or interests in marital property are or should be different from those that then exist”.[83]
[82] Stanford (n 5) at 120, [37].
[83] Stanford (n 5) at 121, [39].
It was not a point of contention in Omacini that valuations should be obtained.[84] In most property settlement cases valuations will be obtained but I was not taken to any authority, nor have I located any authority, to support the proposition relied upon by the husband that a determination of whether it is just and equitable to make an order can only be made after the property of the parties or either of them has been valued.
[84] Omacini (n 75).
It will depend upon the particular circumstances of each case. In the current case it is conceded by the wife that she owns property worth about $7,000,000, and that if her interests in the Kingston Group were found to equate to a one third proprietary interest in the Kingston Group, the value or her property could be up to $50,000,000. Accordingly, I am not determining this issue in a total vacuum. I have also made significant factual findings in this case. The proceedings are well advanced.
It is necessary, given the competing arguments, to set out the particular principles laid down in Stanford.[85] They are as follows commencing at [35]:
[85] (n 5) at 120-122, [35]-[42].
35.It will be recalled that s 79(2) provides that "[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order". Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36.The expression "just and equitable" is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. And while the power given by s 79 is not "to be exercised in accordance with fixed rules", nevertheless, three fundamental propositions must not be obscured.
37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to "altering the interests of the parties to the marriage in the property" (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
38.Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs "as [the judge] thinks fit", in any question between husband and wife as to the title to or possession of property, is a power which "rests upon the law and not upon judicial discretion". And as four members of this Court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong:
"The judge called upon to decide proceedings of that kind is not entitled to do what has been described as 'palm tree justice'. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down".
39.Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that "[c]ommunity of ownership arising from marriage has no place in the common law". Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be "decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses". The question presented by s 79 is whether those rights and interests should be altered.
40.Third, whether making a property settlement order is "just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down". To conclude that making an order is "just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
41.Adherence to these fundamental propositions in exercising the power in s 79 gives due recognition to "the need to preserve and protect the institution of marriage" identified in s 43(1)(a) as a principle to be applied by courts in exercising jurisdiction under the Act. If the parties have made a financial agreement about the property of one or both of the parties that is binding under Pt VIIIA of the Act, then, subject to that Part, a court cannot make a property settlement order under s 79. But if the parties to a marriage have expressly considered, but not put in writing in a way that complies with Pt VIIIA, how their property interests should be arranged between them during the continuance of their marriage, the application of these principles accommodates that fact. And if the parties to a marriage have not expressly considered whether or to what extent there is or should be some different arrangement of their property interests in their individual or commonly held assets while the marriage continues, the application of these principles again accommodates that fact. These principles do so by recognising the force of the stated and unstated assumptions between the parties to a marriage that the arrangement of property interests, whatever they are, is sufficient for the purposes of that husband and wife during the continuance of their marriage. The fundamental propositions that have been identified require that a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interests during the continuance of the marriage.
42.In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
(Citations omitted) (Emphasis in original)
In my view, the significant principle to emanate from Stanford, apart from the need to separately consider s 79(2), is the rejection of any assumption that just because a person has for example made contributions as defined by s 79(4)(a) – (c) or one or more of the many matters in s 75(2) may be said to favour an applicant, there should be an order made under s 79(1).[86] In the current case, counsel for the husband earlier submitted that the length of the marriage was a factor of itself which would warrant an order. He even went so far as to suggest that had his client been a wife rather than a husband there would be no discussion about whether it is just and equitable to make an order. I reject both contentions. The submissions are contrary to law and, unsurprisingly, I was not taken to any authority in support of such propositions.
[86] Stanford (n 5) at 121, [40] and [51].
I respectfully adopt observations made by Murphy J said in Watson & Ling[87] from [14]:
14.As Stanford makes plain (see, especially at [39]), the breakdown of a marriage (or de facto relationship as defined in the Act) does not bring, as an automatic consequence, an alteration of existing legal and equitable interests. Just as, if an order is to be made, equality is neither to be assumed nor is a starting point (Mallett v Mallett [1984] HCA 21; (1984) 156 CLR 605), so too, the making of an order at all is not to be assumed.
15.The emphasis by the High Court in establishing the existing legal and equitable interests of the parties as a precursor to answering the question required by s 79(2)/s 90SM(3) can be seen to derive from the fact that s 79/s 90SM is concerned with rights in property which “...have their source in [the] relationship...” but which “...are created by curial order...”; “... orders made under s 79 [cf s 90SM] ... perform a dual function by creating and enforcing rights in one blow, so to speak...” (per Mason and Deane JJ, Fisher at 453). Given that the relationship does not itself create interests in property, due recognition must be given to existing legal and equitable interests because, as Macrossan CJ said (in a different context) in Turner v Dunne[1996] QCA 272“[i]f it were otherwise, it might have to be concluded that ordinary categories of legal ownership could be not much more than provisional in all domestic relationships.”
