Tilston and Tilston & Ors
[2020] FamCA 857
•12 October 2020
FAMILY COURT OF AUSTRALIA
| TILSTON & TILSTON AND ORS | [2020] FamCA 857 |
| FAMILY LAW – JURISDICTION – Where the husband and wife seek a property settlement order – Whether the Court has jurisdiction to determine claims made by the son against the husband for misleading and deceptive conduct or alternatively for breach of fiduciary duty – Consideration of the term ‘accrued jurisdiction’ – Where the claim by the son against the husband arises out of a “common substratum of facts” and there is a “single justiciable controversy” and the Court therefore has authority to adjudicate all issues comprising the matter. CONSUMER LAW – Where the son alleges that the husband has engaged in misleading and deceptive conduct pursuant to s 18 of the Competition and Consumer Act 2010 (Cth) relating the family partnership, trust and superannuation fund – Where it is found that the husband has not engaged in misleading and deceptive conduct. DAMAGES – Discount for contingencies – Where if the Court had found that the husband had engaged in misleading and deceptive conduct a 50% discount to the sum of damages to be awarded to take into account contingencies would have been appropriate. FIDICUARY DUTIES – Where the son alleges that the husband has breached his fiduciary duties as a partner of the family partnership and as a trustee for the family superannuation fund – Where the son’s claim is without foundation. SUPERANNUATION – Where the husband has an interest in a Defence Force Retirement and Death Benefit (“DFRDB”) Pension – Consideration of the approach to be adopted. PROPERTY SETTLEMENT – Contributions – Where the husband concedes that contributions should be assessed as favouring the wife by up to the proportion 55/45 – Where the wife contends that contributions should be assessed as favouring her in the proportion 55/45 and that she should receive an adjustment of a further five percent such that she receive 60% of all assets (except for the capitalised value of the husband’s DFRDB pension) – Where an order is made which divides the property pool, comprising all bar the husband’s DFRDB pension, in the proportion of 57.5% to the wife and 42.5% to the husband. |
| Family Law Act 1975 (Cth) Competition and Consumer Act 2010 (Cth) |
| Beach Petroleum NL v Abbott Tout Russell Kennedy & Ors (1999) 48 NSWLR 1 Bevanere Pty Ltd v Lubidineuse (1985) 59 ALR 334 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 Camden Pty Ltd & Laue and Ors (2017) 262 CLR 1 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 Coghlan & Coghlan (2005) FLC 93-220 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 I and L Securities v HTW Valuers (2002) 210 CLR 109 Marks v GIO Australia Holdings (1996) 198 CLR 494 Nadinic v Drinkwater (2017) 94 NSWLR 518 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 Rizeq v Western Australia (2018) 58 Fam LR 97 Rosati & Rosati (1998) FLC 92-804 Stanford v Stanford (2012) 247 CLR 108 Sykes v Reserve Bank of Australia (1998) 158 ALR 710 Williams v Pisano (2015) 90 NSWLR 342 Ye v Zeng (No. 7) [2018] FCA 1478 |
| APPLICANT: | Ms Tilston |
| 1st RESPONDENT: | Mr Tilston |
| 2nd RESPONDENT: | Ms A Tilston |
| 3rd RESPONDENT: | Mr B Tilston |
| FILE NUMBER: | BRC | 876 | of | 2017 |
| DATE DELIVERED: | 12 October 2020 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Carew J |
| HEARING DATE: | 27, 28, 31 August, 1, 2, 3 September 2020 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr G. Page QC |
| SOLICITOR FOR THE APPLICANT: | Feeney Family Law |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr G. Shoebridge |
| SOLICITOR FOR THE 1ST RESPONDENT: | BGM Family Lawyers |
| THE 2ND RESPONDENT: | Self-represented |
| SOLICITOR FOR THE 3RD RESPONDENT: | Mr T. Somerville, Somerville Legal as solicitor advocate |
IT IS ORDERED THAT:
CLAIM BY THIRD RESPONDENT
The claim by the third respondent against the first respondent (“the husband”) as contained in the Response to Initiating Application filed 11 February 2020 and amended by the Case Outline filed 21 August 2020 be dismissed.
DISBURSEMENT OF FUNDS HELD BY THE TRUSTEE FOR SALE
The applicant (“wife”), husband, second respondent and third respondent (collectively “the parties”) instruct the Trustee for Sale to disburse the funds held on trust by him on behalf of the parties as follows:
(a) to the Tilston Family Trust, the sum of $1,192,733;
(b) to the Tilston Family Superannuation Fund CBA Account No. …25, the sum of $574,492;
(c) to the C Partnership CBA Account No. …86, the sum of $178,130.75; and
(d) the balance, equally between the husband and the wife by way of payment of:
(i)50% to the trust account for the lawyers for the wife; and
(ii)50% to the trust account for the lawyers for the husband.
THE TILSTON FAMILY TRUST
The husband cause D Pty Ltd as trustee for the Tilston Family Trust to do all acts and things and sign all documents necessary to distribute the assets of the Tilston Family Trust between the husband and the wife in the most tax effective way so as to achieve a distribution of all assets listed in the attached schedule in the proportion 57.5% to the wife and 42.5% to the husband.
The husband and wife do all acts and things and sign all documents necessary to wind up the Tilston Family Trust, with the costs of same to be shared equally between the husband and the wife.
THE TILSTON FAMILY SUPERANNUATION FUND
In respect of the Tilston Family Superannuation Fund, each of the parties is to:
(a) Forthwith do all acts and things and sign all documents required to transfer their respective member entitlements out of that fund and into another superannuation fund of that party’s nomination; and
(b) Do all acts and things and sign all documents required to wind up the Tilston Family Superannuation Fund with the cost to be met from resources of that Fund or if necessary, shared equally between the four trustees.
THE C PARTNERSHIP
In respect of the C Partnership:
(a) the parties are to each respectively do all acts and things and sign all documents required to divide equally between them all funds held by the partnership once the $178,130.75 referred to in paragraph (2)(c) above have been received; and
(b) thereafter, the parties are to do any acts and things and sign any documents to formally wind up the C Partnership, with the costs of same to be shared between the parties equally.
REMAINING ENTITIES
In respect of any other entities relating to the Tilston family business in which any of the parties have interests:
(a) The husband is to prepare, at his expense, any documentation, resolutions or other documents necessary to record the resignation of each of the wife and the third respondent from any office that they respectively hold in any such entity; and
(b) The husband is to deliver all such documentation to the wife and the third respondent; and
(c) The wife and the third respondent are, at their expense respectively, to sign and return all such documents within 14 days of receipt.
JEWELLERY
The wife make arrangements for the 1.14 carat solitaire diamond ring which belonged to the husband’s mother to be delivered to the second respondent within 14 days from the date of this order;
The wife make arrangements for the following items to be delivered to the husband within 14 days from the date of this order:
(a) Unit #...15; ID #187 Pear Shaped Opal Necklace;
(b) Unit #...16; ID #188 Emerald cut kunzite broach;
(c) Unit #...4; ID #197 1x loose .45 carat diamond; and
(d) Unit #...1; ID #204 Qty 3 loose gemstones.
E HOLIDAY MEMBERSHIP
Within 7 days from the date of this order, the husband and wife are to do all acts and things and sign all documents necessary to list the E Holiday Membership for sale on ….com.au for a list price of $26,000, and the following shall apply:
(a) if the E Holiday Membership has not been sold after one fortnight, the list price is to be reduced by $5,000 and by $5,000 each fortnight thereafter until it reduces to a list price of $11,000;
(b) if, at the time the list price reaches $11,000, the E Holiday Membership has not been sold, the list price is to thereafter reduce by $1,500 every 7 days until the list price reaches $3,500;
(c) if, at the time the list price reaches $3,500, the E Holiday Membership has not been sold, the E Holiday Membership is to remain listed on ….com.au until such time as:
(i)it is sold to a third party, or
(ii) either party gives notice in writing to the other party that they wish to acquire the interest at the currently listed price;
(d) each of the husband and the wife are at liberty to acquire the E Holiday Membership at the then listed price, by giving notice in writing to the other party at any stage of the selling process provided for in this order;
(e) if a third party makes an offer to purchase the E Holiday Membership at the then listed price, the husband or the wife are each at liberty to purchase the membership at the same price offered by the third party, by giving notice in writing to the other party that they wish to do so;
(f) if the E Holiday Membership is purchased by a third party, the husband and the wife are to each do all acts and things and sign all documents necessary to cause the transfer of the membership to the third party, and the proceeds of sale are to be divided equally between the husband and the wife;
(g) if either the husband or the wife give notice to the other party that they wish to retain the E Holiday Membership in accordance with this order then:
(i) the party acquiring the interest shall pay 50% of the sale price to the other party, by depositing the funds into the non-retaining parties’ bank account as nominated by them in writing; and
(ii) in consideration for that payment, the non-acquiring party is to execute any and all documents necessary to cause the transfer of their right, title and interest in the membership to the acquiring party.
MISCELLANEOUS
The wife shall otherwise retain as and by way of property settlement, and free from any further claim by the other parties:
(a) her personal bank accounts, inclusive of any partial property settlement distributions made to the wife throughout the course of the proceedings;
(b) the furniture and contents in her possession;
(c) her personal possessions and belongings, including the remaining jewellery not dealt with specifically in this order;
(d) the share portfolio or proceeds of sale thereof; and
(e) any and all liabilities in her sole name.
The husband shall otherwise retain as and by way of property settlement, and free from any further claim by the other parties:
(a) his personal bank accounts, inclusive of any partial property settlement distributions made to the husband throughout the course of the proceedings;
(b) the campervan, plant and equipment and other items purchased by the husband from the Trustee for Sale throughout the course of these proceedings;
(c) the furniture and contents in his possession;
(d) his personal possessions and belongings;
(e) his interest in the Defence Force Retirement and Death Benefit (DFRDB);
(f) his interest in D Pty Ltd as trustee of the Tilston Discretionary Trust;
(g) his interest in F Pty Ltd;
(h) his member entitlements in the Mr Tilston Retirement Fund; and
(i) any and all liabilities in his sole name.
The husband and the wife shall forthwith do all acts and things and sign all documents necessary to close their joint CBA Account …23 and divide the balance equally between them.
