Case Note: Keating & Keating [2019] FamCAFC 46

by Andrew Lind on 16 August, 19

Is a Court entitled to consider family violence in assessing a party’s contributions based entitlements during a property settlement? The answer is yes, in a limited range of cases. The rationale for this was explained in the case of Kennon & Kennon (1997) FLC 92-757 where it was said that (at 84-294):

 “… where there is a course of violent conduct by one party towards the other during the marriage which is demonstrated to have had a significant adverse impact upon that party’s contributions to the marriage, or, put the other way, to have made his or her contributions significantly more arduous than they ought to have been, that is a fact which a trial judge is entitled to take into account in assessing the parties’ respective contributions within s 79…”

(emphasis my own)

These considerations apply in only a limited range of cases. To be relevant, it must be shown that the conduct had a “discernible impact” on the contributions of the other party (84,295).

In the recent decision of Keating & Keating [2019] FamCAFC 46 the wife asked the Court to make an adjustment to her entitlement at property settlement on the basis that family violence had a significant adverse impact on her ability to contribute to the marriage.

She gave evidence that she had been exposed to significant family violence by the husband during their relationship and after their relationship had ended. The husband admitted one incident of family violence some ten years before trial but otherwise denied all allegations of family violence.

The primary judge said that the wife provided insufficient evidence to satisfy him that the family violence made her contributions more onerous.

The wife appealed the decision. The Full Court of the Family Court of Australia did not express a view about whether the primary judge was wrong in his approach, but the majority took the opportunity to clarify the law on this point.

Their Honours referred to the case of Spagnardi & Spagnardi [2003] FamCA 905. The Full Court in that case, in discussing Kennon & Kennon, said that it is necessary to provide evidence to:

  • establish the incidence of domestic violence
  • establish the effect of domestic violence
  • enable the Court to quantify the effect of family violence upon the capacity of a party to contribute

In Keating & Keating, Ainslie-Wallace and Ryan JJ criticised the third point. Their Honours felt that the reference to “quantification” suggests that the evidence of the victim spouse must be corroborated by expert evidence. They confirmed that it is well settled that evidence of the victim spouse is not required to be corroborated before it can be accepted (at [42]).

It was noted that perhaps the reference to “quantification” was simply confirming that there does need to be evidence to show that there was a discernible impact on the ability of the victim to contribute although that evidence does not need to quantify that impact.

In summary, the Full Court in Keating & Keating found that in family violence cases involving a Kennon & Kennon argument, the focus should be on the “discernible impact” of the family violence rather than any lack of evidence allowing “quantification” of that impact.

Should you need advice regarding property settlement and experienced family violence, set up an appointment with one of our family law team. Call (07) 3252 0011.

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It is not uncommon for churches to find themselves in a scenario where they need to consider removing a person from the church membership or board. A relatively recent decision of the New South Wales Supreme Court is particularly instructive on this matter whether your church has a corporate structure or is an unincorporated association.

This case concerned the expulsion of a member, Mr Subeski, from the membership and board of a company limited by guarantee and his subsequent application for that decision to be reversed. The key issue in this case was whether Mr Subeski was extended natural justice in respect of the resolution that proposed to expel him as a member, which in turn expelled him from the church board. It was a pre-requisite for all board members to also be members of the company.

In this case the church had given a written notice to Mr Subeski to provide him with an opportunity to attend an upcoming board meeting and also respond to an intention to remove him as a member. This notice also provided a very detailed narrative about the sorts of things that the council/ board would be considering in their decision, and that Mr Subeski could make written submissions for their consideration. Importantly, the notice also specified that Mr Subeski was to give three days notice in writing if he intended to attend the meeting in person. This was to allow the church to arrange appropriate security measures in light of Mr Subeski’s  aggressive, abusive, and at times violent behaviour on a previous occasion relating to the same matter. Mr Subeski decided to make various written submissions, then personally arrived at the board meeting without having given any prior notice of his intention to attend. When he arrived, the board called the police who removed him from the property.

The court decided that there was no denial of natural justice in the way the board meeting was conducted. It was viewed that the church had been eminently reasonable in their request for notice from Mr Subeski, and that he had decided to forfeit his right to be heard orally at the meeting by not providing notice of his intention to attend.

As a result, it was decided that Mr Subeski had been effectively removed as a member. The court also declared that he was not a board member and that he was permanently restrained from representing that he was a board member or representing that he was a member.

This case highlights the importance of correctly drafting and particularising a notice to persons such as Mr Subeski, because the courts are clearly willing to involve themselves in church governance matters where it is in the interests of justice.

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Background

In the 2009-10 Budget, the former Government announced that it would amend the ‘in Australia’ special conditions for tax concession endorsements as found in the Income Tax Assessment Act 1997 (ITAA 97).

