Hall v Hall [2016] HCA 23

Hall v Hall [2016] HCA 23 - HCA 2016 case summary — Zoe

"14.1 ([the wife] not involved in management and control) My daughter [the wife] is not involved in the management and control of the [V] Group and its business operations and I intend by my directions in this Will that my sons [X] and [Y] and [Z] should, between them, manage and control the [V] Group.

...

14.4 (gift to [the wife]) It is also my wish that, subject to clause 14.5 of my Will, [the wife] should receive from the [V] Group, a payment in cash of $16,500,000 ... I record that the gift of $16,500,000 to [the wife] (which I refer to as '[the wife's] Entitlement') is the amount that I have decided should be given to her and is not based upon any precise mathematical or valuation criteria.

14.5 (payment of [the wife's] Entitlement of $16,500,000) I direct that [V] Group should pay [the wife's] Entitlement to [the wife] only on the first to occur of any of the following events; that is:

(a) [the wife] is divorced from her husband [the husband]; or

(b) [the wife's] sixtieth (60th) birthday; or

(c) [AA] is wound up; or

(d) [BB] Family Trust is terminated or vested in its entirety; or

(e) the business assets of [BB] Family Trust, including goodwill, are sold or transferred to another entity or entities that are not owned or controlled by my sons or any of them.

14.6 (CPI indexation of [the wife's] Entitlement) I direct that [the wife's] Entitlement of $16,500,000.00 should be indexed to Adelaide CPI on each anniversary of my death.

14.7 (annual distribution to [the wife]) It is my wish that [the wife] should also receive from [V] Group, until the date (if any) of payment of [the wife's] Entitlement under clause 14.5, an annual payment of One Hundred and Fifty Thousand Dollars ($150,000.00) net of tax from the date of my death (I call this '[the wife's] Annual Distribution').

14.8 (CPI indexation of [the wife's] Annual Distribution) I direct that [the wife's] Annual Distribution of $150,000.00 per year should be indexed to Adelaide CPI on each anniversary of my death.

14.9 (manner of payment) It is my wish that my sons [X] and [Y] and [Z] should cause [V] Group to pay [the wife's] Entitlement and [the wife's] Annual Distribution to [the wife] in accordance with this clause 14 in the manner that they believe to be most effective and beneficial for [V] Group and [the wife] at that time, taking into account legal, financial, economic and taxation considerations existing at that time. My sons must ensure that [the wife] receives a net amount equal to [the wife's] Entitlement and [the wife's] Annual Distributions after all applicable income taxes (including income tax assessable to [the wife] in respect of [the wife's] Entitlement and [the wife's] Annual Distributions), levies, duties and similar charges that may apply at that time, whether or not presently in existence. By way of example, if [the wife] is liable to income tax on [the wife's] Annual Distribution, then that Annual Distribution must be increased such that the net amount received by [the wife] after payment by [the wife] of that income tax is equal to the amount in clause 14.7 (as adjusted for CPI under clause 14.8).

14.10 ([the wife's] children) I direct that, if [the wife] does not survive me, then my Executor must hold [the wife's] Entitlement and [the wife's] Annual Distribution upon trust for those of [the wife's] children who attain or have attained the age of twenty five (25) years, and if more than one then between them in equal shares." (emphasis in italics added)

[16]

It is not clear what evidence the Full Court relied upon in concluding that the wife had a "good relationship" with her brothers. It is true that the brothers had provided her with the two luxury vehicles. There was also evidence that in the past they had given her gifts of money for furniture and effects for the family home. But that "good relationship", and the fact that the brothers had never expressly stated they would not make the voluntary payments referred to in cl 14 of the will, if requested, must be considered against the evidence that, when it came to the wife's position under the father's will, the brothers had not been forthcoming.
First, the father died in 2009. The wife was not provided with a copy of her father's will when he died. In December 2013, shortly after her separation from her husband and more than four years after her father's death, her request of one of her brothers for a copy of the will was rejected. The wife first learned of the contents of the will in about February 2014 when the solicitor filed his affidavit and the wife subsequently had a conversation with one of her brothers.
In this context, it is important to record that the Full Court rejected a claim by the husband that the wife had failed to disclose and provide evidence of the value of her assets**[30]. The Full Court stated that it was "beyond doubt that the wife revealed these assets and interests at the time of the hearing"[31]** before the primary judge. That was unsurprising. At the hearing of the application for the ISM Order, the wife's financial statement had listed her shareholding in seven named private companies and specified an interest in the estate of her late father. The value of both the shares and her interest in the estate had been listed by her as not known.
Second, not only did the wife not know about the contents of the will, the wife had not received any income or capital from her father's estate.
The brothers' conduct since the father's death in relation to the will did not support a finding that the brothers would have caused the V Group to make a payment to the wife if requested. On the contrary, their conduct suggested an unwillingness to disclose the contents of the will to the wife and an unwillingness to comply with their father's stated wish in relation to the wife, their sister. In this respect, the wife's position stands in stark contrast to the position of a beneficiary of a discretionary trust who has no control over the trustee but has a reasonable expectation, by reference to past distributions, that the trustee's discretion will be exercised in their favour**[32]**.
To the extent that it might be suggested that no payments were made to the wife under the will because she was living with her husband at the time of her father's death and did not need the money at that time, it must be remembered that the brothers had personally given the wife gifts of money while she was living with the husband to fund the purchase of furniture and personal effects for the home she shared with her husband. And further, to the extent that the brothers were under some "moral obligation" to honour their father's wish, there was no evidence that such an obligation had compelled them to do anything in relation to that wish since their father's death, before or after the wife's separation from the husband.
Nevertheless, assuming the conclusion that the wife had a "good relationship" with her brothers was soundly based, there are at least two difficulties in relying on it to draw the inference. First, there is a difference between having a "good relationship" with a person and being willing to give them large sums of money on a regular basis. The latter does not necessarily follow from the former. Second, the payments were to come from the V Group, not the brothers in their personal capacity. Although the brothers controlled the V Group, it could not be assumed that they would have been willing to distribute money from one or more of the corporate entities and trusts which comprised the V Group to fulfil their father's wish. It is necessary to say something more about the relationship between the wife and the V Group.

