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How the High Court Considered the Treatment of Financial Resources in Divorce

When Do A Testators Wishes Become A “Financial Resource” To Be Factored Into A Divorce

FROM THE HIGH COURT: WHEN DO A TESTATORS WISHES BECOME A “FINANCIAL RESOURCE” TO BE FACTORED INTO A DIVORCE?

William Sloan | Senior Associate | Kim Wilson & Co Family Lawyers

In a decision delivered on 8 June 2016[i] the High Court of Australia considered a case where a testator had set out in writing his wish that following his death his sons (who were to receive the majority of his wealth) should make a payment of $16.5 million to his daughter (their sister) – but only after the daughter had divorced her husband. Until the divorce it was the father’s wish that the brothers should pay $150,000 per year to their sister. Even though the father’s wishes gave rise to a moral obligation (and nothing higher) on a part of the brothers, the brothers were well-disposed towards their sister.

The sister did separate from her husband. However, by the time the divorce case[ii] was before the Courts the sister had done nothing to ask her brothers to make any payment to her (neither the annual payment nor the lump sum payment).

The High Court decided that the father’s wishes gave rise to his daughter having a “financial resource”. The Family Law Act says that “the Court shall take into account … the … financial resources of each of the parties”[iii] when deciding a divorce case.[iv] Because of the resource, the daughter’s claim for spousal maintenance from her husband failed.

The daughter had argued that her late father’s wishes did not amount to a “financial resource” (and consequently that the requirement under the Act to consider any resources had not been triggered – and consequently that her husband should pay maintenance to her).

How then did the Court arrive at the conclusion that the wishes were a “financial resource”?

The High Court had the following to say about the characteristics of a “financial resources”:

“… financial resources … cannot be confined to the present legal entitlements of the parties.

The reference to “financial resources” in the context of [the Family Law Act] has long been correctly interpreted by the Family Court to refer to “a source of financial support which a party can reasonably expect will be available to him or her to supply a financial need or deficiency”. The requirement that the financial resource be that “of” a party no doubt implies that the source of financial support be one on which the party is capable of drawing. It must involve something more than an expectation of benevolence on the part of another. But it goes too far to suggest that the party must control the source of financial support. Thus, it has long correctly been recognised that a nominated beneficiary of a discretionary trust, who has no control over the trustee but who has a reasonable expectation that the trustee’s discretion will be exercised in his or her favour, has a financial resource to the extent of that expectation.

Whether a potential source of financial support amounts to a financial resource of a party turns in most cases on a factual inquiry as to whether or not support from that source could reasonably be expected to be forthcoming were the party to call on it.”[v]

The facts in this particular case that lead to the conclusion that the wishes did amount to a financial resource included:

  • The brothers were “well-disposed” towards their sister. For example, they had purchased 2 luxury motor vehicles for her.
  • The daughter had known for an extended period of time[vi] of the existence and content of the document setting out her father’s wishes.
  • The daughter had not asked her brothers for payment.
  • Nor had she explained to the Court why she had not asked. The Court concluded that “her failure to do so allows the inference to be drawn that such explanation as she was able to provide would not have assisted her case.”[vii]

Broader implications

This particular case happens to be a case about the wishes of a testator. But, of course, financial resources is a much wider category and there are many other things that can fall within it.

The High Court itself gave another example[viii] of something that can fall within the financial resource category: being a mere beneficiary of a discretionary trust (without being trustee or otherwise having control of the trust).[ix]

 

[i] Hall v Hall [2016] HCA 23

[ii] In this article, the generic expression “divorce case” will be used for simplicity. Strictly speaking, in this case the Court was considering an application for financial relief (and in particular an application for spousal maintenance) – which is distinct from an application for dissolution of the marriage (divorce).

[iii] Family Law Act 1975 (Cth) s. 75. In Hall v Hall [2016] HCA 23 the Court was dealing with parties who had been married. Mirror legislation in nearly identical terms applies to parties who have been in a de facto relationship.

[iv] In Hall v Hall [2016] HCA 23 the Court was dealing with an order for spousal maintenance. However under the legislation the same mandatory requirement for the Court to consider any financial resources applies equally to an application for alteration of interests in property.

[v] Hall v Hall [2016] HCA 23 at [53] to [55] (footnotes omitted)

[vi] An Affidavit had been filed in February 2014 – see Hall v Hall [2016] HCA 23 at [18]

[vii] Hall v Hall [2016] HCA 23 at [48]

[viii] Hall v Hall [2016] HCA 23 at [54]

[ix] Although query the relationship between what is said in Hall v Hall [2016] HCA 23 about being a mere beneficiary amounting to a “financial resource”, with what has been said elsewhere about the rights associated with being a mere beneficiary amounting to “property”. See, for example, Kennon v Spry [2008] HCA 56 at [78].

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