Since that announcement, the following steps have taken place:

  • July/August 2011 – First exposure draft & public consultation period;
  • April/May 2012 – Second exposure draft & public consultation period;
  • 23 August 2012 – Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012 (the 2012 Bill) introduced to Parliament;
  • 29 June 2013 – Some of the provisions of the 2012 Bill were enacted in the Tax Laws Amendment (2013 Measures No. 2) Act 2013 with effect from 29 June 2013. From that time, for an entity to be exempt from income tax, it must (a) comply with all the substantive requirements in its governing rules; and (b) apply its income and assets solely for the purpose for which the entity is established;
  • 5 August 2013 – the 2012 Bill lapsed at the dissolution of Parliament;
  • 14 December 2013 – the present Government announced that it would proceed with reforming the “in Australia” requirements. (It also announced that it would not proceed with defining ‘not-for-profit’ throughout the tax laws, which had been a part of the 2013 Bill.)

The latest development

On 12 March 2014 new draft legislation, draft regulations and explanatory material was released – Restating and Centralising the Special Conditions for Tax Concession Entities. We enter a new consultation period. The Government is inviting submissions from all interested individuals and organisations, with submissions closing on 7 April 2014.

The Government has indicated that improvements have been made to the exposure drafts to address concerns raised by the not-for-profit sector in relation to the 2012 Bill.

Full details of the exposure drafts and explanatory materials may be found here.

Summary of the new special conditions for tax exempt entities

Under the latest draft, for an entity to be exempt from income tax it must satisfy the following special conditions:

1. be a non-profit entity; and

2.(a) operate principally in Australia; and

(b) pursue its purposes principally in Australia; and

3. (a) comply with all the substantive requirements in its governing rules; and

(b) apply its income and assets solely for the purpose for which the entity is established.

No substantive change from the new special conditions as expressed in the 2012 Bill.

The “in Australia” requirement

As has been noted previously, the re-stated “in Australia” special condition (refer 2 (a) & (b) above) moves away from the expenditure based test in the current “in Australia” requirement. This will allow the Commissioner to consider a wider range of circumstances in determining if the condition is satisfied. The explanatory material notes, at para 1.59:

            … the Commissioner is expected to consider all surrounding circumstances: including factors such as where the entity incurs its expenditure; where it undertakes its activities; where the entity’s property is located; where the entity is managed from; where the entity is resident or located; where its employees or volunteers are located; and who is directly and indirectly benefitting from its activities.

“Principally” means mainly or chiefly. Less than 50% is not considered principally. (Explanatory Material Para 1.60)

As is currently the case, tax exempt entities have an obligation to self-assess their ongoing entitlement to exemption. The wider range of circumstances that must now be considered in relation to the “in Australia” requirement will potentially make this self assessment more difficult.

“Tracing” of money given to another entity

As was the case with the 2012 Bill, if a tax exempt entity provides money, property or benefits to another entity, and the other entity is not tax exempt, then the use of that money, property or benefit by the receiving entity (or any other entity that it is subsequently passed on to) must be taken into account when determining whether the original tax exempt entity has satisfied the “in Australia” requirement.

This requirement to trace gifted monies was a cause for concern with the 2012 Bill. The Government has responded to these concerns by inserting an additional clause into the latest draft that limits the tracing requirement as follows:

…take into account the use of the money, property or benefits by an entity outside Australia only to the extent that it would be reasonable to expect the first-mentioned entity to have knowledge of, or to obtain knowledge of, the use of the money, property or benefits outside Australia.

We welcome this addition although what “reasonable” means may cause some concern and will take some time to be clear. What is “reasonable” would no doubt be greater the greater the value of the benefit moving overseas.

While the explanatory materials make the point that the tracing requirement ‘should present no greater an obligation on entities than already exists under charity law and the existing ATO endorsement framework’ (para 1.81), it is a wake up call to entities to be vigilant about how their funds are used, and where they ultimately end up. Your obligations don’t end when the funds go out of your bank account.

Disregarded amounts

Under the current “in Australia” requirement, money or property received by a tax exempt entity by way of  gift or government grant, and which the entity distributes overseas, can be disregarded in determining whether the entity satisfies the current “in Australia” requirement. (Section 50-75 ITAA 97)

When the first exposure draft re-stating the “in Australia” special condition came out in July 2011, the ‘disregarded amounts’ provision was completely removed. It re-appeared in the next draft and was included in the 2012 Bill, but significantly changed from its current form. The latest draft is virtually identical to the 2012 Bill in this regard, but the Government has now released draft regulations, which were really essential to be able to give full meaning to the re-stated disregarded amounts provision.

Essentially, an entity will only be able to disregard money it has received by way of gift or government grant in determining if it satisfies the re-stated “in Australia” requirement, if it complies with the regulations as set out below.

