Stephens & Stephens and Ors

[2005] FamCA 1181

FAMILY LAW ACT 1975

IN THE FAMILY COURT OF AUSTRALIA

AT MELBOURNE No MLF 2847 of 2002

IN THE MATTER OF:

MS STEPHENS
(Applicant Wife)
AND

MR STEPHENS
(Respondent Husband)

AND
[THE HUSBAND] AND
MR J
(As Trustees of the W STEPHENS TRUST, the X STEPHENS TRUST, the Y STEPHENS TRUST and the Z STEPHENS TRUST)
  (First Interveners)
AND
  W STEPHENS
  (Second Intervener)
  AND
  X STEPHENS
  (Third Intervener)
  AND
  Y STEPHENS
  (Fourth Intervener)
  AND
  Z STEPHENS
  (By Z’s next friend […])  (Fifth Intervener)

CORAM: THE HONOURABLE JUSTICE STRICKLAND

DATE/S OF HEARING: 1 – 4 August 2005, 31 August 2005

DATE OF REASONS: 30 November 2005

JUDGMENT

APPEARANCES: Mr Ackman QC with Ms Macmillan appeared as counsel (instructed by Kennedy Wisewoulds Solicitors) on behalf of the applicant wife
Mr North SC appeared as counsel (instructed by Nedovic & Co Solicitors) on behalf of the respondent husband
Mr Kirkham QC appeared as counsel (instructed by [the husband] and [Mr J] (As Trustees of the W Stephens Trust, the X Stephens Trust, the Y Stephens Trust and the Z Stephens Trust)) on behalf of the first interveners
Ms Molyneux QC appeared as counsel (instructed by Marshalls & Dent Solicitors) on behalf of the second to fifth interveners

FAMILY LAW - PROPERTY SETTLEMENT – Family Trust – Wife seeks to set aside pursuant to s106B trust variation instruments which exclude the husband from the capital of the fund and dispositions of shares worth $500,000 and trust property worth $4.7million by the husband – alternatively wife seeks to notionally add back shares and trust property to the pool – alternatively wife seeks to treat trust assets as a financial resource of the husband taken into account under s75(2) – husband is appointer and trustee of the trust – assets of the trust can be treated as the property of the husband or his financial resource – Part VIIIAA cannot be applied as the requirements of s90AE have not been satisfied – trust variations may be set aside pursuant to s106B – alternatively Townsend principles applicable to the husband’s distribution of assets – husband’s contributions outweigh the wife’s due to his substantial initial contribution – no s75(2) adjustment, wife’s care of the youngest child offset by her greater income and earning capacity – total pool $9.8million –order 52%/48% division in favour of the husband – orders do not cause a breach of trust or fraud on power – set aside the disposition of trust property and the variation to the trust instrument excluding the husband from the capital of the fund.

Family Law Act 1975 (Cth) ss 75(2), 106B

Kowaliw and Kowaliw (1981) FLC 91-092
Townsend and Townsend (1995) FLC 92-569
Coventry and Coventry and Smith (2004) FLC 93-184
Plugradt and Plugradt (1981) FLC 91-052 at 76,429-76,430
Ascot Investments Pty Ltd v Harper (1981) FLC 91-000
Gould and Gould; Swire Investments Ltd (1993) FLC 92-434
Davidson and Davidson (1991) FLC 92-197
Ashton and Ashton (1986) FLC 91-777
Webster and Webster (1998) FLC 92-832
Goodwin and Goodwin-Alpe (1991) FLC 92-192 ad 78,273
Re Wakim; Ex parte McNally (1999) 198 CLR 511
Gazzo v Comptroller of Stamps (1981) 149 CLR 227
G and G (Family Court of Australia, 21 November 1996 – unreported)
R and R (2004) FamCA 388
Kennon and Kennon (1997) FLC 92-757

Introduction

I have before me for determination competing applications for property settlement.
The wife filed a Second Amended Form 1 Application on 11 April 2005 in which she sought the following orders in relation to property settlement:
2.1.That the Instrument of Variation of the Stephens Trust dated 7 December 1998 be set aside pursuant to the provisions of Section 106B of the Family Law Act 1975.
2.2.That the instrument entitled “the [Stephens] Trust” dated 18 January 2002 and the dispositions purported to be made pursuant thereto whereby the husband has purported:
2.2.1   To forgive and release all amounts owing by him to the said trust.
2.2.2   To apply the income and capital of the trust:
2.2.2.1        As to one-quarter thereof to the [W Stephens] Trust.
2.2.2.2As to one-quarter thereof to the [X Stephens] Trust.
2.2.2.3        As to one-quarter thereof to the [Y Stephens] Trust.
2.2.2.4As to one-quarter thereof to the [Z Stephens] Trust,
be set aside pursuant to the provisions of Section 106B of the Family Law Act 1975.
2.3.That the instruments dated 18 January 2002 whereby the husband has purported to create the [W Stephens] Trust, the [X Stephens] Trust, the [Y Stephens] Trust and the [Z Stephens] Trust (“the children’s trusts”) be set aside pursuant to the provisions of Section 106B of the Family Law Act 1975.
2.4.That the instrument dated 20 January 2002 whereby the husband has purported to dispose of the beneficial ownership of and to assign shares and investments to the children [W Stephens], [X Stephens], [Y Stephens] and [Z Stephens] be set aside pursuant to the provisions of 106B of the Family Law Act 1975.
2.5.That the instruments entitled “the [W Stephens] Trust”, “the [X Stephens] Trust”, “the [Y Stephens] Trust” and “the [Z Stephens] Trust” each dated 20 May 2002 whereby [Mr J] is purported to be appointed as trustee of the children’s trusts be set aside pursuant to the provisions of Section 106B of the Family Law Act 1975.
2.6.That the husband pay or cause to be paid to the wife such sum as shall (when adjusted for the assets and resources to be retained by each of them) represent a division of all assets and resources held in their individual or joint names or in the [Stephens] Trust (also known as the […] Trust) or the children’s trusts and in any superannuation fund as to 50% thereof to the wife and 50% thereof to the husband or in accordance with his direction.
2.7.That the paintings owned by the parties be divided equally between them.
2.8.That the wife retain to the exclusion of the husband the following assets and resources in her ownership, possession or control:
2.8.1The proceeds of the sale of the house property at [Suburb A]
2.8.2All shares in public companies in respect of which she is registered as owner;
2.8.3Her [motor vehicle];
2.8.4The furniture and chattels in her possession;
2.8.5Her jewellery and personal possessions;
2.8.6Her interest in the … Superannuation Fund;
2.8.7All monies standing to her credit in any bank account.
2.9.That the husband retain to the exclusion of the wife (save to the extent that such assets may need to be realised to effect a just and equitable settlement in favour of the wife) the following assets and resources:
2.9.1The real property at [Suburb B] registered in his name;
2.9.2Furniture and chattels in his possession;
2.9.3His library and personal effects;
2.9.4The proceeds of his interest in the … Superannuation Fund;
2.9.5Monies standing to his credit in bank accounts;
2.9.6Monies (if any) held in overseas deposits;
2.9.7The [motor vehicle] registered in his name.
2.10.That pursuant to Part VIIIAA of the Family Law Act 1975 the Trustees of the Stephens Trust and the children’s trusts sign all documents and do all acts and things reasonably necessary to effect a payment to the wife from the assets of the trusts of such sum or sums as the Court may determine to be necessary to effect a just and equitable settlement of property issues between the parties.
2.11.Such further or consequential orders as may be necessary to effect and implement a just and equitable settlement of property issues between the parties.
2.12.That the husband pay the wife’s costs of and incidental to the determination of the applications contained in paragraphs 3-6 hereof and of the third parties of and incidental to these proceedings and the implementation of the orders made by the Court on an indemnity costs basis.
On 22 April 2005, the husband filed a Second Amended Form 1A Response in which he sought the following orders in relation to property settlement:
3.1.That paragraphs 1, 2, 3, 4, 5, 6, 8, 9 and 10 of the wife’s amended application filed 11 April 2005 be dismissed.
3.2.That the wife pay the husband’s costs of and incidental to her application in the said paragraphs 1, 2, 3, 4, 5, 6 and 10 on an indemnity costs basis.
3.3.That the paintings owned by the parties be divided equally between them (paragraph 7 of the said amended application is accepted).
3.4.That the wife retain (subject to paragraph 6 hereof) to the exclusion of the husband the following assets in her possession, ownership and control:
3.4.1All shares in public companies registered in her name, except the 14,600 Westpac shares held by her as nominee and referred to in the Application of the Trustee Interveners filed on 14 November 2003;
3.4.2The [motor vehicle] registered in her name;
3.4.3The furniture and chattels in her possession;
3.4.4Her jewellery and personal possessions;
3.4.5Her interest in the … Superannuation Fund;
3.4.6All moneys standing to her credit in any bank account.
3.5.That the husband retain to the exclusion of the wife the following assets in his possession, ownership or control:
3.5.1The unit at [Suburb B] registered in his name;
3.5.2Furniture and chattels in his possession;
3.5.3His personal effects;
3.5.4The [motor vehicle] registered in his name;
3.5.5All moneys standing to his credit in any bank account.
3.6.That the wife pay to the husband such sum as represents a division of all assets owned by them or either of them as to 60 per cent to the husband (including the assets in 5 above) and 40 per cent to the wife, and that for this purpose no account be taken of any assets owned by any of the Interveners.
3.7.That the wife transfer the said 14,600 Westpac shares to the Trustee Interveners together with all dividends received by her on those shares and interest in respect of those dividends.
3.8.Such further or consequential orders as are appropriate to effect a just and equitable settlement of property issues between the parties.
3.9.That subject to paragraph 2 hereof the wife pay the costs in these proceedings.
The first interveners filed an Amended Form 1A Response on 22 April 2005, in which they sought the following orders:
4.1.That paragraphs 1, 2, 3, 4, 5 and 10 of the wife’s amended application dated 11 April 2005 be dismissed.
4.2.That in determining any amounts to be paid by the wife or by the husband to the other no account be taken of assets owned by the [W Stephens] Trust, the [X Stephens] Trust, the [Y Stephens] Trust or the [Z Stephens] Trust or by any of the beneficiaries thereof.
4.3.That the wife pay the Trustees’ costs of and incidental to the determination of the applications set out in the said paragraphs 1, 2, 3, 4, 5 and 10 and the other costs of the Trustees in these proceedings on an indemnity costs basis.
4.4.That the wife transfer to the Trustee Interveners the 14,600 Westpac shares referred to in the Application of the Trustee Interveners filed on 14 November 2003 and held by her as nominee together with all dividends received by her on those shares and interest in respect of those dividends.
4.5.Such further or consequential orders as are appropriate.
On 23 May 2005, the second to the fifth interveners each filed an Amended Form 1A Response in which they sought the following orders in relation to property settlement:
5.1.That the Orders sought by the applicant number 1 to 6 (inclusive) and Orders numbered 10 and 12 be dismissed.
5.2.Such further or other Orders as this Honourable Court deems meet (sic).
5.3.That the wife pay the costs of and incidental to this Application.
In relation to the application by the wife to set aside the instrument dated 20 January 2002 whereby the husband assigned shares to the four children, the court was informed during the course of the opening by the wife’s senior counsel that the wife was not seeking that these shares be actually transferred back to the husband, but rather that their value “be added notionally back into the pool” for the purposes of determining the respective entitlements of the parties to property settlement.
At trial the husband altered his position in relation to the percentage division which should be applied. Instead of 60%/40% in his favour he submitted that his contributions should be assessed within the range of 57.5% - 60% and there should then be an adjustment of 5% in his favour for the relevant Section 75(2) factors.

