Property – wife fails in her attempt to have a related company pay partial property settlement

In Russo and Russo & Ors [2020] FCWA 182 (15 October 2020) O’Brien J dismissed a wife’s interim application for an order that third parties make payments totalling $1.1 million to enable her to fund her litigation costs and purchase a property.

The second respondent, Company A, was the trustee of Trust A. The husband and his parents were directors of Company A. The husband and his parents were shareholders of the third respondent, Company B, which operated a business on a farm of which the husband’s parents were the registered proprietors. Company B paid Company A rent for the use of farming land, such funds forming the majority of Company A’s income. The rental paid was highly inflated with the intention to quickly reduce Company A’s indebtedness. The wife deposed that Company A owed the husband and wife’s family trust $5,517,696.

The wife sought payment of $1.1 million from Company A to the family trust. She also sought that Company B continue to pay the inflated rent.

The court said (from [75]):

“The application of the broad terms of s90AE(2) is expressly limited by the conditions in s90AE(3), and by reference s90AE(4).

[76] The limitations … in s90AE(3)(b) and (c) are self-explanatory…

[77] The limitation … in s90AE(3)(a) … requires the court to be satisfied that the making of the order is either reasonably necessary to effect a division of property between the parties to the marriage, or reasonably appropriate and adapted (…)”

The court continued (from [142]):

“The … difficult question is whether an order made on an interim basis can properly be said to be reasonably necessary, or … appropriate and adapted, to ‘effect a division of property between the parties to the marriage’.

[143] The power under s79, … is to make orders ‘altering the interests of the parties to the marriage’ in property; … ‘division of property’ is not used.

[144] An interim order made pursuant to s79 must be capable of variation or reversal without resort to s79A or an appeal, Gabel & Yardley [2008] FamCAFC 162 (…)

The court concluded (at [198]):

“… [T]he order … may only be made if it is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; on the wife’s own case, the order is sought for the purpose of increasing the property … The distinction is … fatal to this aspect of the wife’s application (B Pty Ltd & Ors & K and Anor [2008] FamCAFC 113).”

Robert Glade-Wright is the founder and senior editor of The Family Law Book, a one-volume loose-leaf and online family law service (thefamilylawbook.com.au). He is assisted by Queensland lawyer Craig Nicol, who is a QLS Accredited Specialist (family law).

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