Child support trust maintained for child
The following is annotated.
- The husband seeks leave to appeal and, if leave is granted, to appeal orders made by Aldridge J on 2 December 2014. The effect of his Honour’s orders was to deny the husband’s claim that $300,000 of an amount within a trust (called the “ child support trust ”) be returned to him. The trust was settled as part of consent orders made on 17 July 2008.
- The husband’s central contention in this appeal, as reflected in his grounds of appeal and filed summary of argument, mirrored that which was argued at trial; it was asserted that the primary purpose of the trust has failed. The contention at trial that no trust existed was rejected by his Honour and that contention forms no part of this appeal.
- The oral argument by senior counsel for the husband before this Court differed from the central contention just referred to. The central contention argued orally is that the husband’s beneficial interest in the $350,000 settled by him on the trust was disposed of only so far as was necessary to provide for the purposes of the child support trust (which we will refer to as the “CST”). In the latter respect it was argued that the purpose of the CST was to provide for private school education for the youngest of the parties’ six children (“the child”). The child suffers from an intellectual disability. As at trial it was not in issue that the child had not undertaken, and would not undertake, private school education. It is argued that only $30,000 is attributable to the trust’s purposes (other than private school education) and, as a consequence, the balance of the remaining $300,000 is held on resulting trust for the husband. The husband asserts that his Honour erred in failing to so find.
- A subsidiary argument contends that his Honour erred in the exercise of his discretion in not ordering the return of the balance of the $300,000. Consequent upon his Honour’s orders in respect of the trust, his Honour also made orders pursuant to the Child Support (Assessment) Act 1989 (Cth) (“CSAA”) modifying the terms of the earlier consent orders. The husband contends that his Honour’s discretion miscarried in that respect. An additional challenge pertains to the trial judge’s orders in respect of costs.
- Four questions arise for determination on this appeal. The first two of those questions depend on the proper construction of the terms of the CST. The third and fourth questions pertain to the exercise of his Honour’s discretion. The four questions are:
- What are the purposes of the CST and what is the role, if any, of an asserted primary purpose of that trust?
- Did the husband dispose of his beneficial interest in the fund absolutely, subject only to the performance of particular purposes or, conversely, was his beneficial interest disposed of only so far as necessary to provide for the purposes of the CST?
- Did his Honour’s discretion miscarry in failing to order the return of the balance amount of the $300,000?
- Did his Honour’s discretion miscarry in modifying the terms of the consent orders?
- Before considering each of those questions in turn, it is necessary to refer briefly to the need for leave to appeal and also to the fact that the husband’s argument as formulated before us raises an issue not agitated at trial.
Leave to appeal
- His Honour’s orders were made pursuant to the CSAA. Leave is required to appeal those orders (s 102, CSAA). There was no opposition to the husband’s application before us to amend the notice of appeal so as to seek leave and we so ordered.
- The grant of leave to appeal was opposed by both senior counsel for the wife and the child’s Case Guardian. Senior counsel for the husband confirmed that he relied upon his arguments on appeal, without supplementation, as supporting also the grant of leave to appeal and we will deal with the application for leave to appeal on that basis.
An issue not raised at trial
- Grounds 1 and 2 in the husband’s amended notice of appeal are as follows:
- The trial Judge erred in principle by failing to find that the purpose of the trust which His Honour found had been created pursuant to the Orders of July 2008 had failed.
- The trial Judge erred in principle by failing to make a consequential order that the corpus of the said trust be repaid to the Appellant.
- Those grounds do not raise the issue of the disposition of the husband’s beneficial interest. That issue was not raised at trial; the arguments there, and grounds 1 and 2, are confined to assertions of failure of the purpose of the CST. To the same effect, the husband’s summary of argument filed on 19 May 2015 in support of those grounds agitated failure of “primary” purpose of the CST (identified as private school education) as the basis upon which the trial judge ought to have ordered that the corpus of the trust fund be returned to the husband.
- Self-evidently, an argument that an express trust has wholly failed by reason of failure of purpose (the husband’s argument at trial and foreshadowed as the argument on appeal) differs from the contention that the husband did not dispose of his beneficial interest in the trust fund which, to the extent it was not required for the purposes of the CST, is thus held on a resulting trust for the husband’s benefit.