The Factual Background

The husband was born on … 1940 and is 65 years of age.
The wife was born on … 1956 and is 49 years of age.
Between 1967 and 1973 the husband was employed as an academic.
On 21 June 1968 the Stephens Trust (the Trust) was created orally. The husband was settlor and also the trustee of the Trust. The husband made all of the financial contributions to the Trust. The beneficiaries were limited to the issue of [The Husband’s father] … and all persons “married” to such issue.
In 1969 the husband purchased a two-storey brick house at Suburb C for about $30,000.00.
In 1973 the husband purchased a three-storey house at Suburb D for approximately $65,000.00.
The wife left school at age 16 years, and after completing College, she worked from when she was 17 years old. Whilst working the wife returned to study commencing a Bachelor Degree at … University.
The parties were married in Melbourne on … 1978. At that time the husband had a successful professional career. The wife was working full-time as a …, and she was in the final year of her degree course.
Following the marriage the wife moved into the husband’s house property at Suburb D. She then completed her degree and gave up her employment in late 1979/early 1980 just before becoming pregnant with the parties’ first child.
[…]
On 23 December 1979 the Trust purchased a two-storey brick house at Suburb B for about $152,000.00, the purchase price being funded in full from the husband’s pre-marriage savings.
Between 1980 and 1983 the Suburb B property was rented to third parties by the Trust.
On … the parties’ first child W Stephens was born.
On 15 October 1981 an instrument of trust in the terms of the parole trust created on 21 June 1968 was executed and stamped. The instrument of trust provided as follows:
21.1.Clause 1 - The trustee of this trust (hereafter called “the trustee”) shall be [THE HUSBAND] (HEREAFTER called “the settlor”) and any other person or persons as he may from time to time appoint. [THE HUSBAND] is empowered from time to time to remove any person or persons, being trustees, as he in his absolute discretion sees fit. After the death of the settlor, the trustee shall be the trustee then existing together with the eldest male issue of the settlor from time to time alive.
21.2.Clause 2 – The settlor may at any time vary the terms of this trust, but not in such a manner as to increase in any way his rights under the trust to the beneficial enjoyment of the fund.
21.3.Clause 3 – Hereafter “the fund” shall mean the trust fund from time to time in existence.
21.4.Clause 4 – Hereafter “the beneficiaries” shall mean all issue of [THE HUSBAND’S FATHER] and all persons married to such issue; and “the date of distribution” shall mean either one hundred years from 21 June 1968 or 21 years after the death of the last survivor of all children alive at 21 June 1968 of […], whichever is the earlier date.
21.5.Clause 5 – At any time this trust may be terminated if all the beneficiaries then alive and being sui juris unanimously so consent; and none of the fund shall in such event be paid or applied for the settlor, but it shall be distributed equally amongst the male beneficiaries.
21.6.Clause 6 – The Trustee shall have the power from time to time, as he in his absolute discretion sees fit, to apply all or any part of the income and/or capital of the fund to or for all or any of the beneficiaries, either by making payments or applications for the benefit of the beneficiary in question or payments to a trust set up substantially for the benefit of such beneficiary; and income not from time to time lawfully paid or applied shall be accumulated.
21.7.Clause 6A – No part of the income of the fund shall at any time be paid or applied for the settlor in repayment of any debt owed to him by the trustees; nor shall any such income be accumulated for the settlor.
21.8.Clause 7 – At the date of distribution the fund shall be divided amongst such of the beneficiaries as the trustee thinks fit and, in default, amongst all male beneficiaries equally with the exception of the settlor.
On … the parties’ second child X Stephens was born.
The family moved to the Suburb B property in 1983.
On 4 March 1983 a deed was executed by the husband as settlor, the wife, and the husband as trustee which excluded the husband as a beneficiary of the Trust. This was done to prevent the property owned by the Trust being aggregated for the purpose of the assessment of land tax with the properties owned personally by the husband. The wife remained a beneficiary as to the capital and/or income of the Trust. The Deed provided as follows:
24.1.Clause 1 – The settlor hereby releases all his rights to be repaid moneys which have from time to time been lent by him to the trustee and all other rights to or in respect of moneys lent to the trustee and agrees and acknowledges that as from the execution hereof no amount is or remains owing to him by the trustee or in relation to the trust fund of the said trust and that he has no rights to or interest in the trust fund or the income thereof.
24.2.Clause 2 – The settlor hereby releases and abandons all and any beneficial interest or rights held by him or which may hereafter be held by him under the trust instrument or under the said trust or in the trust fund or income thereof and confirms that by reason hereof he ceases to be a beneficiary of the trust or a person to whom or for whose benefit all or any part of the trust fund and income thereof may be applied.
24.3.Clause 3 – For the purpose of removing doubts it is confirmed that the expression “issue” used in the said instrument includes all descendents however remote, and not merely children; that appointments by the settlor of a trustee or trustees may be revocable or irrevocable; and that any variation of the trusts of the said instrument shall be invalid to the extent which it purports to confer directly or indirectly any right or benefit upon the settlor.
24.4.Clause 4 – For the purpose of removing doubts it is confirmed that at time of the execution hereof no loans to the trustee by [the wife] or any other person are outstanding.
24.5.Clause 5 – The settlor hereby appoints [the wife] to be trustee on his death or resignation and W Stephens after the death or resignation of [the wife], provided that this appointment is revocable by the settlor at any time.
24.6.Clause 6 – In all other respects the trusts of the said instrument are confirmed.
On … the parties’ third child Y Stephens was born.
In November 1986 the husband executed his first post-marriage Will providing, inter alia, for the wife to receive such amount as may be necessary to bring her net assets up to $500,000.00.
On … the parties’ fourth child Z Stephens was born.
On 22 March 1989 the Trust sold 90,000 … Ltd shares and the proceeds were applied subsequently to acquire 14,600 Westpac shares for $46,699.09 on 28 December 1990. The Westpac shares were registered in the wife’s name as nominee for the Trust.
On 5 December 1991 a separate share certificate was issued for the Trust’s 14,600 Westpac shares after the wife wrote to Westpac and requested her personal holding of 3,500 shares be separated formally from the Trust’s shares.

In or about 1991 the wife became aware that the husband was having an affair with Ms R….
In 1992, because of the issues surrounding the Ms R affair and concerns about the husband’s career the wife returned to University and commenced a graduate diploma course. She duly completed that course and obtained her diploma in 1993.
In March 1992 a two-storey brick house at Suburb A was purchased in the name of the wife. The purchase price of about $405,000.00 was wholly paid for by the husband from his savings. This property was then rented out until 15 December 1994, when the family moved in.
In about 1993 the husband executed a second will providing, inter alia, for the wife to receive such amount as may be necessary to bring her net assets up to $1,200,000.00.
In 1994 the wife commenced part time employment as … at ….
In 1996 the husband sold the Suburb C property.
In about 1996 the husband executed a third will providing, inter alia, for the wife to receive such amount as may be necessary to bring her net assets up to $1,500,000.00.
In about 1996 the parties bought a [motor vehicle] which was registered in the wife’s name.
In 1998, the wife commenced part time employment as … at ….
The husband retired from his profession on 27 August 1998.
In late 1998 the husband moved to a downstairs bedroom. The husband says that this was because of an injury to his knee, but the wife says that it was because of the state of the marriage.
On 7 December 1998, an instrument of variation was executed by the husband as settlor of the Trust. This excluded the husband and the wife as to the capital of the Trust. The husband says that this instrument accorded with the agreement that he had with the wife that the Trust capital would be passed to the four children and for that reason he did not tell the wife about this document. The wife says that this instrument was executed by the husband at a time when he knew or should have known that the marriage was in serious trouble and either did or should have anticipated an order being made. The instrument provided as follows:
41.1.Clause 1 – After the death or resignation of the settlor as trustee the trustees shall be jointly the settlor’s two eldest children, [W Stephens] and [X Stephens]. If the settlor ceases to be trustee, no payment or distribution or application of the income or capital of the fund or exercise of powers under Clause 6 or 7 of the trust instrument shall be made during his lifetime without his prior consent in writing.
41.2.Clause 2 - The power of variation set out in clause 2 of the trust instrument is hereby varied so that (a) it may be exercised by the settlor either in writing during his lifetime or by his will, and (b) any exercise of that power of variation may be either revocable or irrevocable (but unless expressly stated to be irrevocable any such exercise shall be revocable).
41.3.Clause 4 – Clauses 6 and 7 and the other terms of the trust set out in the trust instrument are hereby varied so that no power or discretion to pay or apply the capital of the fund or any part thereof shall be exercised in favour of the settlor or [the wife] or in favour of any trust in which either of them has any interest, right or possibility and the settlor and the said [the wife] are hereby excluded absolutely and irrevocably from all and any interest, rights and possibilities in the capital of the fund. The variation made by this clause 4 of this instrument shall be irrevocable, and no future purported variation purporting to amend this clause 4 or purporting to confer any interest, right or possibility in the capital of the fund on the settlor or on the said [the wife] shall be valid in any way.
In 1999 the parties had marriage guidance counselling. The wife did not consider this to be successful, and she asked the husband to leave. He refused and also indicated that he would not return to counselling.
The husband’s knee was operated upon by … in late1999.
In the late 1990’s or early 2000’s two distributions were made to the husband from the Trust in the total sum of $46,724.00.
On 14 March 2000 the husband executed a fourth will which made no provision for the wife. The husband says that that was because the wife’s assets at that time exceeded $1,500,000.00.
On 13 May 2001 the wife told the husband that she wanted a divorce.
In 2001, just before separation, the husband bought a new … motor vehicle.
On 30 October 2001 the parties separated with the husband leaving the matrimonial home.
In December 2001 the husband, without notice to the wife, took his entitlements in the … Superannuation Fund. He received the sum of $116,828.16.
In December 2001, again without giving notice to the wife, the husband instructed agents to sell the Suburb D and Suburb B properties.
On 20 December 2001, after the wife became aware of the proposed sales, the husband gave an undertaking through his solicitors that he would keep the wife advised of all developments in relation to the sale of the properties including providing her with copies of contracts of sale and not otherwise disbursing the proceeds without the wife’s written consent or Court order.
On 2 January 2002 the wife as nominee executed a transfer to the trustee of the Trust’s 14,600 Westpac shares but subsequently removed that transfer from the husband’s possession without his authority.
On 18 January 2002 the husband, without informing the wife, set up the W Stephens Trust, the X Stephens Trust, the Y Stephens Trust and the Z Stephens Trust (the children’s trusts). The Trust instrument for each of the children’s trusts provided as follows:
53.1.Clause 1 – In this Trust Instrument “the Trustees” shall mean the Trustee or Trustees from time to time. [The husband] shall be a Trustee from the commencement of this Trust, and on his death he shall be succeeded as a Trustee by such person or persons (each being a solicitor or accountant) as is specified in his will and, in the absence of such specification or if no such person remains a Trustee, by [the wife]. In addition, [the child] shall be come a Trustee on attaining 32 years. [The child] and [the husband] jointly, and on the death of either, the survivor, and on the death of the survivor, the Trustees, shall be entitled to appoint or remove Trustees from time to time.
53.2.Clause 2 – Herein “the Fund” shall mean the capital and income of the Trust Fund from time to time; and “the Beneficiaries” shall mean the Primary Beneficiary (the child) and his/her children, grandchildren, sisters, nephews and nieces and the spouses of all of the foregoing …
53.3.Clause 8 – [The child] and [the husband] jointly, or on the death of either, the Trustees, may from time to time amend the provisions of this Trust Instrument, including the provisions of this Clause 8, provided that no amendment shall add any further beneficiary or enable any further beneficiary to be added, or amend Clause 9 below or enable Clause 9 to be amended.
53.4.Clause 9 – [The husband] is excluded absolutely from any interest or benefit in or from the Fund, and neither the Fund nor any part thereof shall be paid or applied for his benefit in any way whatsoever, directly or indirectly, or for the benefit of any company or trust in which he may have any beneficial interest or from which he may receive any benefit.
On 18 January 2002 the husband, again without informing the wife, executed a document in his personal capacity and in his capacity as trustee of the Stephens Trust which provided for the forgiveness and release of all amounts owing to the husband and to the wife by the Trust and for the application of one quarter of the income and capital of the Trust to each of the Trusts set up for the children.
The consequence of the husband’s actions was that each of the children’s trusts acquired assets to the value of approximately $875,000 which included $1,188,000 being the net proceeds of sale of the Suburb B property.
On 20 January 2002 the husband also without informing the wife executed a document entitled “Benefaction by [the husband] to [W], [X], [Y] and [Z Stephens]” (the Benefaction) by which he assigned shares held by him beneficially to the four children and declared himself trustee for them of such shares. The effect of this transaction was that each child personally received assets to the approximate value of $125,000.00, i.e. a total of $500,000.00. Of this $500,000.00, $97,000.00 represented funds already held beneficially for the children, being an inheritance from the husband’s father held by the husband on trust for them, and the remaining amount was the value of the husband’s own assets that were transferred. The document also recorded that shares to the value of $54,000.00 were to be held by the husband specifically for X, Y and Z to be transferred to them, and this was done on the basis that the husband at this time had purchased a motor vehicle for W for $18,000.00.
On 26 January 2002 the Trust sold the Suburb B property for $1.23 million and the husband sold the Suburb D property for $1.4 million. The wife says that the Suburb B property was sold without her knowledge or consent and in breach of the husband’s undertaking given through his solicitors on 20 December 2001.
On 19 April 2002 the wife filed a Form 3 Application in this Court seeking orders for property settlement and maintenance.
In May 2002 the husband instructed … to sell the 14,600 Westpac shares registered in the wife’s name without her knowledge or consent.
On 14 May 2002 the husband attempted to bank a cheque for about $223,000.00, payable to the wife, being the proceeds of the sale of the Trust’s 14,600 Westpac shares. The wife says, and the husband denies, that the husband attempted to forge her signature in order to endorse and bank the cheque. The wife was advised of the husband’s actions by a representative from the bank’s Investigations Unit – Fraud Control. She telephoned … and arranged for the cancellation of the cheque and reversal of the sale.
On 20 May 2002 Mr J, solicitor, was appointed a further trustee of the children’s trusts as from 1 July 2002.
In May 2002 the husband purchased a unit in Suburb B for $640,000. The wife agreed to the husband’s undertakings being varied to enable him to complete the purchase and carry out certain works to the new property.
On 24 May 2002, the husband filed a Form 3A Response seeking such alteration of the interests of the parties in their property as may seem just and equitable to this Honourable Court.
The wife filed an Amended Form 3 Application on 4 July 2002 seeking orders to set aside the January 2002 transactions pursuant to s106B of the Family Law Act 1975 and to remove the husband as trustee of the children’s trusts. The wife also sought specific declarations and orders pursuant to ss78 and 79 of the Family Law Act. She sought orders on the basis that the parties’ assets be divided 60% to the wife and 40% to the husband.
The husband filed a Form 8 Application on 12 September 2002 seeking orders that part of the wife’s Amended Form 3 Application be dismissed.
In November 2002 the wife placed the Suburb A property on the market for sale.
On 22 January 2003 the wife filed a Form 8A Response seeking orders that the husband’s application filed on 12 September 2002 be dismissed and that the husband provide financial information to the wife in relation to his assets and the assets of the Trust and the children’s trusts. The wife also sought orders that pending final determination, the wife replace the husband as trustee of the children’s trusts.
The decree nisi of dissolution of the parties’ marriage became absolute on 17 February 2003. The husband says that the wife ceased to be a beneficiary of the Trust from this date.
The wife sold the Suburb A property on 22 February 2003 for $1,060,000.00.
On 1 April 2003 Kay J refused the husband’s application for dismissal of part of the wife’s amended application and the wife’s application to remove the husband as trustee of the children’s trusts. His Honour granted leave to the trustees of the children’s trusts to intervene in the proceedings insofar as the wife sought to have orders made which affect their interests. The husband gave undertakings as to restraints on management, disclosure of financial information and maintenance of the assets of the children’s trusts provided that he could invest the monies as specified in the undertakings and pay himself $3,500.00 per month for his living expenses.
On 29 April 2003 the husband filed an Amended Form 3A Response seeking orders that, in determining any amounts to be paid by the wife or by the husband to the other, no account be taken of assets owned by the children’s trusts. The husband also sought orders that the parties’ assets be divided 60% to the husband and 40% to the wife.
On 14 June 2003 the husband repaid the sum of $46,724.85 to the children’s Trust on the basis that the distributions were made in error.
The second to the fourth interveners filed a Form 8 Application on 20 June 2003 seeking that they be granted leave to intervene in the proceedings and that leave be granted for […], solicitor, to be appointed Litigation Guardian of Z Stephens.
On 7 July 2003 the first interveners filed a Form 3A Response seeking that part of the wife’s amended application filed on 4 July 2002 be dismissed and that in determining any amounts to be paid by the wife or husband to the other no account be taken of assets owned by the children’s trusts or by any of the beneficiaries thereof.
The wife filed a Form 8 Response on 15 July 2003 seeking orders that the application of the second to fourth interveners filed on 20 June 2003 seeking leave to intervene be dismissed.
On 30 October 2003 Carter J made orders:
76.1.That [W Stephens], [X Stephens] and [Y Stephens] have leave to intervene and be made parties to proceeding number MLF 2847 of 2002, in so far as the relief sought in paras (3), (4), (5) (should it be reinstated), (6), (7) and (13) of the wife’s amended application filed 4 July 2002 affects the Trust or Trusts of which each applicant is a contingent beneficiary and also in so far as there have been distributions to or receipt by each of them of moneys or other property.
On 10 November 2003 Carter J made the following orders:
77.1.That pursuant to Order 15 Rule 14 of the Family Law Rules, […] be appointed next friend of the child [Z STEPHENS] for the conduct of these proceedings.
77.2.That the said [Z STEPHENS] have leave to intervene and be made a party to proceeding No MLF 2847 of 2002 in so far as the relief sought in paragraphs (3), (4), (5) (should it be reinstated), (6), (7) and (13) of the wife’s Amended Application filed on 4 July 2002 affects the trust of which the said [Z STEPHENS] is a contingent beneficiary and also in so far as there have been distributions to or receipt by her of monies or other property.
On 11 November 2003 the second to fifth interveners each filed a Form 3A Response in which they sought orders that part of the wife’s amended application filed on 4 July 2002 be dismissed.
On 14 November 2003 the first interveners filed a Form 8 Application seeking orders that the wife transfer the 14,600 Westpac shares held by her as nominee to the trustees of the children’s trusts or their nominee and deliver to the trustees any dividend cheque paid on the said shares pending the registration of transfer.
The wife filed a Form 8 Response on 5 December 2003 seeking orders that the application of the first interveners filed on 14 November 2003 be dismissed.
On 11 April 2005 the wife filed a second Amended Form 1 Application seeking final orders in relation to property settlement.
On 22 April 2005 the husband filed a Second Amended Response and the first interveners filed an Amended Form 1A Response.
The second to the fifth interveners each filed an Amended Form 1A Response on 23 May 2005.