A Registrar of the Family Court of Australia be authorised to execute documents at the request of a party in accordance with s 106A of the Family Law Act 1975 (Cth), should any party fail to sign such document within 7 days of being requested to do so.
Each party has liberty to apply to the Court as to the implementation or enforcement of this order, upon giving 7 days’ notice to the other parties to the proceedings.
In the event that the parties are unable to agree in writing within 21 days of this order what order, if any, might be made regarding costs of and incidental to these proceedings:
(a) Each party file within a further 14 days written submissions in respect of that issue; and
(b) Unless any party otherwise therein contends to the contrary, that issue be determined in chambers without the necessity of further appearance by any party.
In the event that the parties reach agreement in writing on the issue of costs, they are at liberty to file, jointly, a minute of consent via e-mail to the Associate to Justice Carew.
SCHEDULE
Ownership Description Value Wife Commonwealth Bank of Australia Shares $250,051.00 Wife Interest in the TFSF (42.71%) $437,743.93 Wife Interest in proceeds of sale of plant & equipment formerly owned by the family partnership (25%) $44,532.68 Wife Partial Property Settlement distribution received in accordance with Orders made in April 2019 $18,721.85 Wife Partial Property Settlement distribution received in accordance with Orders dated 4 September 2019 $81,478.15 Wife Partial Property Settlement distribution received in accordance with Orders dated 8 May 2020 $553,730.15 Wife 50% of remaining funds held in the Shearer Doyle Law Practice Trust Account (as referred to in paragraph 2(d) of the Order) $596,994.00 Husband 50% of remaining funds held in the Shearer Doyle Law Practice Trust Account (as referred to in paragraph 2(d) of the Order) $596,994.00 Husband Interest in the TFSF
Accumulation $68,214.77 (6.51%)
Pension $236,150.65 (23.56%)$304,365.42 Husband Interest in proceeds of sale of plant & equipment formerly owned by the family partnership (25%) $44,532.68 Husband Partial Property Settlement distribution received in accordance with Orders made in April 2019 $18,721.85 Husband Partial Property Settlement distribution received in accordance with Orders dated 4 September 2019 $81,478.15 Husband Partial Property Settlement distribution received in accordance with Orders dated 8 May 2020 $553,730.15 Husband Motor Vehicle 1 $2,000.00 Husband Motor Vehicle 2 $2,500.00 Husband Interest in F Pty Ltd (established post-separation)
Comprising the following:(a) H Bank Account No. …70; and
(b) Fuel enterprise formerly operated by J Pty Ltd, acquired with the purchase of Lot B from the Trustee for Sale
$10,427.46
Wife and Husband E Holiday Membership Proceeds of sale Wife and Husband
(to be divided so as to achieve an overall distribution 57.5% to wife and 42.5% to husband)Interest in the TFT
Comprising of the following:(a) Share of sale proceeds (200 acre property/half share of 2 K Street and half share of 4 K Street) held in the Shearer Doyle Pty Ltd Law Practice Trust Account after payment of sale costs and costs of trusteeship $1,192,733;
(b) CBA Bank Account No. …02 with balance of $1,255; and
(c) Plant and equipment.
$1,193,988 Total To be calculated upon sale of the E Holiday membership and upon taking into account any necessary adjustments
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Tilston & Tilston has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 876 of 2017
| Ms Tilston |
Applicant
And
| Mr Tilston |
First Respondent
And
| Ms A Tilston |
Second Respondent
And
| Mr B Tilston |
Third Respondent
REASONS FOR JUDGMENT
This dispute involves the four members of the Tilston family comprising Ms Tilston (“the wife”), Mr Tilston (“the husband”) and their two adult children, namely, Ms A (“the daughter”) and Mr B (“the son”).
In addition to the wife and husband seeking a property settlement order, the son is suing the husband for damages arising out of alleged misleading and deceptive conduct or alternatively for a breach of fiduciary duty relating to the operation of a family partnership and self-managed superannuation fund.
Since these proceedings commenced, the wife, husband and son have collectively incurred legal fees of about $1,750,000 (the wife has incurred fees of about $876,190, the husband has incurred fees of about $393,916 and the son about $490,605). The daughter is self-represented. The value of the remaining property is about $3,000,000.
For the reasons which follow, the wife will be awarded 57.5% of the property ‘pool’ excluding the capitalised value of the husband’s Defence Force Retirement and Death Benefit (“DFRDB”) pension and will be required to deliver the husband’s mother’s diamond ring to the daughter. The husband will be awarded 42.5% of the property pool and retain his DFRDB pension. The son’s claim will be dismissed.
Issues
Having identified nine separate issues for determination when this matter was set down for trial, it was agreed by all parties that issues 1, 2, 3, 6, 7, 8 and 9 set out as a notation to the order made 8 May 2020 were no longer matters requiring determination.
The remaining issues identified from that list were:
(4)Did the husband engage in misleading and deceptive conduct or alternatively breach a fiduciary duty as alleged by the son and, if so, should he pay damages?
(5)Whether the husband and the second respondent have received unauthorised distributions and/or engaged in unauthorised transactions which should be adjusted in favour of the third respondent and/or the wife.
Despite the son and wife submitting during the trial that issue number 5 above remained an issue for determination, the son ultimately did not press this issue. The balance sheet (exhibit 3) includes a notation that the wife’s position is that “wages drawn from L Pty Ltd and M Pty Ltd by the daughter and the husband ought be added back into the pool”. During oral submissions, I indicated that if issue number 5 remained an issue for the wife, her counsel would need to take me to specific evidence of the alleged unauthorised distributions or transactions and quantify the total sought to be notionally added back. No submissions were made by counsel for the wife in relation to this issue in either his written or oral submissions and accordingly I have treated it as abandoned.
Additional issues requiring determination were articulated during submissions as follows:
·Should the overall assessment of the wife’s entitlements to a property settlement favour the wife in the proportion of up to 55% (the husband’s position) or 60% (the wife’s position)? and
·Should the daughter receive the husband’s mother’s ring (as sought by the husband but opposed by the wife)?
During the trial, I ordered the wife to deliver the ring to her solicitor pending the outcome of the trial and the wife’s solicitor confirmed that they had possession of the ring.
In the amended joint balance sheet (exhibit 3) tendered on behalf of the husband and wife, a share of the net sale proceeds of plant and equipment formerly owned by the C Partnership (“the family partnership”) was attributed to each of the son and daughter ($44,532 or 25% each) together with their benefits in the Tilston Family Superannuation Fund (“TFSF”) (son - $76,407.17 or 7.46% and daughter - $203,953.58 or 19.76%). Neither the son nor the daughter took issue with the calculation of those interests as they appeared in the balance sheet.
Before turning to consider the issues, it will be helpful to set out some background to this dispute.
Background
The wife is 70 years of age and retired. The husband is 73 years of age and retired. The wife and husband married in 1973 and separated in January 2016. They divorced in 2017.
The wife and husband have two adult children, namely, Mr B Tilston born in 1975 and Ms A Tilston born in 1977.
The son works in the transport industry, although he has recently been given notice of his redundancy due to the COVID-19 pandemic. The son joined the Australian Defence Force (“ADF”) in 1992 at age 16 and upon leaving the ADF in 2007, he worked in Australia until 2012. At that time, he joined an international company based overseas where he commenced to live with his wife and son.
The daughter worked as a finance professional and later established a consultancy. She is currently working as a part time tutor. She has a number of health problems, including a closed brain injury arising from a car accident in 2012. She lives in O City, Queensland.
At the time the wife and husband married, the husband was a member of the Australian Defence Force (“the ADF”) which he had joined in 1966. He owned a vacant block at Suburb P in the Q Region and after marriage, the husband used the sale proceeds of this property of about $7,500 to assist in the purchase of a jointly acquired unit at R Street, Suburb S (“the Suburb S unit”) in Brisbane for $35,000. This property was rented out while the husband and wife lived in accommodation provided by the ADF.
In 1975, the wife and husband jointly purchased land at T Street, Suburb U (“the Suburb U property”) in Brisbane which was available to the husband because of his war service. The wife contributed $10,000, which was provided by her parents as a gift. The combined cost of the land and house was somewhere between $35,000 and $45,000 and the wife and husband obtained a Defence Services Home Loan and a second mortgage from Westpac Bank. The Suburb U property became the family home. It was sold in April 2019 for $572,000 and, after payment of liabilities, the net proceeds were $144,925.
In about 1976, the wife and husband commenced to operate, in partnership, a business at Suburb V in Brisbane growing trees. The husband’s parents assisted with the establishment and care of more than 2000 trees at their own property while the wife and husband lived overseas and interstate. When the trees were ready to be planted they were transported and planted at the X Town property (referred to below).
At around this time the wife and husband jointly purchased rural land at W Street, X Town (“the X Town property”) for about $22,000 on which they established a business. A $20,000 gift from the wife’s parents was used towards the development of the business. Although the husband now says he does not recall this gift, he acknowledged that it had been made in an affidavit filed earlier in these proceedings. No money was borrowed to complete the purchase. The X Town property was sold in 2019 for $2,357,148 net.
The Suburb S unit was sold for about $47,500 in 1976. By the time of its sale, the parties had paid off the loan obtained for its purchase. The proceeds were used towards the Suburb U property and the X Town property.
The husband left the ADF in 1986 and commenced to receive a fortnightly DFRDB pension which he continues to receive. Additionally, the husband received a lump sum payment of $50,629.
After leaving the ADF, the husband commenced as a manager with a government agency.
In 1989, the wife and husband jointly purchased a commercial property in FF Town, Queensland. The husband also acquired an accountancy practice for $175,000, which he operated from the commercial premises. The husband had obtained finance qualifications after leaving the ADF.
The X Town property commenced producing a commercial product in the early 1990’s and in mid-1994 the Tilston Family Trust (“TFT”) was established with the husband as the trustee and the husband, wife, son and daughter among the potential beneficiaries.
In or about 1995/96, the son approached the husband seeking some advice about using primary production losses to reduce his income tax. As a consequence, on 1 January 1996 the wife, husband, son and daughter entered into the family partnership operating as ‘M Pty Ltd. The family partnership operated a business but never made a profit.