- Senior counsel for the Case Guardian submitted (referring to Suttor v Gundowda Proprietary Limited  HCA 35; (1950) 81 CLR 418) that some consideration had been given by him to taking objection to an argument being advanced on appeal which was not advanced at trial. However, he elected to not formally take that objection. Ultimately, neither of the respondents took formal objection.
- Neither respondent contended that any further evidence or evidentiary issues were raised on what is essentially a matter of law: that is, the proper construction of the terms of the CST in the circumstances of its creation. Properly, neither contended they were prejudiced.
- We are satisfied that it is expedient and in the interests of justice to entertain the husband’s argument on appeal (see Water Board v Moustakas  HCA 12; (1988) 180 CLR 491 at  to ).
The purpose or purposes of the trust
- The CST was created as part of, and within the context of, comprehensive consent orders. At the date of the consent orders, three of the parties’ six children were aged over 18 years. The remaining three children were aged 16, 14 and 10 years.
- The orders:
- contained provisions for parenting orders including the amount of time the child was to live with each parent;
- included orders pursuant to s 79A(1A) of the Family Law Act 1975 (Cth) (“the Act”) varying earlier final property orders and which required the husband to pay the wife $400,000;
- included orders pursuant to the CSAA to provide for the husband to pay child support to the wife as and by way of departure from administrative assessment such that the husband’s annual rate of payable child support by assessment was reduced to nil;
- provided for any liability of the husband for child support for “all of the children of the marriage”, including any claim for arrears of child support, to be extinguished; and
- provided for the wife’s application for adult child maintenance to be dismissed.
- The husband achieved, by the making of the consent orders and the establishment of the CST, his manifest intention of eliminating any past, current or future administrative assessment of child support for the child or indeed (by order 24) for any other of the children of the marriage.
- As can be seen the consent orders dealt with the resolution of a range of financial issues beyond child support and the establishment of the CST. It cannot be assumed nor should it be assumed, for example, that the extent of agreed variation to the final property orders by the ordered payment of $400,000 from the husband to the wife and/or the parties’ agreement to end their financial disputes as part of the agreed terms of the consent orders, were matters completely independent of what they had agreed by way of child support and as to the agreed mandatory terms of the CST.
- The means by which the (legally represented) husband and wife sought to end any further administrative assessments of child support was to include in the consent orders obligations for them to establish a child support trust for the child. As is recorded in the consent orders, the child has intellectual difficulties and consequent special needs.
- The orders required the husband to cause $350,000 to be paid into a bank account in the names of both parents as trustees of the CST as it was defined in the consent orders. Order 22.4 specified five mandatory terms to be included as terms of the CST:
22.4.1 until the CST is wound up, its capital must be applied to meet the obligations referred to in Order 16.
22.4.2 the trustee shall pay education or tutoring expenses additional to those specified in Order 16 as agreed between the parties in writing.
22.4.3 the trustee shall cause the CST to be wound up on 31 December 2015, unless the parties agree in writing to extend the date for the winding up of the trust.
22.4.4 upon the winding up of the trust, the trustee shall hold any residual corpus in the CST for [the child] absolutely.
22.4.5 all income of the CST is to be paid to the husband as and when it is received, on the basis that the Husband is solely responsible for:
126.96.36.199 all costs associated with the administration of the CST (except the costs referred to in Order 22.2); and
188.8.131.52 all tax arising on income received by the CST.
The argument as to the purposes of the trust
- In light of the apparent abandonment of the pleaded grounds and written arguments as the central basis of the challenge to his Honour’s orders, we need say little more than that we consider his Honour was entirely correct in rejecting the husband’s “purpose argument”.
- His Honour had regard to the facts that the consent orders contained specific reference to, or provision for:
- education in a general sense (at  and );
- the child not undertaking a private school education and/or completing secondary education (at  to );
- the trust fund being expended on expenses other than educational expenses (at ) and (); and
- tuition for the child “outside school” (at ).
- The trial judge also noted that since its establishment the CST had been used to pay “limited educational expenses of the child and some orthodontic expenses. It continues to do so.” (at ).
- Finally, and importantly, the trial judge made reference to the consent orders providing (at 22.4.3 and 22.4.4) for the CST to be wound up on 31 December 2015 (unless otherwise extended by agreement) and that upon the winding up of the CST “the trustee shall hold any residual corpus in the CST for the child absolutely.” The trial judge concluded from these terms “[t]he surplus is there for his [a reference to the child] benefit. That is a [sic] valid a purpose as any.” (at  to ).