The current circumstances of the parties
The wife

The wife lives in rented premises at Suburb D. The child Z resides with her. Z is in Year … at … School.
The wife is employed part-time as … at …. Her income is $12,500.00 per annum from this employment but in addition she has investment income of $1,800.00 per week, although this fluctuates.
In an attempt to improve her qualifications the wife has enrolled in a Master’s degree at …University.
With Z, The Z Stephens Trust pays Z’s school fees and various other expenses including income tax, and pays the wife $170.00 per week for Z’s maintenance. Z also has part-time employment and has sufficient income to pay for personal expenses. Z also receives approximately $175.00 per week by way of dividend income from shares.
Z sees the father regularly and usually stays with him one night each week and for one half of all school holiday periods.
The other children, namely W, X and Y spend time with their mother on a regular basis.

The husband

The husband resides in a property that he owns at Suburb B. The adult children W and X live with him. W is completing part-time a Bachelor’s degree at … University, and works part-time as well. X works full-time but is completing part-time a double Bachelor’s course at … University.
The husband retired from his profession some time ago and his only income is from his investments and from royalties. He receives a total of $560.00 per week.
The husband receives weekly amounts from the W Stephens Trust and the X Stephens Trust by way of maintenance for W and X. Those Trusts also pay any University fees and certain miscellaneous expenses. The husband accommodates W and X and provides them with their meals. They pay no board despite having their own income from employment and share dividends.
The other adult child Y is completing a full-time double degree at … University as a resident of …. Y spends time with both the husband and the wife and Y Trust pays $100.00 per week to each of them for Y’s maintenance. Y also works part-time and has … own income, including from share dividends.

The issues in dispute

The primary issue here is what the pool of assets for distribution should comprise. The wife says that it should include the assets of the children’s trusts as well as the shares that the husband assigned to the children. Alternatively the wife says that those assets should be notionally added back to the pool of assets. In the further alternative the wife says that these assets should be taken into account in determining the parties’ respective entitlements to property settlement. The husband says that those assets should not be included on any basis and nor should they be taken into account.
In the context of that dispute the following issues have been raised by the parties:
95.1.The wife says that during the marriage the husband maintained control of the finances of the parties to the exclusion of the wife. Indeed, the wife claims that the husband was secretive about finances and she was even required to sign blank income tax returns which the husband later completed. The husband does not deny that he dealt with the family finances but he denies that he was secretive.
95.2.The wife says that at all relevant times the husband had the control of the Stephens Trust, its assets and its income. The husband does not necessarily deny that as the settlor and the trustee of the Trust he did have control, but he says that the Trust Deed itself and the variations to that Deed limit his control and exclude himself, and the wife following the divorce, from being able to receive any benefit from the assets or income of the Trust.
95.3.The wife says that she had no real understanding of the “structure of the [Stephens] Trust” or the assets owned by it. The wife says that her general understanding of the purpose of the Trust was as a vehicle used by the husband to maximise and preserve the assets of the parties for the benefit of the family, and after the deaths of the parties the assets would pass to the children. The husband says that the wife well understood the structure, the nature, and the purpose of the Trust. Indeed he says that there was an agreement between the parties that the assets of the Trust would be accumulated for the benefit of the children, and pass to them when the husband determined it was appropriate and that the wife would be provided for in other ways, for example by building up assets in her name and by providing for her in the husband’s Wills until her assets had reached a certain level. The wife denies any such agreement.
95.4.The state of the marriage in 1998 was an area of significant dispute between the parties. The wife says that the marriage was in serious trouble and although she made every effort to prevent the parties separating the husband chose to ignore the problems. The wife says that since about 1991 when she became aware of the husband’s affair with Ms R there had been issues in the relationship between them, and then in late 1998 the husband removed himself from the parties’ bedroom. The husband says that although there were issues in their relationship there was no suggestion of a divorce until May 2001. He says that both parties were against divorce and they were successful in keeping the relationship going. He says that he moved into the downstairs bedroom in 1999 (and not 1998) because of a knee injury which prevented him from climbing stairs. The wife says that this was the reason given to others including the children, but the real reason was the state of the marriage.
95.5.The importance of this is that the wife says that on 7 December 1998 the husband executed a variation to the Trust Deed which excluded himself and the wife as capital beneficiaries at a time when the husband knew or should have known that the marriage was in serious trouble and there was every prospect of an order for property settlement being made. She says that the husband did this in order to defeat an anticipated order and thus that instrument should be set aside. The husband of course denies that the marriage was in trouble at this time and that any order for property settlement could have been anticipated. He says that although he did not tell the wife what he was doing there were bona fide reasons for that and for excluding not only the wife but also himself as capital beneficiaries at this time. Specifically, the husband says that he was doing nothing more than securing the position of the children on the basis of the long-standing agreement between the parties that the children would benefit from the assets of the Trust, and not the parties.
95.6.On 18 January 2002, after establishing four identical Trusts for each of the children of the marriage the husband applied one quarter of the capital and income of the Stephens Trust to each of the children’s trusts. The wife says that this was done in order to defeat an anticipated order for property settlement, and this instrument and dispositions should be set aside. The husband says that this transaction was nothing more than a further step in carrying out the agreement and understanding of the parties that the children solely should benefit from the assets of the Stephens Trust.
95.7.On 20 January 2002 the husband executed a document whereby he assigned to each of the children shares held by him beneficially and declared himself as trustee of these shares. The wife says that this was done to defeat or was likely to defeat an order for property settlement and should be set aside. The husband denies this and says that this was done to carry out another long-standing agreement between the husband and the wife that the children would have his personal estate subject to any make-up provision in his will to ensure that the wife’s assets were at a sufficient level.
95.8.The husband says that the wife ceased to be a beneficiary including as to income upon the decree nisi of dissolution of marriage becoming absolute on 17 February 2003. The wife says that that cannot prevent an order of the Court that the terms of the Trust Deed be varied to include her as a beneficiary, if that is necessary.
95.9.The wife says that if necessary the husband could exercise his powers “as settlor” to add to the class of beneficiaries a company or trust in which the husband has an interest. The husband says that the terms of the Trust Deed prevent this.
95.10.The husband says that 14,600 Westpac shares registered in the name of the wife are held by her as nominee for the Stephens Trust and ultimately for each of the children’s trusts. The wife does not dispute this now but says that the shares should be included in the pool of assets for distribution between the husband and the wife in the same way that the assets of the children’s trusts should be. This also applies to the credit balance of the bank account into which the dividends from these shares have been paid and on which interest has been earned.
95.11.The wife seeks to apply Part VIIIAA of the Family Law Act in support of orders that the trustee of the trust and/or the trustees of the children’s trusts effect a payment to her from the assets of the Trust in satisfaction of her entitlement to property settlement. The husband says that this Part cannot be applied here.