In 1997, the TFT acquired a rural property at Y Street, N Town (“the 200 acre property”). The purchase price was about $200,000 and the funds to purchase the 200 acre property were provided by the husband and wife. This property required clearing, which the husband undertook on weekends with the assistance of contractors and one part-time employee. Initially, young trees were transferred from the X Town property to the 200 acre property for planting and subsequently, trees were purchased and planted.
At around this time, the TFSF was also established and all parties were beneficiaries of the TFSF. In 1998, the TFSF acquired an adjoining rural property at G Street, N Town (“the 400 acre property”). The purchase price was about $100,000 and the funds to purchase the 400 acre property were primarily sourced from the sale of a vehicle owned by the husband and wife. As with the 200 acre property, the 400 acre property required clearing and initially young trees were transferred from the X Town property for planting and subsequently trees were purchased and planted.
The 200 acre property and the 400 acre property were sold in 2019 for $1,870,000.
In 2000, the wife received an inheritance from her father’s estate in the sum of $461,746.
In 2003, a corporate trustee, D Pty Ltd replaced the husband as the trustee of the TFT, but the husband maintained control. Also in 2003, the wife and husband sold the accountancy practice (for $725,000 on terms: $15,000 paid up front, $310,000 paid at settlement and the balance of $400,000 paid over ten years with interest) and the commercial property (for $550,000). The wife and husband were able to pay off all of their existing liabilities and the payments made over ten years were used to develop the various properties acquired at N Town. The husband ceased practising as an accountant upon the sale of the practice but continued to carry out Quality Assurance Reviews for a professional body until 2015. The husband mainly devoted his time to the operations on the orchards. Over time, thousands of trees were planted.
In January 2008, a further property was purchased (“4 K Street”) in the joint names of the TFT and the TFSF. This property comprised a two small pump service station and a large shed which was later used as a processing facility. J Pty Ltd was also established and in order to enable it to operate a business, it entered into a commercial tenancy agreement in relation to 4 K Street. All parties were directors and shareholders of J Pty Ltd. The purchase price for 4 K Street was about $220,000. Extensive development work was required in order to set up J Pty Ltd. 4 K Street was sold to the husband in 2019 for $203,000, and is held by the husband in the Mr B Tilston Retirement Fund.
In July 2008, the wife received an inheritance from her mother’s estate of $400,000 and a small share portfolio.
In August 2008, the daughter relocated from Sydney to operate and develop J Pty Ltd. The intention of the parties, at that time, envisaged the daughter assisting for about six months. After that time, her role increased and included writing promotional material for the business (including children’s books), managing the backpackers who were employed to harvest the product, and she also became a board member of the industry group.
In 2008, the wife and husband borrowed $400,000 from the Commonwealth Bank ($300,000 Viridian Loan and $100,000 overdraft) secured on their properties, namely, the Suburb U property and the X Town property. The wife and husband then advanced $400,000 to the family partnership by way of loan.
In 2009, another property was purchased at N Town (“2 K Street”) for $225,000 and acquired in the joint names of the TFT and the TFSF. This property was a commercial property with two buildings on it. The daughter set up an art space in 2 K Street to complement the operations of J Pty Ltd. The funds to purchase 2 K Street were sourced from the wife’s inheritance. 2 K Street, together with chattels, was sold in 2019 for $191,531.
The husband received an inheritance of $201,617 in 2009 from his mother’s estate. Pursuant to the terms of the husband’s mother’s will, her diamond ring was bequeathed to the daughter.
By 2011, the facility at 4 K Street became operational and processed the product from both the X Town property and the 200 acre and 400 acre properties.
The contributions made by the wife and the husband to the family partnership over the years comprised the income from the accountancy practice operated by the husband, the husband’s DFRDB pension, dividends received from shares owned by the wife and husband, interest earned on their savings, the balance of funds and interest payable on the sale of the accountancy practice, and rent paid by the family partnership for the use of the X Town property.
In August 2012, the local council closed the N Town Park which significantly reduced the number of visitors to the area and resulted in the closure of J Pty Ltd.
In November 2012, the wife and daughter were involved in a serious car accident. The wife received a personal injuries damages payout of $118,953 in September 2015. The wife lent $80,000 of her personal injuries payout to the daughter which she then contributed to the family partnership. The daughter eventually received a personal injuries payout and the loan from the wife has been repaid in full. The daughter’s closed brain injury was not diagnosed until March 2016.
In January 2013, the wife and husband were involved in a car accident. The husband received a damages payout of $17,102.
The injuries sustained by the wife in the car accidents significantly impeded her ability to make ongoing contributions.
In May 2013, the wife and husband jointly acquired an E Holiday Membership for $26,400.
In January 2016, the husband and wife separated. Subsequent to their separation, disputes between the parties commenced to arise. The wife and son discontinued attending family meetings and eventually ceased responding to communications from the husband about the business.
On 23 January 2017, the husband established M Pty Ltd but it did not trade.
On 6 March 2017, L Pty Ltd was established by the husband.
On 7 April 2017, the wife placed a ‘stop’ on the family partnership bank account.
L Pty Ltd traded until 26 April 2017 when the husband provided an undertaking to the Federal Circuit Court to continue operating the business via the family partnership until the matter returned to court in August 2017.
On notice to the other parties, in June 2017 the husband converted his benefits in the TFSF to a pension.
On 5 December 2017, an order was made joining the daughter and son to the proceedings. It remains somewhat unclear why the daughter was joined and remained a party as she is not seeking any order and no order is sought against her. She does not oppose the order sought by the husband, which includes that her grandmother’s ring be provided to her.
On 14 March 2018, the daughter purported to give notice of the termination of the family partnership. Although the wife and son take issue with the validity of the termination, neither sought any findings in relation thereto. L Pty Ltd commenced trading at this time.
On 21 March 2018, the son made his final contribution to the family partnership.
On 6 June 2018, the son placed a ‘stop’ on the family partnership bank account. At this time, the husband and the daughter proposed to continue the operations of the business in ‘caretaker mode’ pending sale of all assets.
On 21 November 2018, a trustee for sale was appointed to sell all of the real properties and the plant and equipment identified in a valuation by All Assets Appraisals and this has now been completed. The husband and daughter continued to maintain the farming properties pending sale.
On 15 July 2019, the matter was transferred to this Court.
Interim distributions of $653,930.15 have been made by consent to each of the wife and the husband.
did the husband engage in misleading and deceptive conduct or alternatively breach a fiduciary duty as alleged by the son and, if so, should he pay damages?
Unfortunately, the son’s claim against the father did not proceed by way of pleading. The solicitor advocate for the son sought to address this difficulty in the case outline filed on behalf of the son just prior to trial, but ultimately the written submissions provided at the end of the trial purported to crystallise and articulate the basis of the son’s claim. Despite what might be seen as a deficiency in properly particularising the son’s case against the husband at an earlier time, the husband took no issue with the presentation of the case by the son and does not suggest he was in any way prejudiced. It has nevertheless made the task of identifying the relevant facts and evidence more difficult and, in my view, proceeding without a pleading in cases involving claims other than under the Family Law Act 1975 (Cth) should be discouraged.
All parties agreed that the son’s claim should be considered first.
The son describes his claim as suing the husband “for the loss of the money his father caused him to invest into a farming enterprise”. The causes of action for the son’s claim against the husband are brought in the alternative.
Firstly, it is alleged that the husband breached s 18 of Ch 2 of the Australian Consumer Law[1] (“ACL”), which relevantly provides:
[1] Contained in schedule 2 of the Competition and Consumer Act 2010 (Cth).
(1)A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
And that as a consequence, the husband should pay damages pursuant to s 236 of the ACL which relevantly provides:
(1) If:
(a)a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
In the alternative, the son claims that the husband has breached his fiduciary duty as a partner in the family partnership “in taking steps which ensured that the [son’s] investment in the partnership could never be repaid” and breached his fiduciary duty as a trustee of the TFSF “by taking steps to reduce the [son’s] member account”.
The damages claimed are $887,606, representing the entire contribution made by the son during the period from 1997 to 21 March 2020 to the family partnership ($778,688) and the TFSF ($108,918). The order sought by the son is in the following terms:
1. Judgment for the [son] against the [husband] in the sum of $887,606.
2. Order that the amount, if any, to which the [son] may be entitled under the Tilston Family Superannuation Fund be deducted from such judgment.
3. Order that the [husband] pay interest on such judgment at the rates applicable to judgments of the Supreme Court of Queensland.
The various declarations sought by the son in his Response filed 11 February 2020 were abandoned.
The husband disputes that he engaged in misleading or deceptive conduct, or that he has breached any fiduciary duty owing to the son, and submits that the son’s claim should be dismissed. Nevertheless, the husband concedes that the son should receive a quarter share ($44,532) of the net proceeds of sale of the plant and equipment formerly owned by the family partnership and his member benefits from the TFSF ($76,276); a total of $120,808.
Jurisdiction
The Competition and Consumer Act 2010 (Cth) of which the ACL forms part does not confer original jurisdiction on the Family Court of Australia to hear disputes arising therefrom.[2] The son’s claim in the alternative is said to rely upon the common law and equity. The Family Court of Australia is a court limited by statute; primarily the Family Law Act 1975 (Cth) and also such other federal statutes that confer original jurisdiction e.g. Bankruptcy Act 1966 (Cth) s 35A; Corporations Act 2001 (Cth) s 1337C. The husband and son submit that the Court nevertheless has ‘accrued jurisdiction’ to hear the son’s claim.
[2] See s 86 Competition and Consumer Act 2010 (Cth).
The use of the term ‘accrued jurisdiction’ was disapproved of by the High Court in Rizeq v Western Australia[3] (“Rizeq”) where it was said “the imprecision the term introduces into the word ‘jurisdiction’ means that the term is best avoided. There is but one matter and that matter is entirely within federal jurisdiction, as distinct from State jurisdiction.”
[3] (2017) 262 CLR 1 at 34, [55] (Bell, Gageler, Keane, Nettle, Gordon JJ).