- His Honour concluded on this issue:
- I do not accept the submission of the husband that the sole or primary purpose of the Trust was for the provision of a private school education or that the purpose of the Trust has failed.
- We agree with the conclusion reached by the trial judge, and his Honour’s reasons for the conclusion that the CST did not fail by reason of failure of purpose. We agree with the trial judge’s conclusions that the CST had several purposes which he identified.
- The apparent abandonment by senior counsel for the husband of the “purpose argument” as the central basis of the challenge to his Honour’s orders, appears to accompany senior counsel’s concession that the husband could not contend that funding private school education for the child was more than the “primary purpose” of the CST; nor could it be said that there was total failure of the purposes of the trust. Senior counsel for the husband acknowledged, in that context, that he could not point to any authority to support a contention to the effect that failure of an express trust can be established by something less than total failure of its purposes.
- The central question raised by the husband on appeal is whether the husband disposed of his beneficial interest in the CST fund absolutely upon settlement of the CST. If he did, there exists no basis for a conclusion that a resulting trust in the husband’s favour exists, irrespective of failure of a purpose or irrespective of a surplus remaining after fulfilment of purposes.
Did the husband dispose of his beneficial interest?
- There is nothing novel or contentious about the proposition that a resulting trust in favour of the settlor arises as to that part of the beneficial interest of the property in question which has not been disposed of by the express trust created by the settlement (see Gummow J in the Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia and Ors  FCA 344; (1991) 30 FCR 491 (“Re Australian Elizabethan Trust case”) at p 500).
- However, as discussed in Jacobs’ Law of Trusts in Australia at  at p 238 the particular circumstances involved in each case are determinative of that issue. The learned authors there illustrate that point by reference to the opposite outcomes in Re The Trusts of the Abbott Fund. Smith v Abbott.  2 Ch. 326 and Re Andrew’s Trust. Carter v Andrew.  2 Ch. 48 respectively.
- Significant reliance was placed upon Gummow J’s comments in Re Australian Elizabethan Trust case by the husband’s senior counsel. There are, however, obvious and important distinctions between the facts and issues in that case and those in this case. As but one example, the central issue in that case was whether an express or constructive trust was ever created in respect of the subject gifts or donations made. Gummow J determined that no express trust, or constructive trust or equitable obligation, arose with respect to the subject gifts and donations. In contrast here there is no issue that the husband and wife intended to create an express trust and that a completely constituted express trust was created as a consequence of the consent orders.
- Intention plainly plays an important part in the examination of the particular circumstances of the case and, fundamentally, the proper construction of the terms of the CST. However, as expressed in Scott and Ascher on Trusts vol 1, s 4.1, cited with approval by Gummow and Hayne JJ in Byrnes v Kendle  HCA 26; (2011) 243 CLR 253 at :
“In some situations, legal consequences do turn on actual intentions, as in the case of those charged with certain crimes. Ordinarily, however, the legal effect of a transaction does not depend on the parties’ secret intentions, but on the outward manifestations of their intentions. For practical reasons, we disregard the parties’ undisclosed states of mind. To be accurate, therefore, it is necessary, when dealing with the creation of a trust and its terms, to speak not of the settlor’s intention but of the settlor’s manifestation of intention.”
- That principle is particularly important in this case. As will be seen, we consider that here the settlor’s intention is plainly manifest in the terms of the CST and reinforced by the circumstances in which it was established.
(b) The husband’s construction of the CST’s terms
- Senior counsel for the husband contends that upon the proper construction of the terms of the CST it ought be concluded that the husband retained a beneficial interest in the capital of the trust to the extent that it was not used to fund private education for the child. He places particular reliance upon Notation V to the consent orders.
- Notation V provides:
- The parties anticipate that the educational expenses for [the child] set out in Order 16 are unlikely to exceed $6,000 for the balance of 2008, $10,000 for 2009 and $45,000 for 2010 and their average will not exceed $50,000 (subject to inflation) over the balance of the time until [the child] turns 18. However, these are only estimates and if the expenses exceed the above projections, as a consequence of an unexpected increase in the cost of educational expenses, then upon the CST being exhausted, the Husband will meet those costs. However, it is upon these estimates that the parties have entered into the agreement for departure from Child Support referred to herein, and in particular it is anticipated by the parties that the CST will likely cover all of the expenses for [the child] set out in Order 16 hereof.
