Separated couple dispute Private Binding Ruling and funding in $50M asset pool
Kerr & Christie [2021] FamCA 624 (27 August 2021)
This is a case about a separated couple with a $50 million net asset pool. The wife seeks a Private Binding Ruling (BPR) and the husband requested $200,000 for expenses, which the wife opposes.
Facts:
The case involves a couple who separated in August 2019 and have three adult children. The wife controls approximately $35 million of the net asset pool of $50 million, while the husband controls about $15 million. The wife seeks an order for the husband, as a director of a company called B Pty Ltd, to make an application to the Commissioner of Taxation for a Private Binding Ruling (BPR) concerning capital gains tax liabilities on the assets held by the company. The husband opposes this order and prefers that the matter proceeds to a conciliation conference first.
The husband requested for a sum of money of $200,000, which he needs to cover his expenses and interim costs up to and including the conciliation conference. He seeks funding under alternative heads of power, which the wife strongly opposes.
At the interim hearing, the parties were able to agree on the division of personal property and disclosure issues through negotiations and compromise. However, the two issues of the Private Binding Ruling and the husband's funding request remain for determination.
Issue:
The main issue in this case is the wife's request for the husband to make an application to the Australian Taxation Office for a Private Binding Ruling (BPR) regarding the capital gains tax liabilities of a company called B Pty Ltd. The husband opposes this request and prefers to proceed to a conciliation conference first.
Applicable law:
Family Law Act 1975 (Cth) s 79 - provides that in property settlement proceedings, the court may make such order as it considers appropriate:
(a) in the case of proceedings with respect to the property of the parties to the marriage or either of them--altering the interests of the parties to the marriage in the property
Blueseas Investments Pty Ltd v Mitchell (1999) FLC 92-856; [1999] FamCA 745 - where it was held that it must be remembered that the principle that underlies the jurisprudence about interim financial provision within the family law jurisdiction is the imbalance of power between litigating parties.
Analysis:
The Court was asked to consider whether it had the power to make an order requiring the husband to compel a third party company to make an application to the Australian Taxation Office for a Business Premises Rollover. The husband argued that the Court did not have such power, while the wife argued that the power was found in s 114(3) of the Family Law Act 1975. The Court found that it did have the power under s 114(3), but would not make the order until after an unsuccessful conciliation conference. The husband had practical control of the company and could cause it to make the BPR application. The husband's opposition to the order was difficult to understand given that evidence would need to be led at a final hearing about whether there was a capital gains tax liability and if so, in what quantum.
The Court was also asked to consider the husband's claim for interim financial provision from the wife in the sum of $200,000. The husband submitted that the order could be made on a number of alternative bases, including an interim property order, a maintenance order, or as a costs order. The Court found that the preferred statutory foundation of the claim was under s 117(2) of the Act. The claim for $200,000 bore no resemblance to the amounts referred to in the husband's minute of order, but the claim was supported by the husband's evidence that he was asset rich but cash poor. The Court was satisfied that the wife had the capacity to meet an order for interim financial provision in the sum of $200,000.
Conclusion:
The matter will be referred back to the Docket Registrar for a Direction Hearing on September 8, 2021, at 2 pm. The purpose of the hearing is to make directions for the matter to proceed to Conciliation Conference and allocate a date for it. If the parties don't reach an agreement four weeks after the Conciliation Conference, the husband, in his capacity as a director, shareholder, and public officer of B Pty Ltd, must apply for a Private Binding Ruling from the Commissioner of Taxation in accordance with Division 359 of the Taxation Administration Act 1953 (Cth). The ruling should ask if the majority underlying interests in the properties owned by the company have been held by the same ultimate owners since before September 20, 1985, and if any capital gain arising from the disposal of the properties is disregarded. If the Commissioner is not satisfied, a ruling should be made identifying the date that triggered the change resulting in that property being subject to capital gains. The husband must make the application collaboratively with the accountant/advisor for the wife, answer all requests for information and documents from the Commissioner of Taxation in a timely manner, confirm in writing that the information provided in the final Private Binding Ruling is true and correct, and provide the wife with a copy of all communications and correspondence with the Commissioner of Taxation within seven days of sending/receiving any such communication and or correspondence.
Case: Kerr & Christie [2021] FamCA 624
Judgment of: ALTOBELLI J
Counsels:
Counsel for the Applicant: Mr Alexander
Solicitor for the Applicant: Russell Kennedy Aitken Lawyers
Counsel for the Respondent: Mr Richardson SC
Solicitor for the Respondent: Barkus Doolan