The first interveners took the same stance as the husband in relation to the assets of the Trusts and the application of Section 106B and Part VIIIAA of the Family Law Act. They say that Section 106B and/or Part VIIIAA do not apply, that the assets of the Trust cannot be treated as the property or even a resource of one or both of the parties to the marriage, and for the trustees to make a payment to the wife for the benefit of one of those parties would be a breach of trust and a fraud upon the trustees’ powers. Thus, the issues in dispute in which they are involved are those between the husband and the wife as to the identification of the pool of assets for division.
The children took the same stance as the husband and the first interveners in relation to the Trusts’ assets. They also took the same position as the husband in relation to the shares that the husband assigned to them in January 2002, namely they should not be part of the asset pool.
There was one other issue in dispute involving the children and their trusts. At the conclusion of the 2004/2005 financial year the trustees allocated a total of $114,000.00 to the children from the income of their trusts. The wife says that that should be brought back into the pool of assets but the husband, the trustees and the children say otherwise.
The husband and the wife are also at odds over the assessment of their respective contributions. The wife says that it should be equal but the husband says that his contributions should be assessed at between 57.5% and 60%. The principal areas of dispute are as follows:
99.1.The husband says that his initial contributions were substantial and were far greater than the wife’s, and as a result, on the basis that the respective contributions of the parties during the marriage and following the separation were equal, his contributions overall were greater than the wife’s.
99.2.The wife says that despite the greater initial contributions of the husband their respective contributions overall should be assessed as equal. She says that her homemaker and parent contributions were substantial and should be accorded great weight. In addition, she says that she supported the husband and his career throughout the marriage but particularly during the difficult times surrounding the Ms R episode. She says that there were emotional and financial consequences of the husband’s conduct which made her contributions greater than usual. The wife says that as a result these contributions offset the greater initial contributions of the husband.
In relation to the application of Section 75(2) of the Family Law Act the wife says that if the respective contributions of the parties are assessed as being equal then there is no basis for any adjustment pursuant to Section 75(2), but if the wife’s contributions are assessed at less than 50% there should be an adjustment made to bring the final percentage division up to 50%/50%. The husband says that there should be an adjustment of 5% in his favour. The principal areas of dispute are as follows:
100.1.The husband says that he is retired and he has a limited earning capacity. He says that the wife currently has a greater income than he does, that she is capable of undertaking full-time employment and she has a greater earning capacity than he does.
100.2.The wife says that she still has the responsibility to care for the child Z who is in Year … at school. The husband says that all Z’s financial needs are taken care of through the Z Trust, Z’s part-time employment and Z’s investments.
The husband initially submitted that it was relevant under Section 75(2) that the wife can expect to receive a substantial benefit under the Will of her mother, but in the end result the husband did not pursue that argument with any vigour.

The principles applicable to the matters before the court
102.The provisions of Section 79 of the Family Law Act define the court's power and obligations in determining applications for property settlement. The court has a discretion to make orders altering the interests of parties in property, provided the court is satisfied that such orders are appropriate, just and equitable.
103.The court is obliged by the provisions of Section 79(4) of the Family Law Act to take into account the following matters:
103.1The financial and non-financial contributions made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them (sub-paragraph (a) and (b));
103.2The contribution made by a party to the marriage to the welfare of the family, including any contribution made in the capacity of homemaker or parent (sub-paragraph (c));
103.3The effect of any proposed order upon the earning capacity of either party to the marriage (sub-paragraph (d));
103.4The matters referred to in Section 75(2) so far as they are relevant (sub-paragraph (e));
103.5Any other order made under the Act affecting a party to a marriage or a child of the marriage (sub-paragraph (f));
103.6Any child support payable (sub-paragraph (g)).

104.Accordingly, in assessing the entitlement of each of the parties for property settlement, there is both a retrospective element relating to the contributions of each of the parties and a prospective element relating to matters referred to in Section 75(2).
105.According to guidelines established through a series of leading decisions, the court should determine the following matters on the evidence, that is:
105.1Firstly, the court must determine the assets, liabilities and financial resources of the parties to the marriage.
105.2Secondly, the court must consider all relevant contributions of each of the parties, and, where possible, the court should assign an entitlement of each of the parties arising as a result of those contributions.
105.3Thirdly, the court should then consider the prospective components of the claims of each of the parties arising as a result of the provisions of Section 75(2). The court should then identify what alteration, if any, should be made to the entitlement of each of the parties earlier assessed on account of contributions having regard to the relevant Section 75(2) factors.
105.4Fourthly, the court should consider whether the order proposed is just and equitable (Section 79(2)).

106.As referred to above the principal dispute here relates to what is comprised in the pool of assets to be distributed between the parties. There are substantial assets held by the four children’s trusts and by the children themselves which the wife says should be included in that asset pool. To achieve that result the wife relies primarily on Section 106B and if necessary Part VIIIAA of the Family Law Act.
107.Section 106B of the Act provides for the setting aside of the making of an instrument or disposition by or on behalf of or by direction or in the interest of a party made to defeat an anticipated order in proceedings or which irrespective of intention is likely to defeat any such order.
108.Here the wife seeks to set aside the instrument of variation of the Stephens Trust Deed dated 7 December 1998, the instrument dated 18 January 2002 establishing the children’s trusts, the instrument and dispositions dated 18 January 2002 applying one quarter of the income and capital of the Stephens Trust to each of the children’s trusts, the instrument and disposition dated 20 January 2002 whereby the husband assigned shares to the children, and the instrument dated 20 May 2002 whereby Mr J was appointed a trustee of the children’s trusts.
109.If successful the effect of this will be the return of the assets of the children’s trusts to the Stephens Trust and the return of the shares to the husband, although with the latter the wife in fact only seeks that the value of the shares be notionally added back to the asset pool.
110.In relation to the former it is then said as one alternative that orders can be made pursuant to Section 90AE of the Family Law Act providing for the trustee to distribute those assets to the wife and/or the husband.
111.Section 90AE of the Act provides for the Court to make an order under Section 79 of the Act binding on a third party who is not a party to the marriage. In particular, in proceedings under Section 79, Section 90AE(2)(a) provides for the court to make an order that directs a third party to do a thing in relation to the property of a party to the marriage and Section 90AE(2)(b) provides that in proceedings under Section 79 the Court can make an order that alters the rights, liabilities or property interests of a third party in relation to the marriage. The Court can only make such an order though if the making of the order is reasonably necessary, or reasonably appropriate and adapted to effect a division of property between the parties to the marriage, the third party has been accorded procedural fairness in relation to the making of the order, the Court is satisfied that in all the circumstances it is just and equitable to make the order, and the Court is satisfied that the order takes into account the matters mentioned in sub-section (4). The matters referred to in sub-section (4) include the taxation effect of the order on the parties to the marriage and on the third party.
112.In the alternative the wife says that the assets of the children’s trusts and the children’s shares should be notionally added to the asset pool under the principles espoused in either KOWALIW and KOWALIW (1981) FLC 91-092 or TOWNSEND and TOWNSEND (1995) FLC 92-569.
113.In the further alternative the wife says that the assets of the children’s trusts and the shares held by the children can be taken into account by the Court under Section 75(2)(b) as financial resources of the husband in determining the respective entitlements of the parties by way of property settlement. She did not address though whether the instruments and dispositions would still need to be first set aside under Section 106B.
114.The husband, the first interveners and the second to the fifth interveners all say that Section 106B and Part VIIIAA of the Family Law Act do not apply here and there is also no basis for taking into account the assets of the children’s trusts or the shares now owned by the children.

The evidence

The wife was represented by Mr Ackman QC and Ms Macmillan. She relied on her affidavits filed on 15 June 2005 and 20 July 2005 as well as her Form 13 financial statement also filed on 15 June 2005. The wife gave evidence and was cross-examined.
The husband was represented by Mr North SC. He relied on his affidavits filed on 31 May 2005 and 25 July 2005 as well as his Form 13 financial statement also filed on 31 May 2005. The husband gave evidence and was cross-examined.
The first interveners were represented by Mr Kirkham QC. They relied on the affidavit of Mr J filed on 8 June 2005 and on paragraphs 125 to 135 of the husband’s affidavit filed on 31 May 2005. Mr J was not required for cross-examination.
The second to the fifth interveners were represented by Ms Molyneux QC. They relied on the affidavits of W Stephens, X Stephens and Y Stephens all filed on 20 June 2003. None of these deponents were required for cross-examination.
I found the wife to be an impressive witness. She was clearly emotional about these proceedings, she became confused on occasions, and there were issues about which she had a poor recollection, but at all times she did her best to assist the court. She was genuine and open in her answers and she was always prepared to make concessions
The wife was also a witness of credit and wherever there is a conflict I prefer her evidence to that of the husband. For example, I find that there was no agreement between the parties that the assets of the Trust were being accumulated for the children to the exclusion of the wife and that it was entirely up to the husband when he would pass those assets to the children. Certainly the terms of the Trust Deed were such that the wife could not be a beneficiary after the husband’s death and the husband says that not only was the wife fully aware of and understood this, but that this was also the basis of their agreement. Indeed, the husband claims that he fully explained to the wife the structure, the operation and the purpose of the Trust and that she not only understood all aspects of this but she was also enthusiastic about building up assets solely for the children through the Trust. However, I do not accept this. I find that the husband did not in fact explain very much at all to the wife about the Trust. He controlled the Trust, its operations and its finances and he did not see the need to keep the wife informed of anything very much about the Trust. For her part the wife did not enquire because not only did she trust the husband to do the best by her and their family, but the husband made it quite clear that he alone was in charge and that he would handle all aspects of the Trust. The husband of course said some things to the wife during the course of the marriage about the Trust but it is apparent from her evidence that she did not understand all that was said to her. She was confused as to her position vis a vis the Trust, but as she said and I accept, to her it was no more complicated than that there “was a matrimonial pool which consisted of (her) assets, the husband’s, and the Trust assets”.
I found the husband to be a far less satisfactory witness than the wife. He was polite and respectful but he presented as though the proceedings were a game and he was forever looking to score points and establish his superiority over the wife’s senior counsel. He was often not able to just answer the question.
Furthermore, I do not consider the husband to be a credible witness on the important areas in dispute. He was not frank and open. He was prone to reconstruct according to what suited his case rather than what the truth was. In particular, as I have already referred to, I do not believe that there was an agreement that the assets were being accumulated for the children to the exclusion of the wife. I find that in order to justify his actions in December 1998 and in January 2002 the husband concocted the story of an agreement between he and his wife. In doing so though he wove a tangled web. For example, he wanted the court to accept that he had fully explained the Trust to the wife and she understood everything about it yet on the other hand he claimed she showed little or no interest in the Trust or for that matter the financial affairs of the Trust or the family.
I consider that the reasons for the husband’s actions in 1998 were to prevent the wife from being able to access the capital of the Trust and to put it out of the reach of the Family Court. At that time the marriage was clearly in serious difficulty. There had been the Ms R affair which commenced in the early 1990’s and continued on until certainly 1996, although the scars remained for a long time thereafter. There was the poor attitude of the husband to the wife generally, and it was in 1998 when the husband commenced to sleep in a downstairs bedroom. I accept the wife’s evidence as to these matters and I reject the husband’s attempts to suggest that they were not important and the relationship was not in any danger.
In relation to the husband’s attitude to the wife and the state of the marriage there was no more telling evidence than what the husband said in paragraph 5 of his affidavit filed on 26 March 2003. The husband placed the blame for his affair with Ms R entirely on the wife saying that if she had been an affectionate and supportive wife the affair would never have happened. However, in fact there could have been no more supportive wife than Mrs Stephens.
The husband spent much time in his earlier affidavits lambasting and criticising the wife yet at trial he disingenuously suggested that it was unnecessary to explore these matters during the hearing and they were better forgotten. Apart from confirming the husband’s preparedness to say whatever he considers suits his case at the time, what he did say about the wife indicates quite clearly that he too felt that the marriage could fall over at any time.
The husband did not tell the wife what he was doing when he made the variation to the Trust Deed in 1998, and there can only be one reason for that, namely, he did not want her to find out that he was preventing her from accessing the capital of the Trust. However, there are two odd aspects of the 1998 instrument which need to be mentioned. The first is that the husband also excluded himself as a capital beneficiary when that had already purportedly been done in the 1983 instrument, and secondly, he left the wife as an income beneficiary. An explanation for the former is that the husband thought that the 1983 amendment had never come into effect. Indeed, that is what he said in paragraph 8 of his affidavit filed on 3 February 2003. An explanation for the latter could be that the husband did not consider it necessary to exclude the wife in this way in order to keep the Trust assets out of the reach of the Family Court. Further he would have wanted to continue to apply trust income for household purposes.
In January 2002 the husband also failed to tell the wife what he was doing, again demonstrating both his egocentric personality and his view that it was entirely up to him what he did with the assets. This was a blatant attempt by the husband to move assets from the reach of the wife and the Family Court.