[17]

Clause 14 of the will contained a "wish" that the V Group, through the brothers, pay the wife an indexed annual payment of $150,000 net of tax.
It is clear that the wife could not herself do anything to ensure that the V Group complied with the wish in cl 14. The V Group comprised private companies and a series of discretionary trusts. The wife was a minority shareholder in the V Group (a fact that she had disclosed), but she had no control over the V Group. The wife had no involvement formally or informally in the decision making of the V Group or in relation to the operation of any of the trusts that formed part of the V Group. The wife had not been and was not a director of any company in the V Group and had no active role in the businesses conducted by the V Group.
Nor was there any evidence to suggest that the V Group would make a payment in accordance with the wish. The financial position of the V Group was not in issue. However, there is a distinction between capacity to pay and willingness to pay. In cl 14 of his will, the father had also expressed a wish that in causing the V Group to pay the wife, the brothers should take into account "legal, financial, economic and taxation considerations existing" relevant to the wife and the V Group at the time of any payment. Aside from the V Group being described as vast, there was no evidence about those considerations generally. The capacity of the V Group to pay was a matter that supported the inference, but it did not speak to willingness to pay.
The V Group was not bound to observe the wish and, as at the date of the appeal before the Full Court, had not done so for the more than four years since the father had died. The evidence disclosed that there had been five distributions to the wife of dividends from certain companies in the V Group - in 2000, 2001, 2002, 2007 and 2008 - all before the father died. But the wife had no fixed entitlement under any of the trusts in the V Group and, since her marriage, there was no history of distributions from any of those trusts to her. Further, there was no history of the V Group having made any voluntary payments to the wife.
In this Court, the husband made a faint appeal to Countess of Bective v Federal Commissioner of Taxation[33] to suggest that, in fact, the brothers were under an equitable obligation to comply with cl 14. This argument was not raised in the Full Court and was not developed in argument in this Court. It turns on the construction of the will, of which only cl 14 and some of Annexure B were in evidence. Even if cl 14 were to impose such an obligation, that is not a conclusion that could be reached without full consideration of the will. That cannot be done here. And to the extent that any indication about the existence of such an obligation can be gleaned from cl 14 alone, it would appear to point against its existence. The words used in relation to the making of an annual payment are precatory**[34]**. And the terms are substantially different from those in Countess of Bective.
When considered in this context, the fact that there was no evidence that the wife had made a request for a payment under cl 14 of the will was not determinative. At best, any such request would be an intermediate step to a payment being made, and does nothing to diminish the matters considered above about the V Group's willingness to make a payment.

[18]

The above discussion demonstrates the difficulties with the Full Court's reliance on the wife's "good relationship" with her brothers and the wish. But there are a number of other matters which demonstrate that the inference drawn by the Full Court was not open.
First, contrary to the conclusions of the other members of the Court, it would not have been wholly inappropriate, given the paucity of the evidence before it, for the Full Court to attempt to form any subsidiary conclusion as to the detail of the timing and mechanics of any payment. The timing and mechanics of a payment were directly relevant to whether the wife was able to support herself adequately at any particular point in time. For example, assume that the wife requested the annual payments, and the brothers subsequently agreed to make the first payment 12 months from the date of the request. It may be that in 12 months' time, upon receipt of the payment, the wife would be able to support herself adequately. But that says nothing about whether the wife is able to support herself adequately in the intervening period. The Full Court had to find, on the balance of probabilities, that the wife would be able to adequately support herself from the point in time it discharged the ISM Order, namely 10 December 2013.
Second, reference should be made to a letter sent by one of the wife's brothers (in his capacity as executor of the father's estate) to the wife, in which the brother stated that "[a]ny voluntary payment by [V] Group to you is entirely a matter for [V] Group and its directors". The letter is carefully worded - the brother did not state that there would be any objection by him to making a payment. But, in that letter, he did not speak for the other brothers or the V Group. The letter did not, itself, provide a foundation for inferring that the brothers or the V Group would not object to voluntarily making a payment. The letter must still be considered against the matters discussed above in the context of the "good relationship" with the brothers.
Third, the Full Court drew the inference based on "presumptions" that were not open on the evidence or were wrong. It was not open to the Full Court to find that the brothers provided for the wife by supplying her with late model luxury motor vehicles "presumably via the V Group (but that is unclear on the evidence)". There was no basis for that presumption. Moreover, the further finding that the luxury motor vehicles provided to the wife replaced other brand new vehicles purchased previously for her "on the same basis" was also without foundation or simply wrong. The evidence of the wife, which was not the subject of cross-examination, was that both vehicles were purchased for her by her brothers (not the V Group) and that, prior to that, she had traded in a vehicle that had been acquired for her by her husband towards the purchase of one of the new vehicles. In any event, there is a difference between the brothers, in their personal capacity, purchasing two expensive vehicles for the wife, and the V Group making a voluntary annual indexed payment of $150,000 net of tax.
Finally, the Full Court referred to the fact that the wife had secured the benefit of a personal overdraft of $1 million**[35]**. The Full Court properly identified that the overdraft was a two-edged sword - any amount that the wife drew down would immediately become a liability that she must repay. Not only was the overdraft a liability, the overdraft was secured by a guarantee from the wife's mother and was evidence that the wife was unable to adequately support herself.

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