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Jacky Campbell, June 2013

Asset split in Family Court matter: financial planner’s report was significant

Thomson Reuters Weekly Tax Bulletin

& Thomson Reuters Separation and Financial Services Bulletin

Family Court proceedings are fraught enough as it is with the emotional issues involved. But the necessity of splitting assets etc frequently brings in tax and superannuation issues … and therefore much complexity (and more emotional angst). A recent Family Court case has highlighted the importance the Court attached to a report prepared by a financial planner. It is worth noting.

The financial planner’s report was found to be reliable evidence of the intentions of the clients in Hampton & Farley & Ors [2013] FamCA 213 (Coleman J, 5 April 2013). This case also illustrated the importance of clearly identifying the client.

The best interests obligations in the Corporations Amendment (Future of Financial Advice) Act 2012 (“the FoFA reforms”) are mandatory from 1 July 2013. It is however beyond the scope of this article to consider the impact of the FoFA reforms, if any, to financial planners in circumstances similar to those of the financial planner in this case.

Background

Mr and Mrs Farley Snr separated after a de facto relationship of about 10 years. Mr Farley Senior (“the husband”) and Mr Farley Junior (“the son”) were equal partners in a farming partnership and had equal shares in a corporation which owned farming land. The husband had been married before and the son was from that marriage. The wife brought an application under the Family Law Act 1975 for an order altering the husband’s property interests.

The wife proposed that the husband pay her approximately $1m by:

  • personally, or through the partnership or corporation, paying her cash of $463,000. She was prepared to accept payment by instalments; and
  • splitting his interest in the Farley and Son Pty Ltd Superannuation Fund (an SMSF) so as to give her a base amount of $537,000.

The husband, the son, the partnership and the corporation argued that the husband did not beneficially own the farming land or the farming business, even though he was registered as a legal co-owner of both.

The son sought orders along the following lines:

  • A declaration that there was an agreement that the husband would, in consideration of the son working in the farming business almost exclusively, and allowing the husband to work in other enterprises, transfer all his right, title and interest in the farming business to the son.
  • A declaration that the husband held on constructive trust for the son all of his right title and interest in the farming business.
  • Alternatively, a declaration that the husband was estopped (or prevented) from:

(a) denying the existence of the agreement, and/or

(b) denying the existence of the constructive trust which arose from the agreement.

The husband sought an order that he pay the wife the sum of $150,000 in full satisfaction of her claims against him, the partnership, the corporation and the superannuation fund. Although it was not clear how he would satisfy her claims, he wanted to avoid the realisation of any corporate assets or of any real estate. The husband otherwise sought orders in identical terms to the son.

The asset pool

The wife submitted that the net assets of the parties were worth about $2.4m. The most significant component of this was the husband’s valuation of the legal interest in the partnership at about $1.2m, which he said he held beneficially for the son.

If the husband and the son were correct, the “property of the parties” available for the Family Court to divide between the husband and the wife, was only valued at about $690,000.

The parties agreed that the husband’s interest in the superannuation fund was worth $549,726 and the wife’s interest was $17,245. The Court was asked to treat the superannuation interests as “property”. Although superannuation is not “property”, it can be “treated as property” under s 90SM(2) of the Family Law Act. Coleman J said it was clearly appropriate to do so, particularly as the wife, being retired and over her preservation age, was able to access any entitlement she was awarded by way of splitting order (see Coghlan and Coghlan [2005] FamCA 429).

In relation to the non-superannuation pool, Coleman J said (at para 26):

It is both logical, and necessary, in the circumstances, to first determine the beneficial ownership of the husband’s interest in the partnership and the corporation“.

This approach accords with the High Court’s recent statements in Stanford v Stanford [2012] HCA 52 where the majority said that the first step or preliminary step of the process of making a property settlement is (at para 37):

First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to ‘altering the interests of the parties to the marriage in the property’ [emphasis added]. The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.”

Although Stanford refers to making a property settlement order under s 79, which applies to legally married couples, this aspect of Stanford is also applicable to making property settlement orders under s 90SM between de facto couples.

The financial planner’s report

In 2004, 5 years prior to the separation, the financial planner gave verbal advice to the husband and the wife as well as to the son and his wife. However, the written report made it clear that the advice was only given to the husband and the son. The report said, in relation to the circumstances of the husband and the son:

“We are preparing this plan for both the husband and the son as many of their assets are held jointly”.