Section 106B of the Family Law Act

The wife seeks to set aside the instruments and/or the dispositions made by the husband in 1998 and in 2002 pursuant to this Section.
Looking at the elements of the Section:
129.1There must be existing or completed proceedings under the Act. That is clearly satisfied here.
129.2There must be an instrument or a disposition. In my view that is also satisfied here. The instrument dated 7 December 1998 is a relevant instrument, as is the instrument dated 18 January 2002 whereby the four children’s trusts were set up by the husband. The other instrument dated 18 January 2002 is the one whereby the husband applied the assets and income of the Stephens Trust to the four children’s trusts. That is also clearly a relevant instrument and it is also a relevant disposition. The same applies to the instrument and disposition dated 20 January 2002. With the instrument dated 20 May 2002 that is a relevant instrument but it does not involve a disposition.
The first interveners in their outline of submissions have implied that to be caught by Section 106B there needs to be a “disposition” and that would not apply to the first instrument or for that matter the instruments setting up the Trusts and adding a trustee. This of course overlooks the fact that there only need be an instrument or a disposition (DAVIDSON and DAVIDSON (No. 2) 1994 FLC 92-469; COVENTRY and COVENTRY and SMITH (2004) FLC 93-184).
129.3The instruments or the dispositions must be made by or on behalf of, or by direction or in the interest of the party. On the evidence there is no doubt that this is satisfied here as well. The husband was in complete control of the Stephens Trust and each of the children’s trusts, and on his own evidence these instruments and dispositions were made in order to further his grand plan agreed to he says by the wife to pass the assets of the Trust to the children.
129.4The instruments or dispositions must be made to defeat an anticipated order in the proceedings or which, irrespective of intention is likely to defeat any such order. The test of whether an order can be said to be “anticipated” is an objective test. In PLUGRADT and PLUGRADT (1981) FLC 91-052, Elliott J said this (at p. 76,429 – 76,430):
“… I consider that the elements of expectation or foreseeability in an ‘anticipated order’ must be considered on an objective rather than a subjective basis – to hold otherwise would be to favour the determinedly ignorant or the blissfully unaware; ‘anticipated’ as used in sec. 85 is an adjective, not a verb. It is therefore descriptive of the order referred to. It requires the order to have the quality of being ‘anticipated’. By whom? The law’s answer must be by a reasonable disponer, at the time of the disposition, properly considering all of the circumstances of the case. . . . It is not a question of whether the husband expected or foresaw a subsequent property application by the wife and ‘anticipated’ and order being made, but whether considering all of the circumstances at the time of the disposition such an application by her at some time, with a consequent order, was objectively to be foreseen or to be expected by him as being likely or reasonably probable”.
The instrument made on 7 December 1998
129.4.1At that time the parties were living together in the house property at Suburb A with the four children. However, the wife says that the marriage was in serious trouble and it was quite apparent that a separation was possible, that proceedings might then be instituted and an order made dealing with the property of the parties. The husband though denies that this was the case.
129.4.2The parties had just come out of the Ms R episode and although the wife had been extremely supportive of the husband throughout that difficult time I accept the wife’s evidence that their relationship was severely strained. The husband attempted to play down the significance of the affair but in cross-examination he at least conceded that it had “a profound effect” upon the wife. Thereafter the wife says, and I again accept, that “the husband became progressively isolated from the family”.
129.4.3By 1997 the parties had ceased having sexual relations and the wife was attempting to arrange counselling.
129.4.4The wife saw the local Minister and attempted to have him counsel the husband about his behaviour and his attitude to her and the children, but his behaviour worsened. For the husband’s part he claimed that by the “latter 1990’s” his wife’s attitude “changed from merely non-supportive in withholding affection to positive unpleasantness” and she showed “increasing shrewishness and anger”. The husband also moved into a downstairs bedroom but there is a dispute as to when and why. The wife says that this occurred in 1998 and that the reason was the state of the marriage. That is of course consistent with the lack of sexual intimacy from the year earlier. The husband though says that his move occurred in 1999 and the reason for it was an injury to his knee which prevented him from climbing stairs. The wife agrees that the husband had an injury to his knee and she says that that was the reason given to their children for the husband’s move, but in fact that was not the real reason. Again, to repeat, I accept the evidence of the wife as to this.
129.4.5Neither the husband nor the wife believed in divorce and the husband says that until May 2001 he proceeded on the basis that the marriage would be continuing. However, it is not a divorce which must be anticipated objectively, but an order being made. The facts indicate quite clearly that a separation was possible and in that event it would have been expected that orders relating to the property of the parties would be made even if on an interim basis.
129.4.6Mr North SC is correct in saying that the inquiry has to be made as at the date of the relevant instrument, namely 7 December 1998, and that it is not open to look at subsequent events, however, I consider that as at that date the state of the marriage was such that a reasonable person in the husband’s shoes would have contemplated or foreseen that an order dealing with the property of the parties would be made in due course. However, the instrument must still be made to defeat that order or irrespective of intention be likely to defeat that order. As to this, the primary effect of the instrument of 7 December 1998 was to exclude the wife and the husband as capital beneficiaries and create a situation where that could not be changed. The husband says that the purpose of the instrument was to further the agreement between the parties that the capital of the Trust would pass to the children at a time to be determined by the husband and not be available for the parties and in particular the wife on the basis that he was providing for her separately.
129.4.7However, apart from the fact that I have found that there was no such agreement, the husband did not adequately explain why it was necessary for this instrument to be made precisely at the time that it was. If there were no difficulties in the marriage and if there was an agreement in place between the parties, why was it done at all? There was no evidence of any issue relating to the children or to the assets of the Trust which justified or required the instrument being made in December 1998. The answer of course is that the marriage was in serious difficulty and the husband was concerned that an order for property settlement would be made which would include the assets of the Trust. It is also telling that the husband did not inform the wife of what he was doing let alone show her the instrument. The husband says that there was no need to do this because he was merely carrying out the agreement of the parties, but I find this to be a specious claim.
129.4.8I find that the husband made this instrument in the knowledge that the marriage was in trouble and that an order dealing with the property of the parties including the assets of the Trust was likely. On that basis he wanted to remove the assets of the Trust from the reach of the Family Court and he considered that this instrument would achieve this result. In other words he was looking to defeat an anticipated order for property settlement.
129.4.9Thus, all the necessary elements of the Section are satisfied in relation to this instrument and it is open to me to make an order setting it aside. However, the first interveners submit that Section 106B should not be applied where a subsequent event defeats the anticipated order in any event. The interveners say that there is a supervening event here, namely the divorce of the parties. As a result of that the wife is no longer within the class of beneficiaries of the Stephens Trust and thus to set aside the instrument will not have the effect of reinstating the wife as a beneficiary now. It is said that that will defeat the order in any event regardless of the terms of the instrument.
The first interveners raise the same argument in relation to the instruments and dispositions made on 18 January 2002 and thus I will return to this issue after I have considered those other instruments and dispositions. Similarly, I will leave until then consideration of the issue of the exercise of the Court’s discretion to apply Section 106B or not.
The instruments and dispositions relating to the Trust made in
January 2002
129.4.10The next instruments to consider are the documents prepared by the husband setting up the four children’s trusts. They are all dated 18 January 2002 and they are in identical terms except for the name of each principal beneficiary.
129.4.11Of course, merely establishing these Trusts does not attract the attention of Section 106B, and in fact in my view there is no need for the wife to pursue setting aside these instruments in order to achieve the result that she seeks. It was the next step which is the crucial one, namely the transfer of assets to those Trusts. The wife wants to have these assets returned to the Stephens Trust, but that can be achieved even if the children’s trusts are left in place. Thus the concentration should be on the instrument made on the same day whereby the husband as trustee of the Stephens Trust, inter alia, applied one quarter of all of the income and capital of that Trust to each of the four children’s trusts. The consequence of the husband’s actions in this regard was that each of the children’s trusts acquired assets to the value of approximately $875,000.00 which included $1,888,000.00 being the net proceeds of sale of the Suburb B property.
129.4.12I also note that by this Instrument the husband forgave and released any amounts owing to him by the Stephens Trust and he did the same in relation to the wife. However, in his affidavit the husband deposed that there was in fact no money owing by the Trust to either himself or the wife, and this claim was not contested by the wife. Accordingly, although to set aside the Instrument would theoretically reinstate any amounts owing to the parties, that is not a relevant consideration and could not affect the asset pool.
129.4.13The interveners say that there was no anticipated order that could be defeated by these instruments and dispositions. They say, as does the husband, that the assets of the Stephens Trust were not the property of the parties or either of them, that if returned to the Trust these assets could not lawfully be applied for the benefit of either of them, that the Trust was not a sham, and nor was it the alter ego of the husband. Further, as with the earlier instrument, they again suggest that these instruments and dispositions represented nothing more than the carrying out of the agreement between the parties that the assets of the Trust were being accumulated for the children and they would pass to them at a time to be determined by the husband, that there was a supervening event, namely the divorce which would defeat any anticipated order in any event, and that the court should not exercise its discretion to apply Section 106B given that that is unnecessary and there is no good purpose in setting aside the instruments or dispositions.
129.4.14In determining most of these arguments it is necessary to consider the terms of the original Trust Deed and the terms of the two instruments made respectively in 1983 and 1998. The husband and the interveners point firstly to clause 2 of the original Trust Deed which provides as follows:
“The settlor may at any time vary the terms of this trust but not in such a manner as to increase in any way his rights under this trust to the beneficial enjoyment of the fund.”
And then to clause 4 which provides:
“Hereafter ‘the beneficiaries’ shall mean all issue of [THE HUSBAND’S FATHER] and all persons married to such issue: and ‘the date of distribution’ shall mean either one hundred years from 21 June 1968 or 21 years after the death of the last survivor of all children alive at 21 June 1968 of […], whichever is the earlier date.”
Under the terms of the first instrument clauses 2 and 3 provide as follows:
“2.The settlor hereby releases and abandons all and any beneficial interest or rights held by him or which may hereafter be held by him under the trust instrument or under the said trust or in the trust fund or income thereof and confirms that by reason hereof he ceases to be a beneficiary of the trust or a person to whom or for whose benefit all or any part of the trust fund and income thereof may be applied.”
3.For the purpose of removing doubts it is confirmed and provided that the expression ‘issue’ used in the said instrument includes all descendents however remote, and not merely children; that appointments by the settlor of a trustee or trustees may be revocable or irrevocable; and that any variation of the trusts of the said instrument shall be invalid to the extent to which it purports to confer directly or indirectly any right or benefit upon the settlor.”
129.4.15The effect of clause 2 of the 1983 instrument was that the husband ceased to be a potential beneficiary and the effect of clause 3 is that the terms of the Trust could not thereafter be varied to confer any right of benefit on the husband as settlor directly or indirectly.
129.4.16Then with the second instrument clauses 2 and 4 thereof provided as follows:
“2.The power of variation set out in clause 2 of the trust instrument is hereby varied so that (a) it may be exercised by the settlor either in writing during his lifetime or by his will, and (b) any exercise of that power of variation may be either revocable or irrevocable (but unless expressly stated to be irrevocable any such exercise shall be revocable).
4.Clauses 6 and 7 and the other terms of the trust set out in the trust instrument are hereby varied so that no power or discretion to pay or apply the capital of the fund or any part thereof shall be exercised in favour of the settlor or [the wife] or in favour of any trust in which either of them has any interest, right or possibility, and the settlor and the said [the wife] are hereby excluded absolutely and irrevocably from all and any interests, rights an possibilities in the capital of the fund. He variation made by this clause 4 of this instrument of variation shall be irrevocable, and no future purported variation purporting to amend this clause 4 or purporting to convert any interest, right or possibility in the capital of the fund on the settlor on the said [the wife] shall be valid in any way.”