(emphasis as in original)
- In the husband’s written outline of argument (at paragraph 16) it is submitted that Notation V “provided the clearest of evidence as to the intention of the settlors that a trust was to be created for the primary purpose of funding the child’s private school education.”
- Moreover, it is then further submitted (at paragraph 17):
- The appellant contends that it is inconceivable that “income poor” settlors, as the trial judge described the parties, would have “tied up” such a large sum of capital, and particularised how the bulk of it was calculated, unless private school education had been their primary intention, and thus the primary purpose of the trust …
- The latter of those submissions is, with respect, disingenuous. The trial judge’s description of the parties’ respective circumstances as “income poor” was a reference to their circumstances as at the trial in May 2014, not July 2008 when the consent orders were entered into. The trial judge actually said “[i]t is accurate to describe each of the parents presently as asset rich but income poor” (at ) and “[b]oth parents are presently asset rich and income poor” (at ) (emphases added).
- The trial judge found (at ) the husband to own property valued at $8,577,400 with liabilities of $3,229,000 (net assets of $5,348,400) and that his tax returns disclosed his income for 2010, 2011 and 2012 respectively to have been $882,741; $218,025 and $318,362.
- The emphasis senior counsel for the husband seeks to place upon Notation V in the consent orders is to invite focus upon that provision in isolation. In fact, the express terms which were to be included in the CST, and the overall circumstances vest Notation V with its proper significance. The CST:
- was established pursuant to personal obligations imposed upon the parties to do so via Court Orders;
- was established in the statutory context of the CSAA; and
- formed only a part of, and is to be viewed in the context of, the consent orders overall.
- As order 22.4 of the consent orders reflects, only five terms were agreed to as mandatory terms of the CST. One of those five terms (order 22.4.3) made specific provision for the winding up of the CST. Another (order 22.4.4) made specific provision for any residual corpus in the CST to be held for the child “absolutely”. Even viewed in isolation Notation V does not assume determinative significance in light of the parties’ unequivocal express agreement.
- No express term provides for any residue to revert to the husband, nor does any express term allude to any such outcome. It cannot be contended that this was an oversight. Aside from the fact that it would have been a simple matter of drafting to achieve that outcome if it were intended, other terms of the consent orders point to the opposite intention.
- As the trial judge noted, other specific consent orders (orders 12.2, 12.3 and 16.3) reflected the parties’ knowledge or acknowledgement at the time that the child may not undertake a private school education nor even complete a secondary education. Education aside, the child obviously had other needs for support.
- Notation F in the consent orders is as follows:
- Notations M, N and O to the consent orders record formal matters in relation to the making of a departure order pursuant to the CSAA and then Notation Q expresses the parties’ intention in these terms:
- The parties intend that:
a. the child support payable by the Husband pursuant to these Orders be in substitution for any Assessment made by the Child Support Agency either now or in the future; and,
b. the Wife shall not be liable for the payment of child support to the Husband or otherwise at any time in the future.
- Against that background, order 17 of the consent orders records that the effect of the child support order to be paid by the husband in accordance with the consent orders is to reduce the annual rate of child support payable by the husband by 100 per cent to nil.
- Moreover, order 24 of the consent orders relevantly provides:
- The child support ordered to be provided by the Husband is intended by the parties to represent 100% of any liability of the Husband for child support for all of the children of the marriage, including any claim for arrears of child support. To that end, each of the parties shall, forthwith upon the making of these Orders, do all acts and things necessary to:
24.1. withdraw any outstanding applications for review in relation to child support;
24.2. acknowledge that any arrears of child support are waived; and
24.3. cause to be registered the present Agreement with the Child Support Agency.
- Senior counsel for the husband, in association with his argument concerning Notation V, pointed to the feature that it was a term of the CST (by order 22.4.5) that the husband was to receive the income of the CST (less administration costs and taxation on that income), prior to the winding up of the trust, as supporting the proposition that the husband retained a beneficial interest. The trial judge observed (at ) that this term “indicates that the parties had given close attention to the terms of the orders and the Trust.” We agree. In our judgment it emphasises, rather than diminishes, the significance of the specific provisions (in orders 22.4.3 and 22.4.4) for the winding up of the CST and for [the child] to have the residual corpus “absolutely”.