In relation to “your objectives”, the financial planner stated in the report:

“We understand that if either the husband or the son were to die their land holdings and business assets are to remain in the Farley bloodline ie: for the benefit of the children and grandchildren.

Both the husband and the son would like the wife and the son’s wife looked after by leaving assets other than farm and business to them.

Specifically, the husband would like the wife to have the options remaining in their home as she wishes. He would also like to provide approximately $500,000 from his estate to her to fund her living costs. The husband is currently considering how to accumulate this amount either in Superannuation cash or life insurance.

The son wishes to leave his wife $900,000 to cover her living costs. This will most likely be funded by insurance …

You are currently considering your wishes in the unlikely event that yourselves and your children were to pass away at the same time”.

The broad wishes of the 4 participants in the financial planning meeting were listed as:

“1. To preserve the assets that you have accumulated.

2. Ensure that your beneficiaries are adequately provided for in the event of your death.

3. To consider avenues available for protection of the capital from claims either by creditors or other family members.

4. To take advantage of available tax planning opportunities.

In essence you wish to ensure that in the event of your death there will be an orderly (and tax efficient) transfer of assets to your beneficiaries”.

The report made recommendations as to how to implement the “objectives”, the first of which was that the husband and his son have new Wills prepared. The husband made a Will which reflected the financial planning report. In his Will, he gave $500,000 to the wife, which to the extent possible, was to be paid from his superannuation fund. The wife was also to have a life interest in the homestead building and curtilage (ie not in the farming land).

The report made no recommendations about what would occur in the event of a separation of either of the 2 couples involved. Coleman J said (at para 143):

It is tempting to speculate about why that was so, but the Court cannot, and does not so speculate“.

Coleman J considered that the financial planning report carried significant weight, saying (at para 58):

The financial planning report however, prepared as it was five years prior to the separation of the husband and wife, and at a time when the evidence does not suggest there to have been any basis for scepticism about the continuation of the relationship between the husband and wife, provides a more reliable reflection of the intentions of the parties than does evidence of those matters seven years later, and at a time when each party has a vested interest in suggesting a particular version of events“.

Outcome

The Family Court found that the husband did not have a beneficial interest as a partner in the partnership or as a shareholder in the corporation. However, he had legal interests, being loan accounts in both, which meant that the net property pool was greater than he and the son contended. The Court found that the property pool was about $1.3m.

The Court ordered that the husband and the son do all acts necessary to transfer the real property to the husband and the son and and/or to the corporation upon trust:

  • for the husband as life tenant;
  • for the son in remainder.

The Court was able to make orders requiring the son to do these things as he was a party to the proceedings.

The Court ordered that the husband split his superannuation entitlement of about $550,000 so as to give $500,000 to the wife. She effectively received this as cash as she was retired and over her preservation age.

It is important to reflect that a report of a financial planner may be evidence in family law litigation, which means that the financial planner may be called to give evidence as to the client’s legal and equitable interests and any advice given. A financial planner needs to be clear when giving advice, of the limits of that advice, including which client is being advised. Financial planning reports can clearly have life outside of the immediate financial needs of the client(s).

Jacky Campbell

Partner

University qualifications

Master of Laws, Monash University

Bachelor of Laws, Monash University

Bachelor of Arts, Monash University

Graduate Diploma of Professional Writing, Deakin University

Other qualifications
Accredited Family Law Specialist,
Law Institute of Victoria

Email Jacky Campbell
jcampbell@fortefamilylawyers.com.au

Connect on LinkedIn

Publications
To read Jacky Campbell’s articles and papers click here.

In 2020, Jacky was recognised as a leading family lawyer in Melbourne by Doyle’s Guide to the Australian Legal Market as well as one of Melbourne’s leading family lawyers in High-value and Complex Property matters, and a recommended lawyer in parenting matters. Jacky was also a recommended lawyer in the Doyle’s leading family and divorce lawyers in Australia. Jacky writes extensively on complex aspects of family law and her up-to-date knowledge means that she is able to provide accurate information about the law. She combines this with offering strategic advice to clients and guidance as to the best approach to take in their particular circumstances.

Jacky wrote her Masters thesis on the relationship of bankruptcy and family law. She continues to have a special interest in matters involving bankruptcy, insolvency, liquidation and receivership.

