Full Court of Family Court Finds No Child Support Resulting Trust Favouring the

Keywords:  child support; private agreement; school fees; repaid; trust; resulting trust; beneficial interest; administrative assessment; child support trust.

Relative Law: Family Law Act 1975 (Cth); Child Support (Assessment) Act 1989 (Cth)

Introduction

The case of Bass & Bass and Anor [2016] FamCAFC 64 (29 April 2016) was heard in the Full Court of the Family Court of Australia in front of judges Strickland, Murphy and Kent.  The case considered a child support trust established pursuant to orders made between the parties.  The case involved the husband appealing Judge Aldridge’s previous decision refusing the return of $300,000 held in the trust to the husband.  The husband claimed the trust money was not being used for the purpose of financing the remaining children’s private school education as the children were not attending private school.

The husband argued that the beneficial interest in the monies settled by him was for the main purpose of providing private school education for the children.  It was argued by the husband that $30,000 of the $300,000 was attributable to the trust’s purpose and the rest was a resulting trust for the husband.  The husband’s appeal was dismissed as it was found that there was no merit in the husband’s argument and that he did not retain any beneficial interest in the child support trust.

Background

On 17 July 2008, consent orders were made to establish a child support trust for the children to undertake private school education.  At the time the consent orders were made, three of the six children were aged over 18 years of age and the remaining children were 16, 14 and 10 years old.  One of the children had an intellectual disability and special needs.

The consent orders included that pursuant to the Child Support (Assessment) Act 1989 the husband was to pay child support to the wife as and by way of departure from administrative assessment.  As a result the husband’s annual rate of child support by administrative assessment was reduced to nil.  Included in the terms of the agreement was that any arrears of child support were annulled and the wife’s application for child support maintenance be dismissed.

The husband’s intention was to establish a child support trust to eliminate any past, present or future administrative assessment of child support.  The husband was ordered to pay $350,000 into a bank out of which both the husband and wife were appointed trustees.

Order 22(4) specified the five following mandatory terms of the child support trust that both parties had to follow:

22(4)(1) until the child support trust is wound up, its capital must be applied to meet the obligations 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 child support trust 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 child support trust for the child absolutely.

22(4)(5) all income of the child support trust is to be paid to the husband as and when it is received, on the basis that the Husband is solely responsible for:

1 all costs associated with the administration of the child support trust (except the costs referred to in Order 22.2); and

2 all tax arising on income received by the CST.

The Appeal

The primary ground of the husband’s appeal asserted that the main purpose of the trust was for the sole purpose of financing private school fees for the children.

Judge Aldridge concluded that from the terms that ‘the surplus is there for his [the child’s] benefit’.  Judge Aldridge disagreed that the primary purpose of the trust was for education alone and therefore the trust had not failed.

Judges Strickland, Murphy and Kent agreed with Judge Aldridge that the child support trust did fulfill its primary purpose and that the child support trust had several purposes.

With the husband’s resulting trust argument, the court thought there was nothing novel nor contentious about the proposition that a resulting trust be set up in favour of the settlor as “part of the beneficial interest of the property in question which has not been disposed of by the express trust”.

Their Honours determined that with trusts, the circumstance determine the issue.  They cited Byrnes v Kendle (2011) 243 CLR 253 where the legal effect of the child support trust was not affected by the secret intentions of the parties but the overall manifest intentions of the parties.  The intentions of the parties was clear from the terms establishing the child support trust and reinforced by the circumstances.  There was no express terms that the residue of the trust was to revert to the husband, nor was there any term alluding to such an outcome.

In their joint judgement Judges Strickland, Murphy and Kent stated that there was merit in the submissions made by the case guardian that:

102. The ordinary rules of construction as applied to the construction of contracts are applied in the interpretation of a Court Order: JKB Holdings Pty Ltd v de la Vega[2013] NSWSC 501 Lindsay J at 87;b. 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 [82] citing Morgan v 45 Flers Avenue Pty Ltd(1987) 11 NSWLR 573 at 579;c. 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 85 citing Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352: Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 at 3 to 5; andd. The same rules of construction of contracts apply to trusts: Byrnes v Kendle per Heydon and Crennan JJ at 102.

Judges Strickland, Murphy and Kent found no merit in the husband’s contention that he retain any beneficial interest in the child support trust.  Their Honours consequently rejected the husband’s claim that the residue of the trust be held in a resulting trust in the husband’s favour.