129.4.17The consequence of this was that both the husband and the wife were excluded as capital beneficiaries and that variation was irrevocable. This still left though the wife as an income beneficiary. The husband of course had already given up his rights as an income beneficiary in the 1983 instrument.
129.4.18The interveners and the husband say that as the husband could not benefit at all despite him being the settlor, the trustee and the appointor of the Trust, and as the wife could not benefit from the capital of the Trust, it was not possible for the husband to lawfully apply any of the assets of the Trust for the benefit of either party and thus these assets could not be treated as the property of one or both of them.
129.4.19In putting this submission counsel cited the well known cases of ASCOT INVESTMENTS PTY LTD v HARPER (1981) FLC 91-000, GOULD and GOULD (1993) FLC 92-434, WILSON and WILSON (No. 1) (1994) FLC 92-498, BOWMAN and BOWMAN (1984) FLC 91-574, SHAW and SHAW (1989) FLC 92-030, ASHTON and ASHTON (1986) FLC 91-777, and DAVIDSON and DAVIDSON (1991) FLC 92-197.
129.4.20It is suggested that there has not been a case where the assets of a Trust have been considered as the property of the parties or either of them where neither the husband, the wife nor any other person who could be considered a “puppet” of either of them, were the beneficiaries of the Trust, or where they were not capable of benefiting from the assets of the Trust either directly or indirectly, and that that is the position here.
129.4.21In the interveners’ case, prior to the divorce, the only opportunity of the husband as trustee to benefit either party was as a result of the circumstance that the wife remained an income beneficiary, but that would not have permitted the husband to distribute the assets of the Trust to her. That is so, but I do not agree that this was the only opportunity for the husband to benefit himself.
129.4.22I consider that prior to the January 2002 instruments the husband could benefit from the assets of the Trust such that they could be treated as his property. First though there would need to be help from this court in the form of the setting aside of the instrument of variation dated 7 December 1998. Prima facie that would reinstate him as a capital beneficiary but subject to the terms of the original Trust and the terms of the instrument dated March 1983. To repeat, by virtue of the latter instrument the husband relinquished his rights as a beneficiary and clarified that the exercise of the power of variation of the terms of the Trust would be invalid to the extent that it conferred benefits upon the husband as settlor either directly or indirectly. However in my view there is nothing to prevent the husband from revoking the entire instrument of March 1983 or more particularly just clause 2. Clause 2 is not a variation of the terms of the Trust, it is a release or a disclaimer by the husband. Thus, in turn, to revoke clause 2 would not be a variation of the terms of the Trust either, and as such it would not be rendered invalid by the latter part of clause 3. Moreover, for the same reason this would not be prevented by clause 2 of the original deed. Not only is it not a variation but it would not increase the rights of the settlor under the Trust. The rights that the settlor would then have would be the same as under the original Trust.
129.4.23There would be no need to revoke clause 3 of the instrument because that does not of itself prevent the husband actually benefiting from the assets of the Trust; it is an attempt to clarify the basis on which the power to vary in clause 2 of the original trust deed can be exercised. I observe that if it can be interpreted as a variation of the power of variation in clause 2 of the original trust deed then it would be invalid. Clause 2 provides for the settlor to vary the terms of the Trust and not the settlor’s powers in relation to the Trust. Thus, the settlor’s power to vary is insulated from variation. Accordingly, insofar as clause 3 of the 1983 instrument attempts to vary the power of variation it is invalid (COVENTRY and COVENTRY AND SMITH (2004) FLC 93-184).
129.4.24If clause 2 of the 1983 instrument can be considered a “variation” of the Trust Deed by excluding the husband as a beneficiary then it can still be discounted on the basis that it is an invalid exercise of the power of variation comprised in clause 2 of the original Deed. That result flows from the submissions made by the interveners that the wife could not be added as a beneficiary because the power of variation cannot be exercised so as to alter the “sub-stratum” of the Trust (IN RE DYER (1935) VLR 273; IN RE BALL’S SETTLEMENT TRUST (1968) 1 WLR 899; CACHIA v WESTPAC FINANCIAL SERVICES LTD (2000) 130 ALR 65 at p. 82). The central sub-stratum of the Trust here is that it is for the benefit of the class of beneficiaries defined in clause 4 of the original Trust Deed. They are the objects of the Trust and the power of variation cannot be used to alter them by adding a beneficiary. This would be a fraud on the power (CACHIA v WESTPAC FINANCIAL SERVICES LTD, supra). It also prevents though a beneficiary within the class of beneficiaries from being excluded, and this is apparent from the opinions obtained by the husband from various senior counsel and relied on by his senior counsel during his address. Indeed, it was pointed out in one of those opinions that the nature of the limitation in the settlor’s power of variation itself suggests that it was intended to operate so as to prevent the exclusion of a beneficiary. In other words the limitation implicitly recognised the continuation of the settlor as a beneficiary during his lifetime and while the Trust subsisted.
129.4.25Now, of course, the issue of excluding a beneficiary would usually arise where the settlor excluded another person as a beneficiary, but there is no reason why it cannot apply to an attempt by the settlor to exclude himself as a beneficiary. Thus, here, if clause 2 of the 1983 instrument is a variation the husband has not been validly excluded thereby as a beneficiary and he remains a person to whom any part of the Trust Fund and income thereof may be applied.
129.4.26I note that in the outline of submissions provided by the trustees it is alleged that “on 14 June 2003 Mr Stephens verbally released the clause 2 power of variation”. However, there is no evidence of the release and in particular it was not even deposed to in the husband’s affidavit. Thus I propose to disregard this entirely.
129.4.27Next, even if the 1983 instrument remains in place I consider that it is still open to find that the assets of the Trust can be treated as the property of the parties or one of them.
129.4.28Prior to the commencement of Part VIIIAA the power of the Family Court to reach third party interests was limited as a result of the High Court decision in ASCOT INVESTMENTS PTY LTD v HARPER and HARPER, supra. The High Court held that the Family Court did not have the power to deprive a third party of an existing right or to impose a duty that he would not otherwise be liable to perform. However, there were exceptions recognised, namely in the case of a Trust, where the Trust is a sham and where the Trust is the alter ego of a party to a marriage. Here, there is no question of a sham, but looking at the latter exception the primary issue is the extent of control exercised by the party to the marriage over the Trust. It can either be such that the assets of the Trust are in reality the property of that party or that they are a financial resource of that party. The determination of this issue is a question of fact (see the unreported decision of R v R cited in GOODWIN and GOODWIN-ALPE (1991) FLC 92-192 at p. 78,273), and if it is the former then the assets of the Trust are directly available for division between the parties by way of a property settlement order, but if it is the latter then they can be taken into account in awarding a further adjustment of the available property.
129.4.29Examples of cases where the assets of a trust have been treated as the property of one of the parties are ASHTON and ASHTON (1986) FLC 91-777 and DAVIDSON and DAVIDSON (1991) FLC 92-197. In the former case the husband and his cousin were the directors of the corporate trustee. The husband was appointor and he removed the trustee on two occasions. The husband was not a named beneficiary but the beneficiaries did include any company in which any of the named beneficiaries held shares. The Court found that there was nothing to prevent the husband from holding the overwhelming majority of the shares in such a company. The husband had the power to appoint himself as trustee and he could then distribute assets to that company thereby ensuring that he receives the full benefit of such a distribution. It was also relevant that the husband had in fact been applying the assets and the income of the Trust as he wished and for his benefit. Thus, the Full Court held (at p. 75,653) that:
“. . . Having regard to the powers and discretions which the husband has and having regard to what has in fact taken place, for the purposes of sec. 79, the husband’s power of appointment, and all the attributes it carries with it, amounts to defacto ownership of the property of the Trust.”

In DAVIDSON the husband was a director and secretary of the corporate trustee. He was the appointor but was not a beneficiary. During the marriage the husband removed the trustee. The Trust Deed had a similar provision to the Trust Deed in the case of ASHTON, namely the list of beneficiaries included a company in which any of the named beneficiaries had a shareholding. Again, the Court held that there was nothing in the Trust Deed to prevent the husband from holding the overwhelming majority of shares in such a company and from receiving the full benefit of a distribution to that company. Thus, as in ASHTON, it was held that the assets of the Trust can be considered as the defacto property of the husband by virtue of his control of the Trust.
129.4.30It is evident that if a party has the ability under the terms of the Trust Deed to cause to have distributed to themselves or to someone on their behalf all of its income and capital then the assets of the Trust will be treated as the property of that party. It will also be relevant as to what has happened in the past.
Here the husband is the settlor and the trustee of the Stephens Trust and he has the sole control over this Trust and its assets. Even if clause 2 of the 1983 instrument remains in place the husband is still the person who solely determines whether and if so who of the class of beneficiaries will benefit from the income and capital of the Trust. The fact of his total control is evidenced by the application of all of the capital and income of the Trust to the children’s trusts in January 2002.
129.4.31Looking at the history of the Trust, the husband has clearly had the benefit of the Trust assets. For example, he has resided in the Suburb B property owned by the Trust and he has both directly and indirectly benefited from the distribution of income to meet what can be described as family expenses. He has also clearly shown a propensity to continue this practice given that he has done so but to a lesser extent with the children’s trusts, ie, those Trusts pay the school and University fees of the children and meet various of their other expenses thus relieving the husband financially.
129.4.32The husband’s ability to control the Trust and its assets can not be overstated. It would enable him to distribute capital and income to a beneficiary over whom he in turn could exercise control, for example one of the children. As was said in ASHTON (p. 75,763):
“No person other than the husband has any real interest in the property or income of the Trust except at the will of the husband.”

129.4.33The husband also has the ability to distribute capital and income to a Trust set up substantially for the benefit of a beneficiary of the Stephens Trust (clause 6 Trust Deed), and indeed this is what he did in January 2002. Importantly though as long as the Trust substantially benefits a beneficiary there is nothing to prevent the husband or some other person or entity controlled by him also being a beneficiary of that Trust. It is of course necessary that the payment to the new Trust be for the benefit of the beneficiary of the Stephens Trust and not a non-beneficiary. However, that cannot determine in all circumstances what then might subsequently happen to that payment including preventing it from ultimately being used either directly or indirectly for the benefit of the husband. Certainly there is nothing to prevent the husband indirectly benefiting from such a payment via the primary beneficiary of that Trust and particularly in the circumstances that that beneficiary would be one of his own children.
129.4.34Thus, I consider that even if clause 2 of the 1983 instrument remains the husband sufficiently controls the Stephens Trust such that once the instruments and dispositions of 7 December 1998 and 18 January 2002 are set aside the assets of the Trust can be treated as the property of the husband.
129.4.35However, in the alternative there can be no question that the level of control that the husband has is such that the assets of the Trust can be treated as a financial resource of the husband. The effect of that of course is not to include these assets in the pool of assets even notionally, but in determining what percentage entitlement the parties should have to their assets the fact of the husband having this financial resource would need to be taken into account.
129.4.36As I have said the nature of the husband’s interest in the Trust property is a question of fact, and it seems that what is required to treat the assets as a financial resource is the ability of the husband to control the affairs of the Trust and to financially advantage or benefit himself or others on his behalf (KELLY and KELLY (No. 2) (1981) FLC 91-108). The extent of this ability will then determine the degree to which this is taken into account under Section 75(2)(b) of the Act.
129.4.37An example of where the assets of a Trust were found to be a financial resource is the case of WEBSTER and WEBSTER (1998) FLC 92-832. There the wife established two Trusts with one being for the benefit of the children of the marriage. The wife controlled both Trusts though. Upon the basis of the wife’s undertaking to the court not to make a distribution other than to the children the court found that the Trust primarily for their benefit was a resource of the wife rather than an asset. The court then made an adjustment in favour of the husband pursuant to Section 75(2)(b) of the Family Law Act including because of the value of that Trust.
129.4.38Here, as referred to already, the husband has historically benefited from the assets and income of the Trust and that can continue certainly via the children. Further, he is clearly able to benefit the children directly. Thus, I find that at the very least the Trust assets can be taken into account as a financial resource of the husband, but of course that is not the basis on which I proceed.
129.4.39To return to the issue of treating the assets of the Trust as property of the parties it is necessary to consider whether the process in reaching that position and/or the application of those assets in accordance with that finding constitutes a breach of trust and/or a fraud on the powers of the trustee and/or the appointor. This issue was raised in the cases of ASHTON and DAVIDSON and of course it has been raised by the interveners here.
129.4.40A fraud on a power is an exercise of the power “for a purpose or with an intention beyond the scope of or not justified by the instrument creating the power” (VATCHER v PAULL (1915) AC 372 at p. 378). For example, cases such as RE SKEATS SETTLEMENT (1889) 42 Ch. D 522, at p. 526, and RE CRAWSHAY (DECEASED (1948) 1 Ch. 123) are authority for the proposition that a power such as a power of appointment should not be exercised for an improper purpose namely to benefit a person who is not an object of the power. The appointor is said to have a fiduciary duty to only exercise the power of appointment for the benefit of the Trust and not for any particular beneficiary. However, this principle has been held to be inapplicable in a number of Family Court decisions on the facts in those cases. For example, in the unreported Full Court decision of R and R referred to above the Court said this at p. 27:
“We do not find the decisions in Re Skeats Settlement and Re Crawshay (deceased) of any real assistance. These cases were dealing with trusts and powers of appointment of a completely different nature and were decided in circumstances which bear no resemblance to the present proceedings. In particular the power of appointment in the present case is not a fiduciary power but a power which, by the terms of the Deed, the husband may exercise for the purposes of controlling the trust for his own benefit if he so chooses.”