In the recent case of Camden Pty Ltd & Laue and Ors[4] the Full Court of the Family Court (Strickland, Murphy & Kent JJ) said (after quoting from Rizeq):
171. Thus, once the [Court] is seized of a matter in the exercise of federal jurisdiction, it has jurisdiction that is, the authority to adjudicate (see Baxter v Commissioners of Taxation (NSW) [1907] HCA 76; (1907) 4 CLR 1087; Rizeq per Kiefel CJ at [8] – [9]), all issues comprising the matter. The parameters of the federal jurisdiction which it possesses are the parameters of the matter, the criterion for which is there being a “single justiciable controversy”. A single justiciable controversy might involve differing causes of action; the search being for issues or claims which “arise out of common transactions and facts or a common substratum of facts” (even if the facts do not wholly coincide) (Rana at [36] citing Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 (“Philip Morris”) at 512 and Fencott v Muller (1983) 152 CLR 570 (“Fencott”) at 607).
[4] (2018) 58 Fam LR 97 at 123.
In the circumstances of this case, I am seized of federal jurisdiction being the claim between the husband and wife under the Family Law Act 1975 (Cth). The claim by the son against the husband arises out of a “common substratum of facts”. There is a “single justiciable controversy”. Accordingly, I have the “authority to adjudicate all issues comprising the matter” before me.
The claim under the Australian Consumer Law
There is no definition of ‘consumer’ in the Competition and Consumer Act 2010 (Cth) of which the ACL forms part, but a claimant does not have to be a consumer to make a claim.[5]
[5] Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 601 (per Mason CJ, Deane J, Dawson and Gaudron JJ).
The husband conceded that the limitation expressed in s 18 of the ACL, namely that the impugned conduct must be ‘in trade or commerce’ was satisfied in the circumstances of this case and in particular made the following submissions:
a)The term ‘in trade or commerce’ is not limited to dealings between parties in contractual relationships;[6]
b)The words ‘trade’ and ‘commerce’ are ordinary terms that describe the mutual communications, negotiations, verbal and written, bargains and performance that constitute commercial arrangements;[7]
c)A single transaction should not be viewed in isolation from the totality of the commercial activity of the relevant actors;[8]
d)Statements made by a person that are designed to persuade others to provide goods or services answered the description of conduct ‘in trade or commerce’.[9]
[6] Sykes v Reserve Bank of Australia (1998) 158 ALR 710 at 714.
[7]Williams v Pisano (2015) 90 NSWLR 342 at 349 [36].
[8]Bevanere Pty Ltd v Lubidineuse (1985) 59 ALR 334 at 339.
[9]Ye v Zeng (No. 7) [2018] FCA 1478 at [77].
The leading authority on the meaning of the term ‘in trade or commerce’ in this context is to be found in the High Court decision of Concrete Constructions (NSW) Pty Ltd v Nelson[10] (“Concrete Constructions”). That case concerned a claim for damages arising out of alleged breach of s 52 of what was the Trade Practices Act 1974 (Cth) [11] which largely mirrors s 18 of the ACL. Section 52 provides:
A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[10] (1990) 169 CLR 594; see also Nadinic v Drinkwater (2017) 94 NSWLR 518 at 548.
[11] The Trade Practices Act 1975 (Cth) was substantially amended and renamed the Competition and Consumer Act 2010 (Cth). The Australian Consumer Law is contained in schedule 2 of that Act.
Despite the deletion of the word ‘corporation’ and replacement with ‘person’ in s 18 of the ACL, the jurisprudence developed over many years as to the application of s 52 remains relevant.
In Concrete Constructions, Mason CJ, Deane, Dawson and Gaudron JJ observed that the difficulty arising from the construction of the term ‘in trade or commerce’ does not arise from the words ‘trade or commerce’ but from the word ‘in’.[12] Their Honours rejected[13] the notion that the term ‘in trade or commerce’ encompassed “conduct in the course of the myriad of activities which are not, of their nature, of a trading or commercial character but which are undertaken in the course of, or incidental to, the carrying on of an overall trading or commercial business”. Rather, it was held that the term referred “only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character”. Such conduct can include “promotional activities in relation to, or for the purposes of, the supply of goods or services”.[14] It was recognised that “[in] some areas, the dividing line between what is and what is not conduct ‘in trade or commerce’ may be less clear and may require the identification of what imports a trading or commercial character to an activity which is not, without more, of that character”.
[12] n.10 at 602.
[13] n.10 at 602–603.
[14] n.10 at 604.
In the current case, the conduct said to contravene s 18 of the ACL takes a variety of forms. It includes:
a)A failure to provide information relating to control of and beneficial entitlements in a family trust;
b)Tax minimisation advice;
c)A failure to inform about the impact of two deeds entered into between family members; and
d)Provision of a valuation for a private self-managed superannuation fund.
Ultimately, whether or not the concession that the conduct was ‘in trade or commerce’ was properly made is not a question I need decide because I propose to dismiss the son’s claim for other reasons, discussed below.
Turning then to consider the principles applicable to a claim pursuant to s 18 more generally, a helpful summary can be found in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd[15] where Gibbs CJ said:
The words of s. 52 have been said to be clear and unambiguous: … . Nevertheless they are productive of considerable difficulty when it becomes necessary to apply them to the facts of particular cases. Like most general precepts framed in abstract terms, the section affords little practical guidance to those who seek to arrange their activities so that they will not offend against its provisions. It has been held that the section is not confined to conduct that is intended to mislead or deceive: Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. There is nothing in the section that would confine it to conduct which was engaged in as a result of a failure to take reasonable care. A corporation which has acted honestly and reasonably may therefore nevertheless be rendered liable to be restrained by injunction, and to pay damages, if its conduct has in fact misled or deceived or is likely to mislead or deceive. The liability imposed by s. 52, in conjunction with ss. 80 and 82, is thus quite unrelated to fault and it need not involve any infringement of a right to a trade name, trade mark, copyright or design. It may have been thought that the unequal position of consumers as against the corporations which supply them with commodities justified a measure that from the point of view of the latter seems draconic, but although s. 52 is intended for the protection of consumers, it is enforceable by a trade competitor who is not a consumer (Reg. v. Federal Court of Australia; Ex parte Pilkington A.C.I. (Operations) Pty. Ltd.) and it is not infrequently used by one trader against a rival to protect a trade name or to prevent a passing-off. The section may have been designed to protect the weak from the powerful, but it may be used by a large and powerful corporation to restrain the activities of a smaller competitor. I am, with all respect, unable to see any reason why a section so broadly expressed and so drastic in its possible consequences should be beneficially construed. I do not suggest that the words of s. 52 should be given "some unnaturally confined meaning" (to use the words of Stephen J. in Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd.), or that they should be construed to conform with the common law (see World Series Cricket Pty. Ltd. v. Parish), but simply that they should be given their plain and natural meaning, and should not be understood in some loose or expanded sense.
The words of s. 52 require the Court to consider the nature of the conduct of the corporation against which proceedings are brought and to decide whether that conduct was, within the meaning of that section, misleading or deceptive or likely to mislead or deceive. Those words are on any view tautologous. One meaning which the words "mislead" and "deceive" share in common is "to lead into error". If the word "deceptive" in s. 52 stood alone, it would be a question whether it was used in a bad sense, with a connotation of craft or overreaching, but "misleading" carries no such flavour, and the use of that word appears to render "deceptive" redundant. The words "likely to mislead or deceive", which were inserted by amendment in 1977, add little to the section; at most they make it clear that it is unnecessary to prove that the conduct in question actually deceived or misled anyone. In McWilliam's Wines Pty. Ltd. v. McDonalds System of Australia Pty. Ltd it was rightly held by Smithers J. and by Fisher J. that to prove a breach of s. 52 it is not enough to establish that the conduct complained of was confusing or caused people to wonder whether two products may have come from the same source, and that Southern Cross Refrigerating Co. v. Toowoomba Foundry Pty. Ltd. , a decision on the Trade Marks Act 1905 (Cth), as amended, is distinguishable. I need not add to what their Honours said on this subject. I agree too with those learned judges that the court must decide objectively whether the conduct is misleading or deceptive or likely to mislead or deceive, and that evidence that members of the public have actually been misled is not conclusive. I would add that evidence that members of the public were misled, not by any conduct of the defendant, but by other circumstances for which the defendant was not responsible, would be quite irrelevant.
Section 52 does not expressly state what persons or class of persons should be considered as the possible victims for the purpose of deciding whether conduct is misleading or deceptive or likely to mislead or deceive. It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct. Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must in my opinion by (sic) regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all the circumstances. …
The conduct of a defendant must be viewed as a whole. It would be wrong to select some words or act, which, alone, would be likely to mislead if those words or acts, when viewed in their context, were not capable of misleading. It is obvious that where the conduct complained of consists of words it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words. The same is true of acts. …
[footnotes omitted]
[15] (1982) 149 CLR 191 at 197–199 (“Puxu”).
The enquiry by the Court is concerned not only with the conduct as a whole but also with the relevant surrounding facts. As the High Court said in Campbell v Backoffice Investments Pty Ltd:[16]
The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document. (emphasis in original)
(footnotes omitted)
[16] (2009) 238 CLR 304 citing with approval the statements by McHugh J in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 623, [109]
Thus, the applicable principles as they apply to s 18 of the ACL can be summarised as follows:
a)There is no need to establish an element of fault or intention in the defendant’s conduct;
b)The words in s 18 should be given their plain and natural meaning and should not be understood in some loose or expanded sense;
c)It is not necessary to prove that the conduct actually misled or deceived;
d)It is not enough to establish that the conduct was confusing;
e)The court must decide objectively that the conduct was misleading or deceptive or likely to mislead or deceive;
f)Consideration must be given to the particular class of persons who are likely to be affected by the conduct, and that includes the inexperienced and the gullible;
g)The protection provided by s 18 may not extend to a person who fails to take reasonable care of their own interests;
h)The conduct of the defendant must be viewed as a whole and it would be wrong to select some words which alone would be likely to mislead when in their context were not capable of misleading; and
i)The alleged conduct must also be considered in the light of the relevant surrounding facts and circumstances.
What is the alleged misleading and deceptive conduct?
Before turning to the particular conduct about which complaint is made, I note in summary that the son alleges the husband “induced him to pay money to him, and to transfer superannuation benefits to the [TFSF] on the basis that he was investing in a family business in which he would have an equal share with other family members”.
The solicitor advocate for the son confirmed during submissions that I need only have regard to what he referred to as “the most significant examples” of the alleged misleading and deceptive conduct which he identified.
