April 4

How discretionary are discretionary trusts?

Family (also often called discretionary ) trusts have been protecting assets, policing family benefit sharing, simplifying inheritance and spreading family income and the tax that goes with it.

On average, many of those trusts can theoretically benefit parents, children , grandparents, grandchildren, siblings and aunts and uncles, all multiplied by two to include their spouses – so, many millions of Australians who could potentially have access to a benefit from a discretionary or family trust.

Yes, theoretically, and yet, the vast majority of those people (“mere objects”) never receive a distribution from the trust.

It used to be thought that the trustee didn’t need to give these “mere objects” a second thought. The trustee was believed to have absolute discretion to decide who received what, if anything, from the trust. So, if somebody did not like the fact they were never considered, bad luck.

A recent  Victorian Court of Appeal decision in Owies v JJE Nominees Pty Ltd (2022) showed this to be not entirely the case .

The Owies Family Trust distributed income every year to parents and one adult child while the other two adult children missed out. The trust was valued at many millions of dollars , so the income was not insubstantial.

When the two adult children who never received anything sued, the trustee argued it had complete and unfettered discretion in making its decisions, which the court could not interfere with. The court agreed, but said it could ensure that the trustee acted appropriately in reaching that decision.

The trustee had to act in good faith, giving real and genuine consideration as to who might receive a benefit and with the trust’s primary purpose in mind.

In particular, a trustee could not adopt a fixed rule for distribution, or simply do what one of the key persons in the trust told it to do.

A trustee must engage in bona fide inquiries about the potential beneficiaries, and must then consider how to exercise discretion in light of the results of those inquiries.

The big question is, of course, how are you going to make that decision when the potential beneficiaries include two parents, two adult children, four grandchildren, four grandparents, umpteen siblings, aunts and uncles and all their spouses?

The court said there was no obligation on the trustee to make a detailed analysis to a level that is unworkable. However, in the circumstances of a family trust, the trustee would be expected to be informed about the differing circumstances, needs and desires of each possible beneficiary. That could still be a lot of work.

That problem is exacerbated by the court’s rejection of the argument that the family members saw one another regularly at various social functions, and could have made a claim for a distribution at those events. The court wanted the trustee to be more formal and proactive in its inquiry.

January 24

Divorce: Overview

Divorce is the legal end of a marriage (dissolution of marriage). Australia has ‘no fault’ divorce. This means that when granting a divorce, the Court does not consider the reason/s the marriage ended. Neither spouse needs to prove that the other did (or did not) do something which caused the breakdown of the marriage. The only ground for divorce is that the marriage broke down and there is no reasonable chance that the parties will get back together.

The Federal Circuit and Family Court of Australia (the Court) has the jurisdiction or power to deal with divorce under Part VI  of the Family Law Act 1975.

The granting of a divorce does not determine issues of financial support, property division or arrangements for children. It is simply a formal recognition that the marriage has ended.

Can I apply for a divorce?

You can apply for a divorce in Australia if either you or your spouse:

  • regard Australia as your home and intend to live in Australia indefinitely, or
  • are an Australian citizen by birth, descent or by grant of Australian citizenship, or
  • ordinarily live in Australia and have done so for 12 months immediately before filing for divorce.

You need to satisfy the Court that you and your spouse have lived separately and apart for at least 12 months, and there is no reasonable likelihood of resuming married life. It is possible to live together in the same home and still be separated. This is known as being separated but living under one roof.

Same-sex married couples are treated the same as other married couples and can apply for divorce if the marriage is recognised in Australia and you meet the requirements for divorce under the Family Law Act 1975.

If you were married overseas and your foreign marriage is recognised in Australia (in accordance with Part VA of the Marriage Act 1961), you must provide the Court with a copy of your marriage certificate. If your marriage certificate is not in English, you need to upload an English translation of the marriage certificate, together with an affidavit translation of marriage certificate from a certified translator.

If there are children aged under 18, a court can only grant a divorce if it is satisfied that proper arrangements have been made for them. You will be asked to provide information about any children of the marriage, or who were treated as members of the family in your application. Be sure to provide sufficient detail about the how the child/ren spend time and communicate with each parent, their education, health and financial support.

May 29

Guardianship and Administration Orders

What is Guardianship and Administration?

Guardianship or someone being appointed as an administrator applies in situations where an individual with a disability has limitations on their ability to make decisions for themselves, whether that be for their personal life, financial affairs, or their housing. They may need someone to make all those decisions, or perhaps just for one area, such as their housing. 

Per s3 of the Guardianship and Administration Act 2019 (Vic), an administrator is someone who cares for the individuals’ financial needs, whereas a guardian can make personal lifestyle decisions as needed. These two kinds of positions enable the appointed guardian or administrator to have legal decision-making power for the affairs of the individual. 

These orders are dependent on capacity – as in, does the person need a guardian or administrator to make decisions for them, or do they have capacity to make those decisions themselves? Generally, there is a presumption that every individual over the age of 18 is autonomous and has the capacity to make decisions for themselves. Capacity is defined as a person’s ability to determine the following:

  • Understand the information before them that is relevant to the decision and the effect of that information;
  • Retain the information to make that decision;
  • Use or consider that information as part of the decision-making process; and 
  • Communicate their decision, views, and needs to another person – can be through speech, gestures or other means. 