Also, to be able to rely on the disregarded amounts provision, the provider of the gift to the tax exempt entity must not be entitled to a DGR receipt, and must not itself be a tax exempt entity.

The draft regulations setting out conditions to be complied with in order to make use of the disregarded amounts provision:

  (2)  The entity must take reasonable steps to obtain evidence showing that:

                     (a)  the activities it conducts outside Australia are a genuine attempt to give effect to its purposes; and

                     (b)  the use by the entity of money or property outside Australia is effective in achieving the entity’s purposes.

[Our note: Your “Purposes” need to be carefully examined to ensure that they extend to advancing your charitable purpose overseas or at least are not limited to Australia.]

             (3)  If the entity works with another person (however described) that:

                     (a)  is located in a country in which the entity conducts an activity; and

                     (b)  works with the entity on the activity;

the entity must take reasonable steps to obtain evidence showing that it effectively interacts and coordinates the conduct of the activity with that person.

             (4)  The entity must not have engaged in conduct, or failed to engage in conduct, in circumstances in which the conduct or failure may be dealt with under an Australian law:

                     (a)  as an indictable offence (whether or not the law also permits it to be dealt with as a summary offence); or

                     (b)  by way of a civil penalty of at least 60 penalty units.

Note 1:       The entity is always expected to comply with all Australian laws. An infringement of an Australian law that is serious enough to attract a penalty mentioned in subregulation (4) means that the entity cannot obtain the benefit of subsection 50?50(5) of the Act.

Note 2:       Section 4AA of the Crimes Act 1914 explains the current value of a penalty unit.

Note 3:       The operation of some Australian laws has been extended to overseas jurisdictions. Subregulation (4) is not intended to extend the operation of any Australian law to an overseas jurisdiction.

             (5)  If the entity is a registered entity under the Australian Charities and Not?for?profits Commission Act 2012, it must be in compliance with the governance standards under that Act:

                     (a)  to which it is subject; or

                     (b)  to which it would be subject but for any provision of that Act limiting the application of those standards to it.

             (6)  If the entity is not a registered entity under the Australian Charities and Not?for?profits Commission Act 2012, it must have reasonable processes in place:

                     (a)  to ensure that it is giving effect to its purposes as set out in its governing rules; and

                     (b)  to manage the risk of a breach of its governing rules; and

                     (c)  to manage the risk of fraud or misconduct by an entity responsible for the management or administration of the entity.

(emphasis added)

The draft regulations are not as onerous as what had been hinted at in earlier material; however it is clear that a considerable compliance burden will fall upon those entities wanting to rely upon the disregarded amounts provision, and this will be felt most by smaller, less resourced entities.

We also note that the effect of draft item (5)(b) above, is to require a Basic Religious Charity (as that term is used under the Australian Charities and Not?for?profits Commission Act 2012) that wishes to make use of the disregarded amounts provision, to comply with the ACNC governance standards, which it is otherwise exempt from.

The final and important point to note is that if you are confident that you can satisfy the re-stated “in Australia” condition without relying upon the disregarded amounts provision, this would clearly be the preferred course, as then you will not be burdened by the additional regulatory requirements.

For many entities whose operations are Australia focused, and whose overseas involvement is minimal, the re-stated “in Australia” special condition should not be problematic.

For those entities which have a strong overseas focus, and for people contemplating establishing a new entity with an overseas focus, the compliance burden, and the resourcing required to meet that burden, will need to be carefully considered.

We note that our above commentary is limited to addressing the draft changes for tax exempt entities, and does not address the draft changes for deductible gift recipients.

As noted at the beginning of our commentary, the latest released materials are only exposure drafts, and we have entered another consultation period. There is still a long way to go before we have new legislation in place. We will be continuing to monitor developments.

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In March 2017, the Supreme Court of Victoria heard a Family Provision Application in an estate where the Deceased passed away without a Will.

Davison v Kempson & Ors [2017] VSC 173

The Deceased passed away on 13 April 2014 leaving an estate with a net value of $1.43 million.

Under the default intestacy rules, the estate was to be distributed equally between her three surviving children: Marc, Remy and Pascale.

Notwithstanding that the three siblings each had an equal entitlement to the estate under the default intestacy rules, Marc successfully applied for further and better provision from the estate under Part IV of Administration and Probate Act 1958 (Vic).

Marc was awarded an additional $125,000 from the estate, with the remainder to be divided equally between the Deceased’s three children.

Similarly in Queensland, under Part IV of the Succession Act 1981, an eligible applicant can apply to the Court for further and better provision out of a deceased estate in the event adequate provision is not made from the estate for their proper maintenance and support.

Alleged Disentitling Conduct

One argument raised against Marc was that his conduct, both before and after the Deceased passed away, disentitled him from further provision.