Jacky received the Law Institute of Victoria Rogers Legal Writing Award 2004—for the article “Splitting the Super…and Selling the Home”. She is experienced with complex superannuation interests such as defined benefit funds and self managed superannuation funds.

Jacky is the consultant editor of Wolters Kluwer/CCH Australian Family Law and Practice and contributing author to Wolters Kluwer/CCH Australian Family Law and Practice to the Property, Spousal Maintenance, Financial Agreements, Maintenance Agreements, Procedure and Precedents tabs. She writes several chapters of the Wolters/Kluwer CCH Australian Master Family Law Guide, and is the author of the family law chapters in the Thomson-Reuters Australian Financial Planning Handbook and in the CCH Australian Master Superannuation Guide.

Jacky is a Fellow of the International Academy of Family Lawyers, a board member of the Asia Pacific Chapter of that Academy, and an Associate of the American Bar Association. She acts for many clients who are overseas or where there is an international element such as overseas assets and international child abduction under the Hague Convention. She is also experienced in Australian and overseas surrogacy arrangements and in disputes about the role of a sperm donor. She is a member of the Maintenance and Property Committee of the Family Law Section of the Law Institute of Victoria, the Family Law Section of the Law Council of Australia and Victorian Women Lawyers.

Jacky is keen to assist clients to resolve matters before trial through alternative dispute resolution processes including mediation. She is a trained arbitrator and is an arbitrator with The Alternative Courtroom.

Wendy Kayler-Thomson

PARTNER

University qualifications

Master of Laws, Monash University

Bachelor of Laws, University of Melbourne

Bachelor of Commerce, University of Melbourne

Other qualifications
Accredited Family Law Specialist, Law Institute of Victoria

Email Wendy Kayler-Thomson
wkaylerthomson@fortefamilylawyers.com.au

Connect on LinkedIn

Wendy Kayler-Thomson is a partner of Forte Family Lawyers and has practised as a lawyer specialising in family law for more than 25 years. Wendy is recognised as one of Melbourne’s leading family lawyers in Doyle’s 2020 Guide to the Australian Legal Market.

Wendy is the Immediate Past Chair of the Family Law Section of the Law Council of Australia, the peak body for Australian family lawyers, and has been a member of the Executive of the Family Law Section for more than 10 years. The Family Law Section is regularly consulted by the Federal government and the Courts about changes to family law and court procedures. As a result, Wendy is able to offer her clients the most up to date advice on family law and strategies to take advantage of future changes.

Wendy’s time as Chair of the Family Law Section (from 2016 to 2018) coincided with a period of great controversy and unprecedented attention on the reform of family law and the family law system. This included the Victorian Royal Commission into family violence, the Federal Parliamentary enquiry into the family law system and family violence, the Australian Law Reform Commission’s Family Law Review and the Federal Government’s proposal to restructure the Family Court and Federal Circuit Court.

Wendy was a member of the Advisory Committee to the Australian Law Reform Commission’s Family Law Review, the most comprehensive review of family law and the family law sector in 40 years.

Wendy was also a member of the Advisory Committee to the Law Council of Australia’s 2018 Justice Project, chaired by former High Court of Australia Chief Justice, the Hon. Robert French. The Justice Project is one of the most comprehensive, national reviews into the state of access to justice in Australia in the past 40 years.

Wendy develops close and trusted relationships with her clients and the wide network of professionals that refer her work. Wendy’s approach is tailored to each individual client’s needs, recognising that for most people, the breakdown of a relationship is one of their most stressful and challenging experiences. Wendy brings a high attention to detail, strategic advice and a depth of expert knowledge about family law. Wendy has a commercial background and has acted for many clients with complex financial arrangements. She works closely with her clients’ accountants and other professional advisors to ensure that all the complexities of those arrangements, including tax impacts and restructuring, are dealt with as part of any settlement.

Wendy has undertaken extensive training in a wide range of social sciences that impact on families and their children, including family and domestic violence, parental alienation, personality disorders, drug and alcohol addiction and high conflict. Wendy’s clients benefit from her knowledge of the most up to date approaches by child psychologists and other experts to managing the post-separation care arrangements of children. Wendy has particular expertise in cases where one parent wants to relocate with the children interstate or overseas.

