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In this episode, I discuss Strum J’s recent judgment in Stella & Stella, which involved Stanford arguments, multiple pools and late inheritances.
Overview
Stella & Stella was a matter heard by Strum J in the Major Complex Financial Proceedings list.
Each of the husband and wife was in their early- to mid-50s. They had 3 adult children together.
The total value of the non-superannuation property of the parties, or either of them, was around $16 M. There was controversy about add-backs and treatment of contingent tax issues. Around $10.5 M worth of the non-superannuation property had been obtained by the parties by way of inter vivos gifts or inheritances received from the husband’s late grandmother, or by distributions from a trust associated with her.
It’s important to note at the outset that those property interests were variously received by each of the parties, not only by the husband.
The crux of the case was how those gifts, inheritances and distributions to each of the parties were to be treated.
Positions
The husband’s position was that it was not just and equitable for there to be any property adjustment at all. He was running what family lawyers often call a Stanford argument.
The wife contended for a 2-pool approach:
- Pool A consisting of so-called “non-inherited interests”
- Pool B consisting of the property interests derived from the husband’s late grandmother.
She contended that it was just and equitable for there to be property adjustment with respect to Pool A, but not with respect to Pool B. In other words, she was running a Stanford argument only in relation to Pool B.
Legal Principles
His Honour traversed the authorities in relation subsection 79(2), being the subsection which requires the Court to assess whether it is just and equitable to make a property adjustment order.
His Honour referred to the observation by the Full Court in Bevan & Bevan that subsection 79(2) is unlikely to impact most cases, as the just & equitable requirement will readily be satisfied by virtue of the parties no longer living together, and there is no longer the common use of property.
Importantly, his Honour discussed the 2017 Full Court decision in Zaruba, where it was held that, whilst in the vast majority of cases the justice & equity question is appropriately addressed without making distinctions between individual assets, “the position is likely to be different in circumstances where … the characteristics of the property and the circumstances of its acquisition, improvement and the like can be seen to differ significantly…”
In relation inheritances, Strum J considered the two 2017 Full Court decisions, Holland and Calvin & McTier, which in turn referred to well-known authorities like Bonnici, and Farmer & Bramley.
The upshot is that the Court has a discretion as to how to treat late inheritances, including whether to include them in a global pool or deal with them separately, and how much weight to give to contributions made directly to the inheritance as opposed to global contributions in the relationship.
Strum J also, of course, discussed the principles arising from Gosper and Kessey, and how Chisholm J in 1997 discussed those principles in Pellegrino.
At paragraph 87 of his judgment, Strum J summarised the principles arising from the authorities. I highly recommend that you read that paragraph in full.
Some key points relevant to my discussion here are the following:
(q) Whilst, in the vast majority of cases, it will be appropriate to address the s 79(2) question by ascertaining the legal and equitable interests in property without making distinctions between individual assets, the position is likely to be different in circumstances where the characteristics of the property and the circumstances of its acquisition, conservation and improvement can be seen to differ significantly and where the parties’ relationship has taken on quite different characteristics during the period to which the s 79 enquiry is directed.
(r) The expression “any property of the parties to a marriage or either of them” in s 79(4)(a)–(b) is sufficient to encompass both the entirety of their property and their individual assets, such that if the parties’ interests in specific items of property differ, or they have made differing contributions, justice and equity may best be served by proceeding upon an asset by asset basis in the division of the property between them.
(s) The nature of a particular interest or interests in property, and when and how it was acquired, conserved, improved, or used, may be very relevant to whether a s 79 order should be made at all; whether contributions should be assessed globally or asset by assets or by reference to two or more pools; and what is the nature and extent of each party’s contributions. This calls for the exercise of discretion, to be exercised not by reference to whether property might conveniently be described as “an inheritance” or “after-acquired” but, rather, by reference to the nature, form and characteristics of the property in question and the nature, form and extent of the parties’ contributions of all types across the entirety of their relationship. However, there is no basis for excluding from consideration any property in which the parties have an existing legal or equitable interest.
(t) Whilst it might be convenient to describe property by reference to a characteristic (for example, as an “inheritance” or “post-separation” or “after-acquired” property), its place within the ambit of s 79 is determined by the fact that it exists as a legal or equitable interest of the parties to the marriage or either of them and that the nature, form and characteristics of it and the contributions of all types made by the party suggest that it should be treated in a particular way.
(u) A party cannot be regarded as contributing significantly to an inheritance received very late in the relationship or after it has terminated, except in very unusual circumstances, including the care of the testator prior to death.
(x) Where a relative of one of the parties to a marriage gifts property to both of the parties, dependent upon the circumstances of the case, it is open to the Court in such a case to look at the actuality and treat that as a “financial contribution made directly … on behalf of” the party related to the donor. In many such cases, that gift was only made because of that relationship and, in reality, as a means of benefiting that relative in the marriage. In other cases, the evidence, including evidence that the donor intended to benefit both spouse parties, may not justify that conclusion. If so, the application by the parties of that property to the marriage would, at least at that point, be an equal contribution by them.
On the facts of the case, his Honour determined that it was just and equitable to make a property adjustment order with respect to Pool A – the property which was not derived by way of inter vivos gifts or inheritances from the husband’s grandmother.
Without going into the detail, essentially, there was, irrespective of the husband’s initial contribution, jointly owned property, and no express consideration by the parties of how their property interests should be arranged.
In relation to the inter vivos gifts, Strum J held that there was insufficient evidence of the late grandmother’s intentions to find that the gifts to the wife were intended to specifically benefit her, rather than the parties jointly or the husband.
This was despite his Honour finding that the wife and the husband’s grandmother had had a close relationship.
In relation to the inheritances, particularly the inheritance received by the wife, Strum J considered the fact that there were separate bequests to the husband and the wife (among many others). His Honour gave significant weight to the language of the late grandmother’s will, including a reference to her “granddaughter-in-law”, as opposed to a term such as “my grandson’s wife”.
His Honour found that the evidence established a clear intention on behalf of the grandmother to separately benefit each of the husband and the wife by her separate bequests to each of them.
On that basis, his Honour determined that it would not be just and equitable to make an adjusting order with respect to the parties’ respective inheritances from the husband’s late grandmother.
However, the same could not be said of the inter vivos gifts, which his Honour grouped with the Pool A assets, and which were therefore subject to adjustment.