In relation to the TFT
The first allegation of the husband’s misleading and deceptive conduct relates to the TFT and is expressed in the following terms:
The husband failed to disclose to the son that the TFT (which was established on 3 June 1994) was and always had been under the complete control of the husband and that the son had no beneficial entitlement unless the husband chose to exercise a discretion in his favour (the son being one of a non-exhaustive list of potential beneficiaries)
The particulars of the alleged conduct are as follows:
a)Failing to provide a copy of the 1994 TFT deed;
b)Failing to inform the son that:
i)Clause 13.1 of the trust deed entitles the “Principal” to replace the trustee;
ii)The Fifth Schedule appoints the [husband] as the “Principal”;
iii)The Third Schedule includes as Class “A” Beneficiaries any person appointed in writing by the Principal; and
iv)The Fourth Schedule includes as beneficiaries any company in which any of the Class “A” Beneficiaries hold shares or any trust in which any of the Class “A” Beneficiaries is a beneficiary;
c)Failing to disclose to the son that on 1 July 2003 the husband appointed D Pty Ltd as trustee for the TFT. That company is under the complete control of the husband as sole director and shareholder;
d)In or about December 1995 the son and husband had the following conversation (contained in paragraph 16 of the son’s affidavit of evidence in chief):
[Son]: Now that I am earning more money as a salaried officer in the ADF, I would like to reduce my tax and create a property portfolio.
[Husband]: I established the X Town orchard over 20 years using legal tax effective strategies. As a primary producer, I am able to claim tax deductions on growing trees, and I receive substantial tax refunds to invest into the property and accelerate growth.
e)In “subsequent” discussions the husband said (contained in paragraph 17 of the son’s affidavit of evidence in chief):
We can set up an orchard business as a family partnership in proportions 25/25/25/25, where each member of the family would own one quarter of the business.
f)In an email sent by the husband to the son dated 22 November 2014, he said:
Any sale to max individual benefits means an asking price in excess of 4 million on the four-way to clear all private loans
and
Mr B and GG loan does that, correctly (whether the partner actually contributed physically, financially or not, ethically that was the way Mr Tilston and Ms Tilston intended); because that is the right thing to do!
g)A conversation recorded by the son between himself and the husband on 11 May 2017, included the following exchange:
[Son]: What you’ve explained to me through your view is that any lump sum I put through now will go into a partnership loan account which cannot be guaranteed going forward and therefore there is no security over any land or any equipment that I put my money into on the family business going forward.
[Husband]: That’s totally untrue. Any capital investment that you put in ends up in the trust and Superfund in which you have a 25% share.…
[Son]: 25% share of the trust?
[Husband]: A discretionary trust you effectively do.
As a consequence of the matters particularised above, the son contends as follows:[17]
I was not involved in the legalities of the purchase of the 200 Acres or the structure of the entity by which it was purchased. However, based on the conversations with my Father, including those set out in paragraphs 16 and 17, I believed that the land on which the orchards were being established was owned by entities in which my parents, Ms A and I, had equal shares.
[17] Paragraph 38 of the son’s affidavit of evidence in chief.
In relation to this first allegation, and working through each particular, it is not in contention that the son did not receive a copy of the trust deed for the TFT until well after the commencement of these proceedings, nor did he ask for a copy.
The son nevertheless concedes that sometime in 2000, he had possession of a diagram entitled ‘Tilston family – 2000’ which, among other things, identifies that the 200 acre property was owned by the TFT with the beneficiaries noted to be “as necessary” and the diagram identifies that the 400 acre property was owned by the TFSF, and while the parties are identified as beneficiaries of the TFSF the words “at retirement” are included. The X Town property was identified as owned by the husband and wife. Similar diagrams were in the son’s possession (if not prepared by the son on his computer) for the years 2008, 2009, 2015 and 2017.
The 2008 diagram reflects the family partnership as being the owner of only depreciating equipment. The trustee of the TFT is recorded as D Pty Ltd and that it owns, as trustee for the TFT, the 200 acre property “and trees” and a half share of 4 K Street with the beneficiaries noted to be – “as necessary” and “as deemed”.
The 2009 diagram reflects the ownership of the 200 acre property and trees as being owned by the TFT as well as a half share in the 4 K Street property and the 2 K Street property and depreciating orchard trees. The husband, wife, son, and daughter are shown as beneficiaries, but also the son’s wife and again a notation that the beneficiaries are “as deemed”. Consistent with the 2008 diagram, the 400 acre property land and trees are identified as owned by the TFSF and the beneficiaries include the words “at retirement”. The half share in the other N Town properties are included as owned by the TFSF as well as depreciating orchard trees.
The 2015 diagram reflects the beneficiaries of the TFT as not only the husband, wife, son, daughter, and son’s wife but also an unidentified beneficiary - “X” (I assume this is the son’s child). There is also a notation – “Trustee discretion as necessary as per deed.”
The 2017 diagram also refers to the beneficiaries being at the trustee’s discretion as per the deed.
In an email from the son to the husband dated 31 May 2013, there appears to be at least some recognition of control “of the enterprise” resting with the husband where the son says:
The original business plan predicted that the orchards would be self-sustaining by 2013/14 and therefore a number of funding challenges have occurred. As the orchards are still performing at an operating loss, continued cash injection from the partners remains necessary in the short term to continue operation. As you have said, the ultimate control of the enterprise remains vested with you, and the decision to spend 60% more in the last financial year than in the preceding years does not go unnoticed. Obviously this 'spending beyond means' was funded through your personal reserves in the Viridian account, but does not reflect the sustainability of the 4way nor the ability of the enterprise to develop and grow at such a rate.
The “subsequent” discussions referred to in paragraph 82(e) above are not disputed by the husband, however, he submits that the reference made to each of the parties having a 25% interest refers to the business not the real property on which the business operated. That much is clear from the words used.
While the son relied upon two sentences of the 22 November 2014 email (set out above), the husband was not cross-examined at all about the content of the email. It is not in contention that he sent the email. The email is quite lengthy. The solicitor advocate for the son conceded - “The language is a little bit obscure” (this was in relation to the second of the two sentences relied upon by the son).
The content of the 22 November 2014 email and the 27 November 2014 email also sent by the husband (and included in the son’s evidence) contains other information which, in my view, add important context to the two sentences relied upon by the son. For example, the husband conveys the following:
·There have been a number of disastrous years for the business because of climate and weather conditions and local government planning decisions which make going forward stressful;
·Debt has been carried by the husband and wife even though the appreciating assets are owned by the TFT and TFSF;
·To continue, trees will need feeding and staff will need wages;
·If the venture was a primary production open to the public the investors (contributors of capital) would get little return;
·The ownership of the various properties is confirmed (consistent with the diagrams to which reference has already been made);
·Security for loans has only been provided by the husband and wife;
·Any money received by the TFSF will not be distributed and will not clear debt;
·Any shortfall in what is owed will be lost to all those entitled;
·The farm must show a reasonable crop “this year to determine its future”;
·The greatest financial contribution has been made by the husband and the wife;
·“…any sale would unlikely NOT result in a full return of capital, however the market will be tested early in the new year”.
The full context of those emails demonstrate the precarious nature of the family enterprise, which was to a large part dependent upon matters outside the family’s control. Importantly, the husband’s emails point out the significant contribution made by the husband and wife and that the risk had been borne by them. They also stress that returns to the parties are dependent upon many factors and that money received by the TFSF will not be distributed.
In relation to those parts of the conversation between the son and husband on 11 May 2017, I note that the son selectively quotes from what was a long conversation. Importantly, the son does not include his response to the husband’s statement about the son’s interest in the trust:
[Son]: Do I? Okay, I didn’t think I had a share of the trust. I thought I only had a share of the super fund.
This admission by the son decries his assertion that he believed “that the land on which the orchards were being established was owned by entities in which my parents, Ms A and I, had equal shares”. The 200 acre property and half of 2 K Street and half of 4 K Street were owned by the trust i.e. TFT.
There are also other relevant parts of the 11 May 2017 conversation, including statements by the husband as follows:
·“I cannot guarantee loan accounts in a partnership when the partners don’t perform diligently and therefore in my view, the partnership should be bloody terminated”;
·“I can’t guarantee the loan account”;
·“…you also got significant taxation benefits and most of the capital that you’ve contributed I think initially was fair to say was all income tax refunds that you otherwise would never have been able to contribute. Now for you to say now I’ve invested all this money is actually bullshit because it is money you wouldn’t have got back in the first place”;
·“Because you know it’s not a loan it’s an investment. An investment is something that has a risk attached to it that’s the difference”.
The husband also contends, and I accept, that he told the son repayment of loan accounts was dependent upon the business turning a profit, which it never did. The husband’s evidence on this point is consistent with the information he conveyed to the son in the 2014 emails and the 2017 conversation.
In relation to the 1997 and 1999 deeds
The second allegation of the husband’s misleading and deceptive conduct relates to two deeds signed by the parties in 1997 and 1999 and is expressed in the following terms:
The [husband] presented the deeds to be executed without the [son] “reading them, without him obtaining legal advice, and without providing explanation of their terms”.
As a consequence the son contends:
… I did not realise that these provisions mean that, if the [family] Partnership ceased to trade, or were dissolved, it would lose the ownership of the trees and other improvements on that property for no consideration.
On 9 May 1997, a deed was executed between the husband as trustee of the TFT referred to as “the owner” and the husband, wife, son, and daughter referred to as “the partners”. The recitals to the deed noted that “the partners” owned all improvements located on the 200 acre property and wished to record in writing their previous oral agreement concerning their respective rights and interest in and to the 200 acre property and improvements. The deed provided, among other things, that:
If at any time hereafter the partners shall cease to trade in their business being conducted upon the said lands or if the [family] partnership … shall be dissolved … the partners acknowledge and agree that any improvements effected to the said lands shall become the property of the owner …
… the term “improvements” shall include any buildings fences earthworks and trees planted thereon.
… should they be conducting their business upon any other lands other than [the 200 acre property] … the same provisions as contained herein mutatis mutandis shall apply to such improvements.
The deed was signed by the husband as trustee of the TFT and in his personal capacity and by the wife, son, and daughter.