Wendy is also a member of the Executive Committee of the Family Law Section of the Law Institute of Victoria, the Family Law Section of the Law Council of Australia, the Association of Family and Conciliation Courts, the Australian Institute of Family Law Arbitrators and Mediators and Victorian Women Lawyers.

Jemma Mackenzie

Senior Associate

University qualifications

Bachelor of Laws (Hons) Monash University
Bachelor of Arts (Hons) Monash University

Email Jemma Mackenzie
jmackenzie@fortefamilylawyers.com.au

Other qualifications
Accredited Family Law Specialist,
Law Institute of Victoria

Connect on LinkedIn

Jemma is a Senior Associate at Forte Family Lawyers. She has worked predominantly in family law since being admitted to legal practice in December 2009.

Jemma obtained Specialist Accreditation as a Family Lawyer from the Law Institute of Victoria in 2015. Accreditation recognises the high level of knowledge and practical skills Jemma brings to each family law matter.

Jemma is mindful that the breakdown of a marriage or de facto relationship can be a stressful and often overwhelming experience for clients. She works with her clients to identify appropriate pathways for resolving both parenting and property matters.

Jemma prides herself on her ability to effectively communicate what can be complex legal principles and to provide realistic, up to date and accurate legal advice at each stage of a matter.

Jemma has experience in a wide variety of family law matters including division of property, maintenance (including urgent applications), Financial Agreements (including Agreements made prior to marriage), care and living arrangements for children, child support and family violence – including Intervention Order proceedings.

Prior to joining Forte Family Lawyers, Jemma worked in a Bayside family law firm and a boutique firm in Melbourne’s eastern suburbs. She has conducted litigation in both the Family Court of Australia and Federal Circuit Court in Melbourne and interstate.

In addition to her daily work with clients, Jemma has made presentations to financial advisors and medico-legal professionals about the family law system in Australia and what clients should know about family law prior to separating.

Jemma is a member of Victorian Women Lawyers, the Family Law Section of the Law Council of Australia and the Family Law Section of the Law Institute of Victoria.

Jane Bentley

Senior Associate

University Qualifications

Masters of Applied Law (Family Law), College of Law

Bachelor of Laws, Victoria University

Bachelor of Science, University of Melbourne

Email Jane Bentley

jbentley@fortefamilylawyers.com.au

Other Qualifications

Accredited Family Law Specialist, Law Institute of Victoria

Jane is a Senior Associate at Forte Family Lawyers. Jane is an Accredited Family Law Specialist as a recognised by the Law Institute of Victoria. Accredited Specialists demonstrate superior knowledge, experience and proficiency in their specialist area of law.

Additionally, Jane has undertaken a Masters of Applied Law in Family Law.

Prior to joining the firm, Jane has worked in both the private and community sectors where she worked on both complex parenting and property matters, regularly appeared in the Family Law Courts and through her work at a commercial firm Jane was able to build and enhance her commercial skills. Throughout her career, Jane has worked collaboratively with commercial lawyers providing advice where both family and commercial law intersect, as well as working directly with professionals on family law matters including psychologists, mediators, accountants and financial advisors.

Jane has a wide range of experience in different family law matters including financial agreements, family violence, parenting, IVF issues, matters involving grandparents, Hague Child Abduction Convention, child support, property and spousal maintenance.

Jane prides herself on her ability to communicate effectively with her clients during an emotional and challenging time. Jane builds strong relationships with her clients as she recognises that the legal system can appear complex and daunting and works with her clients to guide them through the process.

Jane is a member of the Courts Practice and the Property and Maintenance Committees of the Law Institute of Victoria which ensures that she is appraised of recent developments in family law and at the Family Law Courts. Jane is also a member of the Family Law Section of the Law Council of Australia.

Matthew Beckmans

Senior Associate

University qualifications

Bachelor of Laws, University of Western Sydney

Email Matthew Beckmans
mbeckmans@fortefamilylawyers.com.au

Connect on LinkedIn

Matthew commenced his legal career practising in a medium-sized rural law firm. Matthew is able to draw on his broad experiences over a number of practice areas, prior to practising exclusively in family law, to offer clients a well-rounded approach to tactically resolve complex legal issues.

Matthew has developed a special interest in complex disputes involving companies and trusts, insolvency and bankruptcy, taxation, and international/domestic relocation.  He also has a particular expertise in child support.