Sometimes, individuals cannot make decisions for themselves if they suffer from:

  • A disability that impacts upon their decision-making skills, such as intellectual or developmental disabilities; 
  • An acquired brain injury; 
  • Mental illness; or
  • Other illnesses, such as dementia or Alzheimer’s. 

However, capacity is not a stagnant issue or something that affects a person’s decision to make decisions about all factors of their life. Sometimes, it is dependent on the domain of the decision, such as finances or healthcare, or it can be time-specific, meaning that a person might have more capacity at the start of the day than at night. It can also be decision-specific, meaning that a person may be able to consent to a blood test, but not to significant surgery or operations. 

Sometimes, informal guardians or administrators can be appointed to look after certain needs of the individual, which can be performed by trusted family members or friends. Other times, there is a need for a formal arrangement in place. This can be done by the person formally appointing another as a guardian or administrator, such as through an enduring power of attorney. 

 

Any person who is concerned about an individual’s capacity to make decisions for themselves can make an application to the Guardianship list of VCAT. However, the application must include a report from the individuals’ social worker or doctor that validates their disability and lack of capacity to make certain decisions. VCAT will then hold a hearing to determine whether a guardian or administrator is appropriate and if so, who should be appointed.  

VCAT can appoint a guardian or administrator if there is no enduring power of attorney in place or in circumstances where the enduring power of attorney is deficient or inappropriate. If no suitable person can be determined, or if a family member does not want to take on that responsibility, then VCAT can appoint the Office of the Public Advocate to act as the person’s guardian or administrator.  

What must a Guardian or Administrator do?

A guardian or administrator must act in the person’s best interests, otherwise they will be in breach of their duty to the person. A guardian is also required, where possible, to consult the person whom they have guardianship over, to ensure that their best interests are maintained. This also allows the individual to be heard and be able to make or contribute to the decisions that affect them. 

If you are require assistance to make a VCAT application, or to make guardianship or administrator orders under an enduring power of attorney, it is crucial that you seek legal advice to determine the best course of action for your matter. Please contact us on (03) 9557 2915 or [email protected] for more information. 

May 29

Family Violence Intervention Orders

What is Family Violence?

Family violence is defined in s5 of the Family Violence Protection Act 2008 (Vic) as being behaviour that is physically, psychologically, emotionally, economically abusive or otherwise threatening, coercive or dominating behaviour that causes a family member to feel fear for their safety or wellbeing, or for another (such as a child). The laws around family violence also protect children who hear, see or are around family violence. 

The definition of family members is designed to cover a wide range of individuals, beyond just blood relations. For example, it includes people who are in an intimate relationship with each other, such as de facto, married, or domestic partners, any relatives by birth, marriage or adopted. It also includes individuals who you treat like a family member, like a guardian, carer or someone who is related to you in the familial structure of your culture. 

What is a Family Violence Intervention Order (FVIO)?

FVIOs are an order by the court to prevent someone from committing family violence (known as the respondent) against one or more protected individuals, who are often referred to as applicant or affected family members (AFMs for short). FVIOs can also have additional orders imposed on the respondent, such as prohibiting them from visiting the AFM’s home, school, or workplace, or prohibiting the respondent to contact the AFM via social media or via telephone or texts. 

FVIOs can be applied for on the court website, or a police officer responding to the incident can make an application. When the application is made, there are no orders imposed on the respondent. But police can also apply for an interim intervention order, which imposes conditions on the respondent until the matter is heard before the magistrate and determined on a final basis. 

What happens if you breach a FVIO?

Breaching FVIOs are extremely serious, as although FVIOs are civil orders, once a breach of a condition has occurred, a criminal offence has occurred. This means that criminal penalties will apply, if a person is found guilty of breaching any condition of the FVIO. 

For the AFM, if they become aware of a breach by the respondent, it is important that they contact police and inform them of the breach. It may be useful to keep details of the breach, and any other incident if the respondent does not stop. 

Depending on the severity of the breach, a respondent may be charged with a criminal penalty such as:

  • Fine;
  • Diversion;
  • Good behaviour bond; 
  • Community Corrective Order (known as CCOs); or
  • Gaol. 

If the breach is minor, police may determine to provide a warning or caution to the respondent. However, it is extremely important to avoid breaching a FVIO to ensure that criminal penalties are not laid against you. 

What if there is a parenting order already in place?

When there are inconsistencies between a parenting order and a FVIO, the decision of the Federal Circuit and Family Court of Australia (FCFCOA) will overrule any intervention order to the extent of the inconsistency. This is because the FCFCOA has Commonwealth jurisdiction, whereas intervention orders are made under state or territory law. 

This means that if there is a requirement for one party, the respondent to the FVIO, to pick up the child (who is an AFM) but the FVIO states that the respondent cannot come within 100m of the AFM or cannot go to the other parent’s property, then the parenting order overrules that condition. However, if the respondent attends the property of the other parent for reasons other than facilitating the pickup arrangement, then they will be in breach of the FVIO. 

However, it is important to seek legal advice, as navigating FVIOs and parenting orders are difficult and there is no one solution that will be applicable or appropriate to every overlapping matter. 

If you have breached an intervention order, or you are being affected by someone who is breaching an intervention order, please contact us on (03) 9557 2915 or [email protected] so that our team can assist you.