The husband says (in relation to both the 1997 and 1999 deeds) and I accept:
I say that at the time, my accounting practice had a client who was having an issue with a hayshed and a dispute about its ownership. The Deed was prepared to avoid that situation for our family. We referred to it as a "Severance Agreement" and it was discussed at length with both Mr B and Ms A.
The daughter corroborates the husband’s evidence to an extent. She says that the husband would often talk to the family about his primary producer clients and that she understood that the 1997 and 1999 deeds were prepared and updated with that experience in mind. The husband’s evidence is consistent with the recital to the deed referred to above, namely, that the parties wished to record in writing their previous oral agreement concerning their respective rights and interest in and to the 200 acre property and improvements.
On 1 February 1999, a deed was executed between the husband as trustee of the TFSF referred to as “the owner” and the husband, wife, son, and daughter referred to as “the partners”.
It was in the same terms as the 1997 deed save that it involved the TFSF. In particular, it contained the recital that the parties wished to record in writing their previous oral agreement concerning their respective rights and interest in and to the 400 acre property and improvements.
The deed was signed by the husband as trustee of the TFSF and in his personal capacity and by the wife, son, and daughter.
While my finding about the son’s knowledge of the content of the deeds effectively disposes of this particular allegation, I nevertheless address a submission by the son that despite the content of the deeds which he signed, he is not precluded from relying upon the husband’s misleading and deceptive conduct as relevantly alleged. In support of his argument the son relies upon the authority of Marks v GIO Australia Holdings[18] (“Marks”) where plaintiffs sued for damages for misleading and deceptive conduct, namely, a representation by GIO that interest would be charged at a specified rate plus a fixed margin of 1.25% despite the plaintiffs signing a contract which allowed a variation of the margin. In that case, it was not in issue that the representation made by the defendant was not a contractual representation, nor was it in issue that the representation was misleading or deceptive. The only question for determination was whether or not the plaintiff was entitled to damages. Marks is otherwise distinguishable from the current case because the son does not allege the husband made a representation that was misleading and deceptive, rather he alleges he was silent. In those circumstances, I do not consider that Marks offers any assistance to the son.
[18] (1996) 198 CLR 494 (“Marks”).
In relation to the need for funds from the son
The third allegation of the husband’s misleading and deceptive conduct relates to the husband’s representations of the ongoing need for the son to pay money into the family partnership.
The particulars of the alleged conduct are as follows:
a)The husband deposed in an affidavit sworn on 23 November 2017 to the following:
i)The business needed funds from the son;
ii)The husband and the daughter did not have funds to continue to conduct the business;
iii)The farming enterprise would be damaged without such funds;
b)In weekly written communications from the husband to the son from 16 July 2018 to 5 December 2019 the husband continued to seek financial input;
c)The husband did not disclose that during periods when requests were being made by the husband for the son to make contributions, the husband had taken funds from the family partnership. “This included the husband taking $88,112 from the [family] partnership through his loan account during the year 30 June 2017 and [the husband] taking drawings of $50,000 and [the daughter] taking drawings of $60,000 also during the year ended 30 June 2017.”
As a consequence of the matters particularised above, the son contends that he continued to make payments in respect of the partnership until 21 March 2018.
The particulars provided for the contravening conduct relate to the period 23 November 2017 to 21 March 2018. The son continued to make the fortnightly contribution of $500 during this period (a total of at most $4,000). His last lump sum contribution was made on 5 December 2016. If by paragraph 110(c) above the intention is to extend the relevant period beyond 23 November 2017 to 21 March 2018 (although no particulars are provided), the fact that the husband and daughter took drawings in the financial year as alleged does not establish that at the time requests for contributions from the son were made by the husband, an injection of funds was not needed.
I also note the following concessions made by the son during cross-examination:
[Counsel for the husband]: It would be wrong that the suggestion was made that your financial contributions to the partnership were based solely on what was said to you by your father, wouldn’t it?
[Son]: Of course, yes
[Counsel for the husband]: Here we are in 2011 and you are walking the property, you are offering an opinion on where planting should be, you have an awareness of the deal being done without knowing the details about selling product?
[Son]: Yes
[Counsel for the husband]: And it was this information, information that you directly formulated based on your involvement in the partnership that influenced you to keep participating in the partnership, wasn’t it?
[Son]: Yes
The son also made a concession during cross-examination that he was not deceived into making contributions to the partnership in the following exchange:
Counsel for the father: Nobody deceived you into making the financial contributions that you made to the partnership, did they?
Son: I disagree – sorry. Not the partnership. Not to the partnership, I don’t disagree.
Further, the husband was not challenged during cross-examination when he said that the son had taken independent financial advice about his contributions to the family partnership.
In relation to the TFSF
The fourth allegation of the husband’s misleading and deceptive conduct relates to the TFSF and is expressed in the following terms:
a)The provision by the husband to the son shortly after 17 January 2014 of “a valuation for the total farming assets at N Town at $4,045,000 including trees and other improvements valued at $2,540,000”;
b)These figures were used in the preparation of the accounts of the TFSF, including the member account of the son;
c)On 27 November 2014, the husband sent an email to the son referring to “a possible sale of the N Town farms for an ‘asking price of somewhere above $6.5m”;
d)Following the separation of the husband and wife, the husband “arranged for further valuation of the farming assets at N Town showing the value of the N Town farm is at $1,155,000”.
As a consequence of the matters particularised above, the son contends:
… it indicates that the 2014 valuation and the statement of the [husband] referred to in [116c] above were vastly inaccurate, so that the [husband] providing the 2014 valuation to the [son] and providing the email of 27 November 2014 were misleading. It makes no difference whether the [husband] was or was not aware of the valuation and email being inaccurate.
It is not in contention that an appraisal dated 17 January 2014 of the 200 acre property and 400 acre property did not differentiate between what was owned by the TFT and what was owned by the TFSF. In the accounts of the TFSF, both properties were mistakenly included as assets of the TFSF. The error was not picked up until after 13 July 2017 when a further valuation was obtained. This is despite the fact that the 2014 valuation clearly identifies that it related to “600 acres”.
External auditors were responsible for the financial statements for the TFSF. In a letter from Mr AA (the external auditor) to the son dated 19 November 2019 he says:
a)That he commenced as auditor for the TFSF in 2013;
b)(In response to suggestions by the son that the husband had transferred assets from the family partnership to the TFSF) – since 2013 there had been only 2 reported fixed asset acquisitions by the TFSF, namely, a property driveway for $1,398.14 and a property shed extension for $8,992.37 and that all other fixed assets held are the same as those reported in the financial statements prepared by the former auditor in 2012;
c)The audits conducted have found no evidence of any manipulation of member account balances;
d)It is a reportable audit contravention under Superannuation Industry (Supervision) Act 1993 (Cth) s 130BA should there be any attempt to unduly influence, coerce, manipulate or mislead the auditor, or any attempt to interfere with the proper conduct of the auditor.
The son, who is also a trustee of TFSF, was as aware as the husband that the TFSF did not own the 200 acre property. The family diagrams referred to above repeatedly made that clear. The error in the valuation was apparent on its face wherein it referred to 600 acres.
Conclusion about the husband’s alleged misleading and deceptive conduct
I am required to decide objectively whether the conduct of the husband, as alleged by the son, is misleading or deceptive or likely to mislead or deceive. The conduct must be considered as a whole and viewed in context. The alleged conduct must also be considered in the light of the surrounding facts and circumstances. The reasonableness of any failure by the son to take care of his own interests is also a factor to consider.[19]
[19] See summary of general principles at [78] above.
Relevant surrounding facts and circumstances in this case include the following:
a)The young age of the son at the commencement of the family partnership;
b)The husband was an accountant;
c)The son’s expressed wish to minimise his income tax;
d)The reasonable aspirations of a family to work together in order to create wealth for their joint benefit;
e)The son’s access to independent financial advice;
f)The unplanned separation of the husband and wife;
g)The breakdown in the family relationships and the difficulties that thereafter ensued in the continued operation of the family partnership and TFSF; and
h)The not unreasonable wish of the wife and husband to extricate themselves from their financial arrangements.
When considering the entire surrounding circumstances it seems tolerably clear from a perusal of the family diagrams referred to above that there was an aspiration for the TFT to provide income to beneficiaries as needed and the TFSF was to provide for the wife, husband, son, and daughter in their retirement. In that sense, the ‘management investment scheme’ (as it became known within the family) was to provide for the long term benefits of the family as a whole. It seems to me that the repeated reference in the diagrams to beneficiaries being “as necessary”, “as deemed” and “trustee discretion as necessary as per deed” indicate that the trustee of the TFT i.e. the husband or the company controlled by him, had a discretion about what and when distributions would be made to beneficiaries and which beneficiaries would be recipients i.e. that he was in control.