16.Given the circumstances of the current proceedings, and the intersecting relationships of those within them, it is also important to bear in mind not only that the claim is that of Mr Watson, but also that his claim, now being pursued by his estate, is “...not answered by pointing to moral obligations”; “[t]he rights of the parties [are] to be determined according to law, not by reference to other, non-legal considerations ...” (Stanford at [52]).
(Citations omitted)
[87] (2013) FLC 93-527 at 86,922, [14].
Stanford offers no clear guidance on what matters inform the determination of whether it is just and equitable to make a s 79 order, although the decision does make it clear that it is not sufficient to only consider s 79(4) matters or to assume that an order is just and equitable.
This case involves a long marriage but, as already observed, that alone is not determinative. This was a marriage where the parties turned their minds to what rights each would have to the property they owned at the time of marriage in 1991, to property acquired by them individually after marriage and inheritances received after marriage, and they signed a pre-nuptial agreement purporting to set out their agreement in relation to those matters.
After marriage they engaged in an extraordinary process of recording their individual expenditure on joint expenses and accounting to each other to maintain equality. They maintained equality of contribution to joint expenses until 2007. Thereafter, the wife assumed a greater than equal contribution.
Throughout the entire marriage the wife provided the accommodation for the family at no cost to the husband. She alone obtained finance where finance was required and she alone paid off the loans.
At no time did the husband and wife acquire any property in joint names nor did they hold any joint bank accounts.
Throughout the entire marriage the wife worked full time save for short periods after each child was born. There were substantial periods during the marriage when the husband was underemployed or unemployed.
When the husband could not contribute his half share to joint expenses, the wife lent him the money and he repaid the loans, often by undertaking work for the wife on her conservation properties for which he was paid by the wife at commercial rates set by him. After 2007, the wife gained some advantages in being able to distribute income from her family trust to the husband and thereby paid less tax. This also had an advantage for the husband who would not otherwise have been able (at times) to make financial contributions to the joint expenses.
Despite the husband’s greater availability at times, his contribution as parent and homemaker did not exceed those made by the wife.
The wife’s direct financial contributions greatly exceeded those of the husband. The wife received substantial distributions from trusts controlled and established by her father until his death in 2008. Thereafter the wife continued to receive substantial distributions from those sources. The wife also received inheritances.
In my view, the only basis upon which the husband could resist a finding that it was not just and equitable to make any order is the s 75(2) factors given that there is a clear disparity in the parties’ financial circumstances. The husband owns virtually no property. By comparison the wife owns significant property. Further, the wife’s income greatly exceeds that of the husband.
To make an order solely on that ground would be to do what the High Court cautioned against in Stanford i.e. make an order only because of s 79(4) factors.
If the husband is unable to maintain himself adequately then he has rights to claim spousal maintenance from the wife and I note that he has an outstanding application for a final order in that regard.
Finding
In my view, when considering the particular circumstances of this case, I find that it is not just and equitable to make an order under s 79(1) of the Act.
MISCELLANEOUS
I propose to list the matter at a time convenient to the parties before pronouncing any orders that follow from the findings made, so as to give the parties the opportunity to make submissions about the form of the order.
I certify that the preceding one hundred and fifty-nine (159) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Carew. Associate:
Dated: 9 July 2021
SCHEDULE OF PARTIES
BRC 12882 of 2016 THIRD PARTY RESPONDENTS
Mr F Kingston (2nd)
Mr G Kingston (3rd)Kingston (New South Wales) Pty Ltd (4th)H Pty Ltd (5th)J Pty Ltd registered number …/1996 (6th)J Pty Ltd ACN …(6th)K Pty Ltd (7th)
K Pty Ltd (as Trustee for the Kingston Family Trust) (8th)
K Pty Ltd (as Trustee of the Kingston Special Trust) (9th)J Holdings Pty Ltd registered number …/1996 (10th)J Holdings Pty Ltd ACN …(10th)Kingston Consolidated Pty Ltd (11th)
Kingston Consolidated Pty Ltd (as Trustee of the Kingston Group Trust) (12th)L Pty Ltd (13th)M Pty Ltd (14th)Kingston Developments Pty Ltd (15th)N Pty Ltd (16th)Kingston Holdings Pty Ltd (17th)Kingston Pty Ltd (18th)O Pty Ltd (19th)O Pty Ltd (as Trustee of the P Unit Trust) (20th)Kingston Constructions Pty Ltd (21st)Q Pty Ltd (22nd)Q Pty Ltd (as Trustee of the Kingston Finance Unit Trust) (23rd)R Pty Ltd (24th)S Pty Ltd (25th)T Pty Ltd (26th)T Pty Ltd (as Trustee of theKingston Group of Companies Super Fund) (27th)T Pty Ltd (as Trustee of the Kingston Pty Ltd Super Fund) (28th)T Pty Ltd (as Trustee of the U Unit Trust) (29th)T Pty Ltd (as Trustee of the V Unit Trust) (30th)
Kingston Group Pty Ltd (31st)
2
18
2