- To this may be added the observation that the mechanism of the orders did not provide for the husband to settle funds upon the CST as and when private school education costs were incurred. That is in contrast to other provisions within the consent orders allowing for payments for particular identified expenses to be made as and when they were incurred (for example, order 16.9).
- In considering the overall circumstances in which the consent orders were made and in which the CST was established, it ought be noted that the object of the CST was the parties’ intellectually disabled son who had special needs. Whatever might have been his foreshadowed position in 2008 (which, again, included that he might not gain entry to any private school), the trial judge found that the child’s earning capacity was “very limited” (at ) and indeed was non-existent as at trial (at ).
- We simply note, in passing, that in analogous contexts equity would apply a rebuttable presumption of advancement to deny the imposition of a resulting trust. We note this only as a means of emphasising that the husband carried a significant onus to demonstrate that on the proper construction of the terms of the consent orders and of the CST, he retained a beneficial interest in the unexpended fund.
- In our judgment there is merit in each of the submissions of behalf of the Case Guardian that:
- The ordinary rules of construction (including the principle of objectivity) as applied to the construction of contracts are applied in the interpretation of a Court Order: JKB Holdings Pty Ltd v. de la Vega  NSWSC 501Lindsay J at ;
- The fact that an inter partes contract/agreement was intended to be, and was in fact, given expression in orders of the Court must be taken into account: JKB Holdings Pty Ltd v de la Vega (above) at  citing Morgan v. 45 Flers Avenue Pty Ltd (1987) 11 NSWLR 573 at  D:E;
- Where the terms of the Court’s order are sufficiently clear to govern the parties’ rights, the Court does not resort to extrinsic evidence of their intention: at  citing Codelfa Construction Pty Ltd v. State Rail Authority of NSW(1982) 149 CLR 337 at : Western Export Services Inc v. Jireh International Pty Ltd  HCA 45; 86 ALJR 1 at  to ; and
- The same rules of construction of contracts apply to trusts: Byrnes v Kendle (above) per Heydon and Crennan JJ at .
- We find no merit in the husband’s contention that he retained any beneficial interest in the fund upon establishment of the CST, and consequently we reject his contention as to a resulting trust in his favour in the residue.
- To the extent there remains any need to say so, it will be clear from what we have earlier said that we consider there is no merit in grounds 1 and 2 of the appeal.
Did the trial judge’s discretion miscarry?
- In circumstances where the child turned 18 years of age in August 2015 and the CST vested on 31 December 2015, there is considerable force in the submission of senior counsel for the wife that there is no utility in these challenges or this aspect of the appeal.
- To that may be added the fact that we have not found any merit in the husband’s primary challenge as to a resulting trust in his favour with respect to the corpus of the CST fund.
- However, as these challenges have some relevance to the further challenges as to the costs orders his Honour made, we will engage with them for that purpose.
- Grounds 3 and 7 were argued together and we will deal with them in that manner. They assert:
- The trial Judge erred in the exercise of his direction [sic] by failing to order that the corpus of the trust be repaid to the Appellant.
- The trial Judge earned [sic] in principle by failing to determine the appropriate amount of Child Support to be paid or remitting the issue of Child Support for determination by the Child Support Agency.
- Orders 1 and 2 made by the trial judge on 2 December 2014 are as follows:
(a) inserting in clause 16 of the orders:
16.11 By way of payment for the maintenance, welfare and support of [the child] other than as to be provided by the parties pursuant to Order 16.9 herein.
(b) inserting Order 22.4.6 as follows:
As from 31 October 2014 the trustees may charge costs associated with the administration of the CST at a rate of $250 per hour.
- [The husband and [the wife] be removed as trustees of the Trust created pursuant to the Orders of 17 July 2008 and in their place [the Case Guardian] and [Mr D] be appointed as trustees.
- In support of grounds 3 and 7, senior counsel for the husband argued that in adding order 16.11 the trial judge was plainly wrong and erroneously exercised his discretion for three reasons which are interrelated.