I am not persuaded that the conduct of the husband as alleged was misleading or deceptive or likely to mislead or deceive for the following reasons:
a)The husband told the son in 1995 and/or on “subsequent” occasions that he had a quarter interest in the business i.e. not in the real property on which the business operated;
b)The 1997 deed was signed by the husband alone as the trustee of the TFT which should have been an indication to the son that the husband had at least a measure of control;
c)The 1997 deed recorded that the parties held an interest in only the improvements to the land not to the land itself. It was a very short document that could have been read by the son in a matter of minutes if he had chosen to do so. It is not as if there was something ‘hidden’ in fine print;
d)The husband discussed the 1997 deed with the son at length, which was referred to as the ‘severance agreement’, at or about the time of its creation;
e)The recital to the 1997 deed recorded that the parties wanted to state in writing what had already been agreed orally concerning their respective rights and interest in and to the 200 acre property and improvements;
f)The 1999 deed was in the same terms save that it applied to the TFSF;
g)In family diagrams completed in 2000, 2008, 2009, 2015 and 2017 the discretionary nature of the interests of the beneficiaries in the properties owned by the TFT is apparent on their face by the reference to “as deemed” and “in the discretion of the trustee” and includes beneficiaries other than the parties which confirmed the control vesting in the trustee even to the point of the trustee including beneficiaries other than the husband, wife, son and daughter;
h)The husband told the son that the partnership loans were “never guaranteed” and that repayment of loan accounts was dependent on the business turning a profit, which it never did;
i)It is not in dispute that the husband and wife owned the X Town property, which they had purchased many years before and on which they had established an orchard, and that the husband and wife borrowed money or sold other property in order to acquire further properties on which orchards were established. The TFT and/or the TFSF owned those properties (the 200 acre property, the 400 acre property and the N Town properties). All four members of the family were potential beneficiaries of the TFT, which was controlled by the husband, and all were members of the TFSF;
j)There is no evidence that anyone other than the husband and wife contributed the capital for the purchase of the real properties. The son conceded during cross-examination that it was logical, given he did not have any capital to acquire the 200 acre property, that the capital must have come from the husband and the wife. The husband and wife also provided the security over their own properties (the Suburb U property and the X Town property) for any borrowings utilised for the family partnership e.g. the 2008 CBA Viridian loan of $300,000 and overdraft of $100,000;
k)The son’s belief as stated by him in the recorded conversation on 11 May 2017 i.e. that he did not think he had an interest in the property owned by the TFT, is inconsistent with his assertion made to the contrary in these proceedings;
l)The cash flow requirements for the family partnership varied from time to time and that the husband’s requests for contributions from the son were not inconsistent with payments having been received by the husband and/or daughter in the same financial year as requests were made;
m)The son conceded that his decision to contribute to the partnership was not based solely on what the husband told him (not that it has to be), and his decision to continue to make contributions was based on information the son “directly formulated” about his involvement with the partnership;
n)The son obtained independent financial advice; and
o)The mistake about the 2014 valuation was made by all four trustees of the TFSF and the external auditor. The son had as much of an obligation as any of the other trustees of the TFSF to rectify the error.
Damages
In the event that I am wrong in my findings that the husband did not engage in misleading or deceptive conduct, I will consider the question of loss or damage.
Ownership Description Value Wife and Husband E Holiday Membership To be sold Wife Commonwealth Bank of Australia Shares ($118,500 held by son as security for loan and $131,551 sold) $250,051.00 Wife Interest in the TFSF (42.71%) $437,743.93 Husband Interest in the TFSF
Accumulation $68,214.77 (6.51%)
Pension $236,150.65 (23.56%)$304,365.42 Wife and Husband Interest in the TFT
Comprising of the following:(d) Share of sale proceeds (200 acre property/half share of 2 K Street and half share of 4 K Street) held in the Shearer Doyle Pty Ltd Law Practice Trust Account after payment of sale costs and costs of trusteeship;
(e) CBA Bank Account No. …02 with balance of $1,255; and
(f) Plant and equipment.
$1,192,733 Wife Interest in proceeds of sale of plant & equipment formerly owned by the family partnership (25%) $44,532.68 Husband Interest in proceeds of sale of plant & equipment formerly owned by the family partnership (25%) $44,532.68 Wife and Husband Remaining funds held in the Shearer Doyle Law Practice Trust Account $1,029,854.89 Wife, Husband, Daughter, Son L Pty Ltd - no longer actively trades $Nil Wife, Husband, Daughter, Son Interest in J Pty Ltd - no longer actively trades $Nil Husband Interest in D Pty Ltd - trustee company and accordingly, does not trade in its own right $Nil Wife Partial Property Settlement distribution received in accordance with Orders made in April 2019 $18,721.85 Husband Partial Property Settlement distribution received in accordance with Orders made in April 2019 $18,721.85 Wife Partial Property Settlement distribution received in accordance with Orders dated 4 September 2019 $81,478.15 Husband Partial Property Settlement distribution received in accordance with Orders dated 4 September 2019 $81,478.15 Wife Partial Property Settlement distribution received in accordance with Orders dated 8 May 2020 $553,730.15 Husband Partial Property Settlement distribution received in accordance with Orders dated 8 May 2020 $553,730.15 Husband Motor vehicle 3 - estimated value of $12,500 purchased from funds received by way of partial property settlement distribution Value incl. above. Husband Motor Vehicle 1 $2,000.00 Husband Motor Vehicle 2 $2,500.00 Husband Interest in F Pty Ltd (established post-separation)
Comprising the following:(c) H Bank Account No. …70; and
(d) Fuel enterprise formerly operated by J Pty Ltd, acquired with the purchase of Lot B from the Trustee for Sale
$10,427.46
Husband Mr B Tilston Retirement Fund - estimated value of $298,806.60 comprising of Lot B purchased from the trustee for sale and a term deposit established with funds received by way of partial property settlement distribution value incl. above Husband Remaining items of plant and equipment purchased from the trustee for sale using funds received by way of partial property settlement value incl. above Husband Term Deposit
estimated value of $100,084, established using funds received by way of partial property settlementvalue incl. above Husband Motor vehicle 4 with a value of $13,000 purchased from the trustee for sale using funds received by way of partial property settlement value incl. above Total $4,627,856.36 Husband DFRDB pension capitalised value $292,564.38
I make the following observations about the balance sheet:
a)An item representing furniture and chattels valued at $14,990 was included as the first item on the amended balance sheet (exhibit 3) but it does not appear in the ‘effect of the respective orders sought by the husband and wife’ in exhibit 9, and the minute of order submitted by the husband and wife simply provides for each of them to retain the furniture in their respective possession. In her affidavit, the wife says that she and the husband each took what they wanted but the total value attributed by her to such items is $16,770 not $14,990. As the husband and wife each propose that they retain whatever furniture, goods and chattels they currently have in their possession, and no submissions were made about this item in the balance sheet, I assume a value is not to be attributed to any furniture or chattels;
b)It is agreed that the E Holiday Membership will be sold;
c)The wife sold some of her Commonwealth Bank Shares after separation and the remaining shares are currently held by the son as security for loans made to the wife for her legal fees. The wife contends that she may have to pay capital gains tax (“CGT”) on any gain made from the sale of the shares but there is no evidence of what, if any, CGT might be payable;[32]
d)I have included in the balance sheet only the interests of the husband and wife in the TFSF, and the value attributed by the parties to their respective interests are said to be exclusive of tax which will need to be deducted if indeed a tax liability occurs;
e)The value attributed by the parties to their interest in the TFT is said to be exclusive of tax which will need to be deducted if indeed a tax liability occurs;
f)While there is mention of plant and equipment owned by the TFT in the balance sheet there is no value attributed to it by the parties; and
g)The minute of order submitted on behalf of the husband and the wife included the equal division of the proceeds of a CBA joint bank account but it was not included in the balance sheet nor were any submissions made about it.
[32]Rosati & Rosati (1998) FLC 92-804 at 85,043
The husband contended that the capitalised value of the DFRDB should be regarded as a financial resource and not property. The wife contended that it should be in a separate pool but at its capitalised value.
The object of Pt VIIIB of the Act is to allow certain payments (splittable payments) in respect of a superannuation interest to be allocated between parties to a marriage or parties to a de facto relationship either by agreement or by court order. Section 90XC of that Part extends the meaning of ‘property’ for the purposes of paragraph (ca) of the definition of ‘matrimonial cause’ in s 4(1) of the Act to include a ‘superannuation interest’. A ‘superannuation interest’ is relevantly defined in s 90XD and means an interest that a person has as a member of an eligible superannuation plan, which in turn is defined as including a superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth). Neither the husband nor the wife submitted that the husband’s interest in the DFRDB is not a ‘superannuation interest’. If a splitting order is sought in a particular case, such an order must be made in accordance with Part VIIIB of the Act which includes the mandatory determination of the amount or valuation of a ‘superannuation interest’ in accordance with the method prescribed by the Family Law (Superannuation) Regulations 2001 (Cth) or, if there is no method prescribed, as determined by the Court (s 90XT(2)).[33]
[33] See affidavit of Mr DD filed 12 August 2020 wherein he says - The Attorney-General in a determination dated 11 May 2004 and titled ‘Family Law (Superannuation) (Methods and Factors for valuing particular superannuation interests) Amendment Approval 2004 (No.3)’ contains approvals under reg 38 and reg 43A of the Family Law (Superannuation) Regulations 2001 of methods for valuing a range of interests in superannuation schemes administered by the DFRDB Authority.
While no splitting order is sought in this case, the majority of the Full Court in Coghlan & Coghlan[34] (Bryant CJ, Finn, Coleman JJ) said:
[34] (2005) FLC 93-220 at 79,646 per Bryant CJ, Finn, Coleman, Warnick, O’Ryan JJ (“Coghlan”).
65.In summary, then, the trial Judge has a discretion as to how superannuation interests will be treated in a particular case. If superannuation is not included in the list of property but rather made the subject of a separate pool, it will be necessary where a splitting order is sought, or extremely prudent where no such splitting order is sought (in order to ensure that justice and equity is achieved) to:
(a) value the superannuation interest (according to the Regulations if an order under Part VIIIB is sought or according to the Regulations or otherwise if no order is sought);
(b) consider and make findings about the types of contributions referred to in s 79(4)(a), (b) and (c) which have been made by the parties to the superannuation interests on either a global approach or an asset by asset approach depending on the circumstances;
(c) consider the other factors in s 79(4) being the matters in s 79(4)(d), (e), (f) and (g); and
(d) ensure that pursuant to s 79(2) the orders in relation to the parties’ property, and any order under Part VIIIB in relation to superannuation interests are just and equitable.
…
67. If this approach is adopted, whereby superannuation interests are dealt with separately from property as defined in s 4(1), but are subject to the considerations in s 79(4), then not only will any contributions, both direct and indirect, by either party to such superannuation interests be more likely to be given proper recognition, but the real nature of the superannuation interests in question can also be taken into account, both in consideration of the s 75(2) matters and in the final assessment of whether the ultimate order is just and equitable.
68.When we refer to “the real nature” of the relevant superannuation interest, we are referring to the fact that notwithstanding that its value according to the Regulations may well be calculated to be a very significant amount, that superannuation interest may be no more than a present or future periodic sum, or perhaps a future lump sum, the value of which at date of receipt is unknown.