Marc, who had lived with the Deceased for a number of years, had refused to vacate the Deceased’s home after the Deceased passed away.

This had, in turn, prevented the Administrator from selling the property, thereby delaying the due administration of the estate and causing the Administrator to commence legal action to have Marc removed from the property.

Upon application by the Administrator, the Court found that Marc had continued to frustrate the orderly administration of the estate, causing additional costs to be incurred.

Accordingly, the Court ordered Marc vacate the property as well as bear the Administrator’s legal costs for the application which were to be paid out of Marc’s share of the estate.

It was also argued that Marc was disentitled from further provision from the estate on the basis that he had allegedly:

  • withdrawn $500,000 from a bank account of the Deceased prior to her death in the form of a bank cheque (before later returning the money);
  • failed to maintain the property;
  • failed to pay rates for the property; and
  • denied the estate rental income for a 2.5-year period while he refused to vacate the property.

Notwithstanding this alleged conduct, Marc was successful in his family provision application.

Decision

In deciding the case, some key considerations of the Court were that:

  • Marc had lived with Deceased for most of his adult life in what appeared to largely be a loving relationship;
  • Marc had sacrificed his career to support the Deceased, who was legally blind and required care, which Marc provided;
  • Marc was in financial need, with limited income and no assets, and despite numerous job applications was unlikely to be gainfully employed;
  • Marc’s conduct before the Deceased’s death did not have a detrimental impact on the Deceased or the estate;
  • Marc’s conduct after the Deceased’s death was only relevant insofar as it may have:
    • demonstrated his need was as a result of his own default; or
    • caused a negative impact of the value of the estate.
  • In the circumstances, Marc’s conduct postdating the Deceased’s death was not disentitling and there was no evidence that it had caused a decrease in the value of the estate.

Lessons From Davison v Kempson

Davison v Kempson demonstrates some key features of Family Provision Applications, including that:

  • Family Provision Applications can be brought in circumstances where there is no Will;
  • A successful applicant can obtain an order for more than an equal share of the estate, depending on the circumstances of the case;
  • Ultimately, the amount of provision in a successful application is decided at the discretion of the Court having regard to all the circumstances of the case;
  • Disentitling conduct is misconduct towards the Deceased (as opposed to inconvenience caused to other people, such as carers of the Deceased);
  • Conduct of an applicant after a person passes away has limited relevance to the issue of whether a person has engaged in disentitling conduct.

If you feel you have not been adequately provided for out of a Deceased person’s estate, and would like us to consider whether you are eligible to make a Family Provision Application, please don’t hesitate to contact our team of Wills and Estate professionals.

We can assist you by advising on the application process and, where appropriate, acting in the application.

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Under the Sex Discrimination Act 1984 (Cth), it is unlawful to discriminate against someone because of their sexual orientation. This includes terminating one’s employment based on their sexual orientation.

In the case of Bunning v Centacare, the plaintiff was an employee of the defendant which was an organisation run by the Catholic Church. In August of 2013 the plaintiff was dismissed for gross misconduct by bringing the defendant into disrepute for her associations with the Brisbane Poly Group.

The plaintiff identified as being polyamorous and begun participating and associating with a Brisbane Poly Group during the period of her employment with the defendant. The conduct engaged in by the plaintiff in relation to the group was contrary to the values of her employer and was contrary to their Code of Conduct and Policies. It was on this basis that the plaintiff was dismissed from her employment.

The pivotal argument in this case was whether polyamory was a sexual orientation for the purpose of the Act and therefore whether the defendant had discriminated against her by terminating her employment for the above reasons.

Section 4 of the Act defines sexual orientation to be an orientation toward:

  • Persons of the same sex
  • Persons of different sex
  • Persons of the same sex and persons of a different sex.

The Court held in this case, that the definition in the legislation operates in a way that confines it “to the words actually used”. The Court held that orientation, as it is defined in the legislation, is interpreted as “a state of being”, an “attraction”, and an “inclination towards”. They went further to distinguish this “sexual state of being” from its manifestation into a “sexual behaviour”.

The Court rejected the notion that a person’s behaviour is a determinant of sexual orientation and cautioned that if this were the case illegal behaviours such as paedophilia and necrophilia may have protection under such a definition. The Court maintained the view, under the legislation, that orientation is the cause of behaviour not the result of the behaviour. Their reasons for this was that “sexual orientation is something far more than how one behaves sexually” and that behaviours should be distinguished and may be treated differently to an orientation.

The Court held that polyamory is a manifestation of a state of being, a lifestyle, not a “state of being” itself. Because it is defined as behaviour not orientation, discrimination on this basis did not fall within the ambit of the Sex Discrimination Act. Because of these reasons the action for unfair dismissal on the basis of Sexual Discrimination was unsuccessful.

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