129.4.41This was then followed and applied in GOODWIN and GOODWIN-ALPE, supra, at p. 78,273, and in DAVIDSON, where the husband had the ability through a corporate trustee to distribute capital or income to himself through a company in which a beneficiary was only a minority shareholder the Full Court said this, at pp. 78,365 – 78,366:
“It was argued that such a manipulation of the provisions of the trust would amount to a breach of the fiduciary duty of the husband as appointor relying on the decision of Kay J, in In Re: Skeats’ Settlement (1889) 42 Ch D 522. Whatever may have been the position 100 years ago, Australian Courts today have to look at the reality of the situation and the purpose which family trusts serve today. A limitation as to the husband’s power to control the assets and income of the trust in accordance with the provisions of the trust deed, is inconsistent with the reasoning of the Full Court in Ashton. Leave to appeal from that decision was refused by the High Court on 5 December 1986 by a bench composed of Gibbs CJ, Wilson and Brennan JJ. Whatever might be the remaining effect of Skeats case, it is not authority for the proposition that the husband is prevented from appointing a trustee who is compliant to his wishes.

It is our view, therefore, that if the husband were to follow the procedure outlined above, it will not render him liable to any other beneficiary.”

129.4.42It is also instructive to refer to the sequel to DAVIDSON played out in the New South Wales Supreme Court and then the New South Wales Court of Appeal. Warnick J in a case of BP v KS (2003) FLC 93-154, to which I will refer again shortly, dealt with this in extenso. In summary though, in proceedings related to an order vesting shares previously held within the Trust in a new trustee appointed by a new appointor, and where it was proposed that those shares which in value equalled the amount due to the wife in the original property settlement be sold and the proceeds distributed to the wife, it was argued that the appointment of the new trustee was a fraud on the power to appoint a new trustee and that to pay the wife the proceeds of sale of the shares would involve a breach or possible breach of fiduciary duty owed by the new trustee to the other beneficiaries of the Trust. Santow J in the Supreme Court found no evidence to suggest that there was a prior agreement with the new trustee to ensure that the wife received her entitlement under the order for property settlement, or that the new trustee had any intention of following any direction by any third party, and the disposition was in accordance with the law. There was an appeal but the Court of Appeal dismissed the same on the basis of the findings of Santow J.

223.The wife has continued in her part-time employment and that enables her to be free after school and during school holidays to supervise Z and help the other three children where necessary.
224.W moved in with the husband in early 2004 but spends time at the mother’s home as well. X also moved in with the husband in mid-2004 and the wife sees X regularly. Z has regular contact with the father and Y spends substantial time with both the husband and the wife. All of the children receive financial support through their respective trusts and from the dividends received on their shares.
225.The wife has managed her share portfolio since separation and it has increased substantially in value. The husband of course divested himself of shares worth approximately $500,000.00 by assigning the same to the children in January 2002, but he has successfully managed the balance of his portfolio.
226.In considering the party’s respective post-separation contributions it is not apparent that one outweighs the other and that is the position that the parties themselves have presented.
Conclusion on contributions
227.The wife says that the contributions should be assessed as being equal but the husband says that his contributions should be assessed at between 57.5% and 60%.
228.The husband’s senior counsel suggests that apart from the greater initial contribution by the husband there is nothing particularly remarkable about the contributions of either party. However, he says that given the significance of the initial contributions, the fact that those contributions provided the foundation for the accumulation of assets during cohabitation and the fact that they were used for the welfare of the family, it is appropriate that the husband’s contributions overall be assessed at a greater percentage than the wife’s.
229.The wife says that although there was the greater initial contribution by the husband, when all the contributions of the parties over the full length of the marriage and post-separation are weighed up neither party can be considered to have contributed more than the other.
230.In my view there is substance in the husband’s argument but I do not agree that the disparity in their contributions created by the husband’s initial input is such that the husband’s contributions should be assessed at between 57.5% and 60%. In weighing all the contributions of the parties as I must do in accordance with authorities such as PIERCE and PIERCE (1999) FLC 92-844, I cannot overlook the wife’s significant contributions as homemaker and parent and particularly her contributions in the form of the support to the husband in those difficult times surrounding the Ms R affair. Obviously the husband’s major contributions have been his direct financial contributions which include his initial input, but there is a danger in comparing contributions that can be quantified in money terms such as the husband’s with contributions which cannot, such as the wife’s. There can be a tendency to discount the latter contributions by highlighting the former simply because they cannot be quantified. This has been recognised in leading cases such as MALLET and MALLET (1984) FLC 91-507 and in FERRARO and FERRARO (1993) FLC 92-335, and the message is that even though they cannot be quantified in money terms great weight should still be accorded to contributions such as those of parent and homemaker. Indeed, there is nothing to say that parent and homemaker contributions cannot outweigh direct financial contributions.
231.This has been a long marriage and there have been many and varied contributions made by the parties over time. It is necessary to weigh each of these contributions in arriving at a result, and in my view, even according great weight to the wife’s contributions I consider that the husband’s contributions exceed the wife’s, but only marginally and only because of the significance of his initial input. I find that their respective contributions should be assessed at 52%/48% in the husband’s favour. The effect of this is that the first 4% of the net asset pool will be treated as having been contributed by the husband whilst the parties have contributed equally to the remaining 96% of the pool (THOMASETTI and THOMASETTI (2000) FLC 93-023). Given the size of the pool, 4% is still a significant amount and it certainly caters for the greater contribution of the husband.
Section 75(2) of the Family Law Act
232.I now turn as Section 79(4)(e) dictates to the individual matters to be taken into account pursuant to Section 75(2) of the Act. The sub-paragraphs that are relevant are (a), (b), (c), (d), (g) and (o).
(a)The age and state of health of each of the parties;
233.The husband is aged 65 years and the wife is aged 48 years. The importance of the husband’s age is in relation to his capacity for appropriate gainful employment, and in this regard I note that he is long since retired. However, I will deal with this further when considering Section 75(2)(b).
234.In relation to the husband’s health he says that it is “not good, but . . . not in ways that are primarily life-threatening”. He still has problems with his right knee and his activities are restricted as a result. He uses a walking stick and has special shoes. He has prostatitis and that may require removal of the prostate gland. He has pain in his neck, right shoulder and lower back necessitating regular physiotherapy.
235.In summary, the husband’s health difficulties restrict his mobility and his ability to look after himself. This is clearly relevant to his future needs and must be taken into account.
236.With the wife’s age, the importance of that is also in relation to her capacity for appropriate gainful employment. In other words, the argument is that she is still young enough to work and even to embark on a full-time career. Again, I will leave this for when I consider Section 75(2)(b).
237.The wife does not raise any issue in relation to her health.
(b)The income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
238.The wife is employed part-time at … and she earns $12,500.00 per annum from this employment. In addition she receives income from her share investments. This income fluctuates but according to her last Form 13 financial statement it is $1,800.00 per week. Apart from this the wife receives money from the children’s trusts to assist her with the support of Y and Z, although this could change in the future.
239.Although the wife still has Z living with her I find that she has the capacity to work full-time. Indeed, the wife has enrolled in a Masters degree at … University in order to improve her qualifications. This will enable her to apply for […] positions. However, I accept her evidence that there are not many employment opportunities in the fields for which she is and will be qualified and that the jobs that are available are not particularly well-paid. Nevertheless she still has the prospect of earning between $45,000.00 and $55,000.00 per annum.
240.The husband is retired, and his income is comprised of investment income and royalties and totals approximately $560.00 per week.
241.The husband has been asked to write a biography but he is finding it difficult to complete, and in any event he expects the royalties will only be minimal. The husband says, and I accept, that his age and his state of health prevent him from obtaining appropriate gainful employment. It is apparent that his income in the future will continue to be from investments and from royalties.
242.However, it is relevant that since the separation the husband has divested himself of shares worth in the vicinity of $500,000.00 from which he previously received income. Thus he has voluntarily reduced his income post-separation and it is hypocritical of him to suggest that he should receive a further substantial adjustment to his percentage entitlement by way of property settlement because of the current disparity between his income and the wife’s.
243.It is also important to recognise that the husband has purchased a house property which further reduced his investments and thus his income. The wife is still renting but she proposes to purchase a house property and that will also reduce her investments and her income. Accordingly, the disparity will be lessened as a result.
244.There was also no evidence of what the husband will do with the balance of the assets of the Trust if he decides to meet the order that I propose to make out of those assets. Whatever he does though the effect of my finding that those assets can be treated as his property is that with his share of those assets it is appropriate for the court to take into account the income that those assets produce as income of the husband. I have no evidence of what the income is but it would be relatively substantial. Equally though it is clear that once the wife receives her entitlement she will be able to significantly increase her income by investing or continuing to invest some or all of that entitlement.

In all these circumstances, although it is unclear what the ultimate incomes of the parties will be, and even allowing for the husband’s voluntary reduction in his income I can be confident that the wife’s income will still exceed the husband’s and there is her greater earning capacity as well. Thus this needs to be taken into account.