Matthew is aware and mindful of the financial challenges and restraints when attempting to resolve family law disputes, and sets out to achieve negotiated and cost effective outcomes which avoid court where possible. Matthew recognises the emotional issues attached to the breakdown of a relationship, and draws on his strong communication skills in demystifying the family law process, and to identify and explain possible options for resolution in a concise manner.

Matthew was a member of the steering committee of the Riverina Family Law Pathways Network, secretary of the South West Slopes Law Society, and a mock trial magistrate for the Law Society of New South Wales.

Prior to practising law, Matthew was rookie listed by the Sydney Swans, where he enjoyed a brief career.  He now plays for the Monash Blues in the VAFA.

Matthew is a member of the Family Law Sections of the Law Council of Australia and the Law Institute of Victoria.  He is on the Court Practice Committee of the Family Law Section of the Law Institute of Victoria.

Natasha Mastroianni

Senior Associate

University Qualifications

Bachelor of Laws (Hons), Latrobe University

Bachelor of Arts, Latrobe University

Masters of Applied Law (Family Law), College of Law

Email Natasha Mastroianni

nmastroianni@fortefamilylawyers.com.au

 

 

Connect on LinkedIn

Natasha Mastroianni has experience in a range of family law matters, including property settlements, financial agreements, parenting matters (including interstate and overseas relocation issues), child support and intervention order proceedings.

Natasha was admitted to practice in August 2014 and commenced her career in a generalist practice where she gained experience in family law, property law, wills and estates. Natasha worked in a boutique family law practice prior to commencing at Forte in February 2020.

Natasha has a Masters of Applied Law (Family Law) from the College of Law and speaks conversational Italian.

Having practical experience in other areas of law assists Natasha to understand the interrelated issues involved in her clients’ family law matters. She regularly appears on behalf of clients at Duty List Hearings and other Court events in the Federal Circuit Court, Family Court of Australia and the Magistrates’ Court of Victoria. Natasha also appears as a solicitor agent for interstate or rural practitioners when required.

Natasha prides herself on being able to understand and manage her clients’ expectations whilst providing realistic and practical advice. She acts with empathy and compassion when striving to achieve the best possible results for her clients.

Natasha is a volunteer lawyer with the Women’s Legal Service and is the Vice President of the Northern Suburbs Law Association. She is also a member of the Courts Practice Committee of the Family Law Section of the Law Institute of Victoria, the Family Law Section of the Law Council of Australia and Victorian Women Lawyers.

Vinh Nguyen

Associate

University qualifications

Bachelor of Laws, Deakin University

Bachelor of Commerce, Deakin University

Email Vinh Nguyen
vnguyen@fortefamilylawyers.com.au

Connect on LinkedIn

Vinh first worked at Forte Family Lawyers as part of his Graduate Diploma in Legal Practice at the Leo Cussen Institute for Law in 2017. He joined Forte Family Lawyers as a lawyer after his admission into legal practice in October 2017 and has, since then, worked solely in family law.

Prior to his admission as a lawyer, Vinh worked as a paralegal in a community legal centre and in a property and commercial law firm, where he gained valuable experience in property transactions.

Vinh is a member of the Family Law Section of the Law Council of Australia, the Law Institute of Victoria and the Asian Australian Lawyers’ Association. Vinh also volunteers at the Darebin Community Legal Centre.

Vinh is fluent in Vietnamese.

 

 

 

Mark Di Donato

Lawyer

University Qualifications

Bachelor of Criminology and Justice, Navitas College of Public Safety

Juris Doctor, Monash University

Email Mark Di Donato

mdidonato@fortefamilylawyers.com.au

Connect on LinkedIn

Mark started work at Forte Family Lawyers as part of his Graduate Diploma in Legal Practice at the Leo Cussen Institute for Law in 2019. Mark was later admitted into the legal practice in September 2019 and transitioned into a lawyer role with Forte Family Lawyers in February 2020.

Prior to his admission as a lawyer, Mark volunteered as a paralegal at Darebin Community Legal Centre and interned at a commercial law firm, where he gained valuable experience in property transactions and in intellectual property. Mark also completed a Professional Placement whilst completing his law degree where he provided legal advice on various family law matters through the Monash Law Clinic.

Mark is a member of the Family Law Section of the Law Council of Australia, and the Law Institute of Victoria. Mark volunteers at the Darebin Community Legal Centre and has provided advice on a range of issues including family law.