- First, it was contended that the order was not “just and equitable” within the meaning of s 117(4)(b) of the CSAA because the order “did not reflect the proper needs of the child, as opposed to a general intention to benefit the child.”
- That contention fails by reason of the terms of the orders as made. By order 2 the trial judge appointed independent trustees to the CST bound by fiduciary duties to preserve the corpus of the fund of the CST. By order 16.11 the trustees could only make payments “for the maintenance, welfare and support of [the child] …”
- Senior counsel for the husband contended that the trial judge ought to have set some fixed payment. However, aside from the feature that the relevant provisions of the CSAA did not mandate that approach, it seems to us that the orders as made would ensure that the proper needs of the child were met from time to time as opposed to some periodic payment which future events may or not have rendered accurate.
- Next, it was contended that the effect of order 16.11 was to make all of the remaining funds in the CST (about $300,000) available for the child’s needs and, having regard to the wife’s significantly lower child support claim, the order was not otherwise “proper” within the meaning of s 117(5) of the Act.
- The same answer may be offered to this contention as in relation to the first. There is an obvious distinction between funds being available for the proper maintenance, welfare and support of the child as needed, as opposed to them being immediately deployed or spent. Nothing in the order made by his Honour resulted in deployment of the funds, outside the terms of the order, by trustees exercising their fiduciary obligations.
- There is thus no merit in the contention that the order was not “proper” within the meaning of the CSAA.
- The foregoing provides important context, if not a complete answer, to the final submission agitated by senior counsel for the husband. It was contended, by reference to  of the Reasons for Judgment, that the trial judge gave “determinative consideration” to the fact that all of the funds would be available “for [the child’s] maintenance after he turned 18”. This was contended to be irrelevant to the matters guiding the exercise of discretion under subsections (4) and (5) of s 117 of the CSAA.
- It ought be noted that at the time the trial judge made the subject orders on 2 December 2014, there was only little more than 12 months to elapse until the winding up of the CST on 31 December 2015, pursuant to order 22 of the consent orders.
- Moreover, the orders of 2 December 2014 were made in the context of the trial judge having rejected the husband’s primary contention at trial, that no trust was ever established (a conclusion not challenged on appeal) and that the CST did not fail by reason of failure of purpose (a conclusion also not challenged as the argument on appeal was developed).
- The trial judge, by reference by ss 124 and 141 of the CSAA determined that order 22 and the consequent creation of the CST were pursuant to orders made under the CSAA (at  to ). There is no challenge on appeal to that conclusion nor the reasons provided by the trial judge for it.
- By reference to s 129 of the CSAA and Morgan v 45 Flers Avenue (supra) at  the trial judge concluded that the Court had power to modify, in accordance with the terms of that section, “the orders giving rise to the Trust and thus to the Trust itself.” (at  and ). Again, there is no challenge on appeal to that.
- Commencing at  the trial judge outlined in considerable detail the matters his Honour considered relevant to the question of whether the 2008 orders ought be modified pursuant to s 129 of the CSAA.
- The trial judge specifically noted (at ), correctly with respect, that the Court’s consideration was not limited to the matters enumerated in the relevant subsections of s 117 of the CSAA. Then, commencing at  the trial judge addressed s 117(4) of the CSAA in detail and, commencing at , discussed the operation of s 124 of the CSAA.
- Thereafter, following reference to relevant authority the trial judge found at  that it was not just and equitable that the wife should bear all of the costs of raising [the child] herself. His Honour then referred to order 18 of the 2008 orders which required the parties to bear sole responsibility for the costs of the child whilst he was in their respective care. His Honour then noted the historical care arrangements and the fact that neither parent made payment to the other of any child support over the period referred to.
- His Honour found that each parent had the assets available to them to contribute to the child’s child support over the historical period.
- Having set out all relevant findings and considerations the trial judge then afforded the parties the opportunity to formulate orders to give effect to his Reasons for Judgment leading to the orders ultimately made on 2 December 2014.
- When the trial judge’s Reasons for Judgment are viewed as a whole we fail to see that the trial judge gave “determinative consideration” to the vesting of the CST, and we are comfortably satisfied that the trial judge appropriately exercised the discretion to make the orders he did.
- We are not persuaded of any discretionary error enlivening appellate intervention with respect to the orders. These grounds of appeal have no merit.