246.In relation to the property of the parties, I have set out the same in paragraph 198 above. As a result of my findings on contributions the husband is entitled to a greater percentage of the net assets of the parties than the wife. Thus there is a disparity that needs to be taken into account. Although the percentage difference is minor, the effect is that the husband will have approximately $400,000.00 more than the wife, and that is relatively significant. Thus, this is a disparity which should also be taken into account.
247.In relation to the financial resources of the parties there are two comments to be made. Firstly, the husband initially suggested that it was necessary to take into account the fact that the wife could expect to receive a substantial benefit under the will of her mother. However, there was insufficient evidence presented to maintain that argument, and when I raised that during the husband’s counsel’s final address he indicated that “it can have little consequence”. However, even that concession was not enough because in my view there is no basis on the evidence to take that into account and I do not propose to. Secondly, if the assets of the Stephens Trust can not be treated as the property of the husband after setting aside the instruments and dispositions of 7 December 1998 and 18 January 2002, then as I have already found these assets can certainly be treated as a financial resource of the husband. Moreover, it may not even be necessary to actually set aside the disposition of 18 January 2002. In any event on that basis there would be a substantial disparity between the parties in terms of their financial resources and this would need to be taken into account here if that was the basis on which the case was determined. It would require a substantial adjustment in the wife’s favour.
(c)Whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
248.The child Z resides with the wife and spends one night each week and half of the school holidays with the husband.
249.Z is completing the second to last year at … School. The Z Stephens Trust pays the discounted school fees, meets various other expenses and pays the wife $170.00 per week maintenance. In addition, Z has investment income from shares which is approximately $175.00 per week. Z also has part-time employment and meets personal expenses from this income.
250.Thus, it is apparent that Z’s financial needs are currently being well taken care of. However, it is unclear what effect my findings in relation to the assets of the Trust will have on this position. If as a result of my orders those assets go to the parties then Z will be reliant on the current level of financial support being provided by the parties themselves, and that will be even more so if the shares that were transferred to them by the husband are returned to the husband. Each of the parties though will have sufficient income and/or income earning capacity to easily meet this responsibility and I would expect that that is what would happen in one form or another.
However, both currently and into the future the wife still has the responsibility for accommodating Z, for attending to Z’s physical needs and for assisting Z with school work. There are also the social and moral implications of having to care for and raise a teenage child. The wife has to be available to counsel and guide Z through these difficult years and this is a relevant factor to take into account here (COLLINS and COLLINS (1990) FLC 92-149, at pp. 78,043 – 78,048; WATERS and JUREK (1995) FLC 92-635, at pp. 82,376-82,378).
(d)Commitments of each of the parties that are necessary to enable the party to support:
(i)himself or herself; and
(ii)a child or another person that the party has a duty to maintain;

251.The husband referred to this paragraph in his outline of submissions but no detail was provided, and no submissions were made on his behalf to assist the court. However, I assume that by mentioning this paragraph the husband is suggesting that it is relevant to consider the support that he provides the two eldest children, W and X. They both live with the husband and he provides them with meals. However, beyond that they are well able to support themselves from their own income and indeed I consider that they have sufficient income and resources to be completely independent from both the husband and the wife. Again though that could very well change as a result of the orders that will be made, but as with Z, despite W and X being adult children, I would expect the parties to readily ensure that their level of financial support is maintained in one form or another. Thus, there is no basis here for making an adjustment in favour of the husband.
(g)Where the parties have separated or the marriage has been involved, a standard of living that in all the circumstances is reasonable;
252.In his affidavit the husband alleged that “by reason of (his) low income (his) standard of living has deteriorated substantially since the termination of (his) marriage”. However, I do not accept the accuracy of this statement, and in any event there is no basis for suggesting that he does not have a standard of living that in all the circumstances is reasonable, and that is to what this paragraph is directed. The husband has a fully furnished freehold home, a motor vehicle, and investments which provide him with an income. Indeed, it is again hypocritical of the husband to complain about his standard of living when he voluntarily gave away approximately $500,000.00 worth of shares in January 2002.
253.Thus, there is no basis for any adjustment here.
(o)Any fact or circumstance which in the opinion of the Court, the justice of the case requires to be taken into account.
254.I have included this as a relevant factor to be considered despite neither party and particularly the wife suggesting that it should be taken into account. What I have in mind is the relevance of the husband’s conduct in attempting to remove assets from the reach of the wife and the Family Court.
255.Certainly, if it is not possible to bring these assets back into the pool, at least notionally, then the husband’s conduct in this regard would be taken into account such that there would be an adjustment to the percentage division between the parties as a result. Indeed, the principles in KOWALIW and KOWALIW, supra, say as much.
256.Reflecting on this, I have found that the assets of the Stephens Trust should be included in the asset pool for division between the parties and thus there can be no basis for making an adjustment for the conduct of the husband. However, it might have been a different result if all that could be done was to take those assets into account pursuant to Section 75(2)(b) as a financial resource. In other words, the conduct of the husband in changing the character of what once were assets available to the parties to financial resources of the parties could properly be taken into account under this paragraph. However, I do not need to concern myself with this now.
Conclusion on Section 75(2) factors
257.The wife’s senior counsel submitted that if contributions are assessed as being equal then there is no basis for any adjustment pursuant to Section 75(2) of the Act. However, if the husband is assessed as having a greater percentage entitlement for contributions then the Section 75(2) factors should be considered and an allowance made to bring the final percentage division up to 50%/50%.
258.I have assessed the parties’ respective contributions at 52%/48% in the husband’s favour and thus the effect of the wife’s submission is that there should be an adjustment of 2% in her favour pursuant to any relevant Section 75(2) factors. The primary factor that she points to is that she still has the care of Z.
259.The husband’s senior counsel submits that there should be an adjustment of 5% in the husband’s favour primarily because of the disparity between the income of the parties and their respective earning capacities.
260.In my view there should be no adjustment for any Section 75(2) factors. The circumstances of the wife having the care of Z is offset by the disparity in their respective income and earning capacities, once the disparity in their property is factored in.
Section 79(4)(d), (f) and (g)
261.Next, I am obliged to consider the effect of my proposed order upon the earning capacity of either party (Section 79(4)(d)); any other order made under the Act affecting a party to the marriage or a child of the marriage (Section 79(4)(f)); and any child support under the Child Support (Assessment) Act that a party to the marriage is to provide or has provided for a child of the marriage (Section 79(4)(g)).
262.In relation to the first matter, the earning capacities of both parties will be affected by my orders to set aside the instruments and dispositions made by the husband in January 2002. Each party will then have more assets of their own to invest and earn income. However, I have already taken this into account when considering the relevant Section 75(2) factors and thus in considering the effect of the proposed orders there is nothing further that I need do.
263.In relation to the second and final matters there is nothing to be considered here.
Conclusion

The net assets of the parties should be divided 52%/48/% in the husband’s favour. As a result, and to return to a previous point, it is necessary to exercise the discretion to set aside the instrument and disposition of 18 January 2002. The assets of the Trust need to be actually in the asset pool for division to allow the wife to receive her entitlement as the figures will shortly indicate.

Just and equitable

Pursuant to Section 79(2) the court cannot make an order unless the court is satisfied that in all the circumstances it is “just and equitable” to make the order. To assess that I need to stand back and consider the practical effect of my proposed orders (WATERS and JUREK (1995) FLC 92-635; JEL and DDF (2001) FLC 93-075; PHILLIPS and PHILLIPS (2002) FLC 93-184).

The net asset pool comprises a monetary equivalent of $9,818,144.37. Thus, the effect of my decision is that the husband is entitled to net assets to the value of $5,105,435.00 (in round dollars) and the wife is entitled to net assets to the value of $4,712,709.00 (in round dollars).
The wife has or has had the benefit of net assets totalling $2,530,406.80 and the husband has or has had the benefit of net assets totalling $1,790,108.15.
Thus, the husband will have to pay to the wife the sum of $2,182,302.00 (in round dollars). Where that will come from though is entirely up to the husband. On the figures he has assets to the value of $1,790,108.15 less $57,727.15 being the amount he has paid for legal costs, but I have found that the assets of the Stephens Trust can be treated as his property once the relevant instruments and dispositions are set aside, and thus that is a source of funds for the husband. My orders though will not permit the husband to apply the assets that he assigned to the children because he himself successfully argued that the discretion to set aside that disposition should not be exercised where the husband has the ability to otherwise meet the order. That of course will not prevent the husband reaching some arrangement with the children about this given that I have still notionally added back these assets to the net asset pool of the parties.
The husband’s position as a result of my proposed orders is therefore somewhat unclear given that it will depend on what he does in relation to the Stephens Trust and its assets. However, that is entirely a consequence of the husband’s own actions in attempting to remove assets from the reach of the wife and the Family Court, and this cannot prejudice the position of the wife in any way. In any event, on the basis of the applicable figures the proposed orders leave the husband with substantial assets but, of course, with a large proportion of those assets being assets in the Stephens Trust. To repeat, it is entirely up to the husband what he then does about this.
With the wife she will have assets to the value of $4,712,709.00 less the amount of $131,000.00 being her legal fees. The majority of this will be in shares and/or cash, but she foreshadowed the purchase of a house property with some of these funds.
In relation to the children, although there is no requirement to consider their position per se, I cannot leave this case without commenting about their involvement in the same.
I note of course that my proposed orders could have a substantial effect on the children. The assets of their Trusts will be returned to the Stephens Trust, and depending on what the husband does in response to the orders there may or may not be assets retained in that trust for the benefit of the children and the other beneficiaries. Further, although prima facie the children will still have the shares assigned to them by the husband, again the husband may choose to make other arrangements with them about that given that those assets have been notionally treated as the husband’s property.
In these circumstances it might be tempting to feel some sympathy for the children, but when analysed that does not necessarily follow. There is simply no basis on which the children can complain about the effect of the orders that I propose. Prima facie they were the innocent victims of the husband’s actions. The husband used them initially in his attempts to remove assets from the reach of the wife and the Family Court, and for that the children cannot be criticised, but it is sad that the children have chosen to thereafter become involved in what is essentially a dispute between their parents. The husband’s actions were to divert assets that the parties had accumulated for the benefit of the entire family, yet the children have sought in these proceedings to maintain the position created by the husband. That is unfortunate to say the least given that in reality the children have had the ability as much as the husband has had to prevent this dispute not only from occurring at all but certainly from reaching the heights that it has. For example, all it would have taken is for the children to have said that they do not consider that it is appropriate for assets accumulated by their parents to be diverted to trusts from which only they can benefit, and without their mother even being informed that that was being done. In other words, although the children may feel that they should benefit from the assets of their parents at some stage, and that is what probably should happen, surely when that is should be a decision for the parents themselves.
The consequences of the children’s attempts to in effect hold on to assets which they had no direct input in accumulating and which should still be under the control of their parents has been a bitterly fought and extremely costly court case, let alone the negative impact on the family and the relationships between the members of that family.
In any event, I digress. Having considered the result and re-visited the history of the relationship between the parties, their respective contributions and the relevant Section 75(2) factors I am satisfied that my proposed orders are just and equitable.

Orders

In all the circumstances I propose to make the following orders:
276.1That the wife forthwith transfer to the trustee interveners the 14,600 Westpac Shares held by her as nominee of the Stephens Trust together with all dividends received by her thereon and all interest earned on those dividends.
276.2That pursuant to the provisions of Section 106B of the Act the Stephens Trust Instrument of Variation dated 7 December 1998 be set aside.
276.3That pursuant to the provisions of Section 106B of the Act the instrument entitled “The [Stephens] Trust” dated 18 January 2002 and the dispositions made pursuant thereto whereby the husband:
276.3.1Forgave and released all amounts owing by him to the said Trust;
276.3.2Forgave and released all amounts owing by the wife to the said Trust; and
276.3.3Applied all of the income and capital of the trust fund of the said Trust;
276.3.3.1as to one quarter thereof to the W Stephens Trust;
276.3.3.2as to one quarter thereof to the X Stephens Trust;
276.3.3.3as to one quarter thereof to the Y Stephens Trust;
276.3.3.4as to one quarter thereof to the Z Stephens Trust;
be set aside.
276.4That on or before 28 February 2006 the husband pay to the wife the sum of $2,182,302.00.
276.5That by consent the paintings owned by the husband and the wife be divided equally between them.
276.6That the wife do retain as her sole property absolutely free of any claim, demand, interest, right or entitlement of the husband the following:
276.6.1The proceeds of the sale of the house property at Suburb A;
276.6.2Subject to paragraph 276.1 hereof all shares in public companies in respect of which she is registered as owner;
276.6.3Her motor vehicle;
276.6.4The furniture and chattels in her possession;
276.6.5Her jewellery and personal possessions;
276.6.6Her interest in the … Superannuation Fund;
276.6.7All monies standing to her credit in any bank account.
276.7Subject to compliance with paragraph 276.4 hereof the husband do retain as his sole property absolutely free of any claim, demand, interest, right or entitlement of the wife the following:
276.7.1The unit property situated at Suburb B registered in his name;
276.7.2The furniture and chattels in his possession;
276.7.3His library and personal effects;
276.7.4The proceeds of his interest in the … Superannuation Fund;
276.7.5All shares in public companies in respect of which he is registered as owner;
276.7.6All monies standing to his credit in any bank account;
276.7.7The motor vehicle registered in his name.
276.8Each party do all such acts and things and sign all such documents as may be necessary to give effect to the terms of this order.
276.9Liberty to each party to apply as to consequential matters.
276.10That all applications be removed from the pending cases list.

I certify that the preceding
276 numbered paragraphs are
a true copy of the reasons herein of the
Honourable Justice Strickland.
The 30^th day of November 2005.

……………………………………….

Associate

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Strickland delivered this day will for all publication and reporting purposes be referred to as Stephens & Stephens and Ors [2005] FamCA 1181

[2005] FamCA 1181

30 November 2005

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Legal Concepts

Consent

Constructive Trust

Remedies

Statutory Construction