(emphasis added)
The correct approach is to treat the capitalised value of the husband’s DFRDB pension as “another species of asset”[35] in a ‘separate pool’ to the other assets. As said by the majority in Coghlan:[36]
53. Importantly, the conclusion, that by virtue of s 90MS superannuation interests are to be regarded as another species of asset in relation to which orders can be made, will mean that the Court will be relieved from having to determine in any particular case the question of whether “a superannuation interest”, which comes within the definition of that term contained in s 90MD, may in fact also come within the definition of “property” in s 4(1) (as was suggested in the submissions made in Hickey to which we earlier referred in paragraphs 24 to 26), or whether it is only a financial resource. It is interesting to note in this regard that, from its inception, s 75(2) has contained reference in paragraph 75(2)(b) to “property and financial resources” and then in paragraph 75(2)(f) has contained reference to “a... benefit... under any superannuation fund or scheme”. Thus, the treatment by the legislation of a superannuation benefit or entitlement as a concept separate from property and financial resources is not new.
(NB ss 90MS and 90 MD have been renumbered in amendments to the Act made subsequent to this decision as ss 90XS and 90XD)
[35]Coghlan (above n 34) at 79,642, [43]
[36] Ibid at 79,644.
Lest it be thought that the agreed inclusion of the husband’s and wife’s beneficial interests in the TFSF with the other assets to be divided is inconsistent with the matters just discussed, I note the majority in Coghlan approved of such a course:
61. Nothing we have said in this judgment would prevent a Court in the exercise of its discretion from including a superannuation interest as an item of property in the list of property which is drawn as “the first step” in the determination of proceedings under s 79, whether or not a splitting order is sought in those proceedings. This approach could be adopted where the parties agree that it should be adopted, or where the Court is satisfied that the superannuation interest is indeed property within the meaning of the definition of property contained in s 4(1), or if the interest is not within that definition, but is of relatively small value in the context of the value of the other assets in the case, or there are features about the interest which leads the Court to conclude that this would be an appropriate approach.
The husband’s interest in the TFSF has been converted in part to a pension and since July 2018 he has received a pension of $17,680 per annum. No submissions were made in relation to this particular aspect.
Contributions
It is common ground that the wife and husband each made significant contributions both financial and non-financial and to the welfare of the family throughout their 43 year marriage. The husband was primarily the bread winner and the wife was primarily the homemaker and parent. The husband also undertook significant physical work at the various properties, including clearing and developing the various properties, maintaining machinery, managing labour, marketing and advertising, and preparing submissions and negotiating with local council and State government. The wife provided support to the husband in these activities and when the children were small she took on a greater role in caring for the children during times the husband was otherwise engaged with the properties.
The husband owned a property at the commencement of the marriage which was used towards the purchase of another property. As a member of the ADF, the husband also had certain benefits associated with his employment e.g. housing, access to land, favourable loan terms, and a superannuation interest.
Each party received gifts/inheritances during the marriage. The wife received gifts from her parents of $30,000 and inheritances of $861,746 and the husband received an inheritance of $210,617.
The husband commenced to receive a DFRDB pension after leaving the ADF in 1986. The husband had been a member of the ADF since 1966, some seven years prior to the marriage, but by the time of his resignation from the ADF he had been a member for 20 years. In addition to his pension, the husband received a lump sum payout of $50,629 on which he paid tax of $2,036. The husband continues to receive the DFRDB pension by way of a weekly payment variously described in the evidence as being $473.35 and $589.58 (although the latter amount includes a DFRDB disability sum but I am unclear what the difference is) and the valuation of the DFRDB by Mr DD refers to the husband’s indexed retirement pay or invalidity pay of $30,238 per annum or $581 per week.
Each party received damages for personal injury sustained in car accidents. The wife received $118,953 in late 2015 of which the wife says she contributed $80,000 to the family partnership. It seems more likely that the wife ultimately retained her damages payout - initially lending $80,000 of it to the daughter (who contributed it to the family partnership) but subsequently being repaid. The husband received a personal injury payout of $17,102 in 2013, $17,000 of which he transferred to the TFSF.
The wife’s injuries impeded her ability to make contributions from 2012. The wife lived in the Suburb U property after separation in January 2016 until its sale in April 2019.
After separation, the husband continued the planting, cultivation, maintenance and harvest operations until sale of the farms in 2019. The farms experienced both drought and flood during this time and had to manage a feral pig eradication. The husband’s efforts involved considerable physical work, particularly around harvest time from March until September and the husband was not challenged on his evidence that he worked 18 hour days, seven days a week during these times. The husband received some financial recompense for his efforts. The wife’s contribution after separation was minimal. The husband and daughter assisted the trustee appointed to sell the properties in readying the properties for sale. The husband (with the assistance of the daughter) produced 73 weekly reports (as required by the order made on 10 July 2018) for the benefit of the wife and son detailing their efforts during this time. No response was made by the wife or the son to the reports.
After separation, the wife continued to receive dividends and imputation credits arising from her ownership of shares until her disposal of them commencing in January 2018.
The husband concedes that contributions should be assessed as favouring the wife by up to the proportion 55/45, largely due to her inheritances, and submits that no other adjustment should be made pursuant to s 75(2) of the Act. However, this does not adequately recognise the husband’s retention of the DFRDB pension which the husband contended should be treated as a financial resource.
The wife contends that contributions should be assessed as favouring her in the proportion 55/45 and that, additionally, she should receive an adjustment of a further five percent and be awarded 60% of all assets in ‘pool one’ i.e. all assets other than the capitalised value of the DFRDB. It is submitted by the wife that the husband’s use of funds and of the assets after separation is a matter relevant to the assessment of contribution or a relevant matter under s 75(2)(o) of the Act. While this may be so, the husband also took on the continued maintenance of the properties which involved long hours. The wife also submits that the husband is likely to resume his primary production activities. I am unpersuaded. I accept the husband’s evidence that he purchased the plant and equipment from the trustee to put a stop to fees being incurred and that he has no intention of continuing in primary production. It seems improbable that at age 73 the husband would embark upon a new primary production endeavour.
The wife is 70 years of age and retired. Since the sale of the Suburb U property the wife has had no fixed abode and has lived a very frugal lifestyle. A considerable portion of the property already received by her has been expended on legal fees and she has an outstanding debt to the son for further legal fees.
The husband is 73 years of age and retired. The husband has also spent a considerable portion of the property already received by him on legal fees. He will retain his pension from the TFSF (which he has moved into an alternate self-managed superannuation fund) and his DFRDB pension.
In my view, having regard to the myriad of contributions made by each of the husband and the wife over their long marriage to the assets included in both pools and that the DFRDB pension will not be received other than as a pension and also having regard to the competing relevant s 75(2) factors discussed above, I conclude that a just and equitable outcome in this case should see the wife retain 57.5% of the assets in ‘pool one’ and the husband retain 42.5% of those assets and his DFRDB pension. I have been careful not to double count contributions and s 75(2) factors when considering this ‘other species of asset’ i.e. the DFRDB pension in ‘pool two’.
Should the daughter receive the husband’s mother’s ring?
The husband’s mother died in 2009.
It is not in dispute that by her 2003 will, the husband’s mother bequeathed her 1.14 carat diamond ring to the daughter.
The wife nevertheless asserts that it was the husband’s mother’s wish that the wife have the ring. Other than her bare assertion, the wife provides no evidence of this. The wife also asserts that the husband’s three siblings agreed that the wife should have the ring. There is no evidence to corroborate the wife’s assertion.
After the death of the husband’s mother there was a dispute between the husband and his three siblings about the will. The husband and his sister were not left anything by their mother and proceedings were commenced in the Supreme Court of Queensland.
On 20 April 2011, the daughter signed a document entitled ‘relinquishment of gift’ in which the daughter relevantly stated the following:
I, … hereby relinquish all my right title and interest in and to the 1.14 carat diamond ring belonging to my grandmother, … in consideration of the settlement of the Supreme Court proceedings …
In relation to the relinquishment of gift document the daughter said during cross-examination:
In order for the settlement to occur, I had to relinquish the gift … on the understanding that it would be returned.
…
My understanding was that in order for the siblings to settle their dispute, I needed to relinquish the ring to allow them to communicate. Didn’t mean I didn’t want the ring back.
The daughter also said:
My understanding was that I would eventually receive the ring. … My father mentioned it would follow down in the Tilston family and my mother and I had a discussion on the farm. … probably about 2015/16. … Mum had the ring, we were looking at it and she said it wouldn’t fit her finger and that she wouldn’t wear it so she gave it to me but I was working on the farm and I didn’t want to keep in on the farm so I asked her when she went back to the family home to keep it with my jewellery. There is a locked box, a metal box, and she did that.
…
I talked to my mother and she said the jewellery had been stolen, that I was to file a police report, that it had been stolen some months back when Mum was living in the family home. So I went to the police and notified them but they asked if there was a family dispute going on between my parents or in the household and they said they couldn’t get involved. I asked Mum to look everywhere and she said she couldn’t find anything but a couple of months or a year later I had a letter from [the wife’s solicitor] saying the jewellery was in their possession and they would give it back to me. When they did, the diamond ring wasn’t in it, just my other precious jewellery.
The wife concedes that the ring only fits on her little finger but denies the conversation as alleged by the daughter.
The husband said in oral evidence that as part of the settlement with his siblings, he paid $12,000 to one of his siblings for the ring because he wanted “my mother’s estate to be honoured”. The husband said that upon returning home after the settlement, he said to the wife – “This is the ring from my mother’s estate. I have just paid $12k for it, for Ms A, which would honour my mother’s estate.”
On balance, I prefer the evidence of the daughter and husband. It seems appropriate for the wishes of the husband’s mother as expressed in her will to be honoured and I will order the wife to deliver up the ring to the daughter.
Conclusion
This is a most unfortunate case in which the separation of the husband and wife and the inevitable consequences which followed have resulted in a fracture of the relationship between the wife and daughter and between the husband and the son. Legal fees in the vicinity of $1,750,000 have been spent by family members over what became a very bitter dispute.
In the end, I have found that the son’s allegations against the husband of misleading and deceptive conduct and/or breach of fiduciary duty to be without foundation and, accordingly, his claim for damages and/or equitable compensation will be dismissed.
As between the wife and husband, I have found that there should be a property settlement order which divides the property pool comprising all bar the husband’s DFRDB pension in the proportion of 57.5% to the wife and 42.5% to the husband.
The husband’s mother’s diamond ring will be given to the daughter.
I certify that the preceding one-hundred and ninety-eight (198) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Carew delivered on 12 October 2020.
Associate:
Date: 12.10.2020
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