Sandini Pty Ltd atf the Karratha Rigging Unit Trust & Ors v. Ellison & Ors v. Commissioner of Taxation of the Commonwealth of Australia & Ors

[2018] HCA Trans 190

(Judgment by: Bell Gordon JJ)

Sandini Pty Ltd atf The Karratha Rigging Unit Trust
Wabelo Pty Ltd ATF The Ellison Family Trust
Ellison
Ellison WA Pty Ltd
v. Ellison
Wavefront Asset Pty Ltd atf The Felstead Family Trust
Commissioner of Taxation

Court:
High Court

Judge:
Bell Gordon JJ

Hearing date:
Judgment date: 14 September 2018

Perth

Judgment by:
Bell Gordon JJ

MR A.J. MYERS, QC: May it please the Court, I appear with MR F.D. O'LOUGHLIN on behalf of the applicants in both matters. (instructed by Jackson McDonald)

MS H.M. SYMON, QC: If the Court pleases, I appear with my learned friend, MR J.F. PARK, in both matters. (instructed by Park Legal Solutions)

MR S.B. LLOYD, SC: I appear with my learned friend, MR D.P. HUME, for the Commissioner, your Honours. (instructed by Australian Government Solicitor)

BELL J: Yes, Mr Myers.

MR MYERS: Thank you, your Honours. At the application book pages 194 to 195, are set out the special leave questions which we advance. The questions fall into two parts because of the way in which the case was put below. In the first place, it was contended that the order of the Family Court, of its own effect caused a disposal of the shares, the subject property. Alternatively, it was put that the effect of the arrangement that was made between Mr Ellison and Ms Ellison afterwards, enabled one to say that there was a disposal of the property by reason of the provisions of the taxation law which extend what constitutes a disposition of property of party of the marriage.

BELL J: That is the involvement issue.

MR MYERS: The involvement issue - - -

BELL J: Yes.

MR MYERS: - - - and because of and so on.

GORDON J: Can I ask one question up front, Mr Myers, and that is this? Is it the position that when I read the orders of the Family Court as they currently stand that what was set out there was not implemented?

MR MYERS: What - that was set out there was implemented, we say.

GORDON J: Right.

MR MYERS: We say on the first basis that the order itself effected a disposal within the meaning of the income tax legislation of the 2,150,000 shares.

GORDON J: Shares.

MR MYERS: That is the first contention that I would like to examine and develop.

GORDON J: I see.

MR MYERS: Now, could I say something about the order? Your Honours have looked at the order obviously and it is conveniently set out in paragraph 48 of the reasons of the Federal Court on which the appeal is made. There are two matters about the order to which particular reference is made. Sandini is described as trustee of the Ellison Family Trust - - -

GORDON J: And it is not.

MR MYERS: It was not and never was.

GORDON J: No, that is my point. So how could it ever be implemented?

MR MYERS: It is just a mis-description.

GORDON J: So, why do you not go back and get it fixed?

MR MYERS: Well, the word "you" in that sentence - why has not my client done it? I am unable to answer that. The matter has gone to the point where we are here.

GORDON J: I read somewhere in the papers there is an application on foot to, in effect, rectify the order under 79 of the Family Law Act.

MR MYERS: No, it has been withdrawn, that application. That application is no longer extant, I am instructed.

GORDON J: Right.

MR MYERS: Whether it could be reinstated is another matter, but it is not extant.

GORDON J: I see.

MR MYERS: Can I just say what we say about those words "as the trustee of the Ellison Family Trust"? They are a mis-description as the judge below said. The point of it is they add nothing to the question of the capacity of Sandini to effect the transaction and add nothing to the capacity of the court to make the order. They are otiose. They are a description of or in relation to Sandini which does not affect either the power of the court or the power of Sandini to carry out the order.

BELL J: In the event Sandini failed to carry out the order, was a remedy available and what was that?

MR MYERS: Well, we say that Sandini did not do the acts which are described in the third order.

BELL J: Yes.

GORDON J: Sandini could not do it. As trustee for the Ellison Family Trust it did not have the capacity to transfer shares, did it?

MR MYERS: But Sandini had the capacity to transfer the shares. It does not have to do it as trustee of the Ellison Family Trust. That is not part of the order.

GORDON J: Was not that the only capacity in which it was joined as a party to the proceedings? I mean, under 79, 79A of Part VIII of the Family Law Act third parties are joined in order for them to be bound by the orders of the court. The whole scheme of the Act is such so that it operates in that way. They are joined, they give a natural justice and the taxation effects are taken into account as one of the matters under Part VIII.

MR MYERS: But my point is simply this, your Honour, that the description of Sandini as the trustee of the Ellison Family Trust does not limit, define Sandini's powers, capacity at law to do what it is ordered to do. This is a description of it. It is a characteristic of it no doubt but it is not a characteristic that affects its capacity. Now, the Family Court in fact ordered Sandini Pty Ltd to be joined - as trustee or as anything else is simply otiose.

GORDON J: Well, I do not know that is right, Mr Myers. This is a serious question. Under 90AE of the Family Law Act the court has given power to make orders binding third parties and a whole range of considerations have to be taken into account and one of the purposes is, in order to make orders under 79 which bind an entity, bind a party - and that is the capacity in which it is joined. It is not joined to Sandini Pty Ltd on its own. It is joined in a particular capacity.

MR MYERS: But it can only be bound as Sandini. A trustee that holds property acts in its own capacity, its own legal capacity. The effect of what it does might depend upon the terms of the trust deed but it does not deal with the capacity of the person described as a trustee to do acts. The order does not endow Sandini with any capacity or limit in any way any capacity that it has.

GORDON J: I thought the facts were that Sandini in its own right, not as trustee, held shares.

MR MYERS: The facts are that Sandini as trustee of another trust, which was associated with the family, held the shares. The shares were held on trust for what is described as - - -

GORDON J: The Karratha - - -

MR MYERS: - - - the charmingly described KRUT Trust, the Karratha something or other trust.

GORDON J: Rigging Unit Trust.

MR MYERS: Yes. Your Honour, that is what we say about it.

BELL J: The shares were transferred at the direction of Ms Ellison. Is that right?

MR MYERS: They were.

BELL J: The primary judge adopted a view - I think he characterised it at paragraph 125 as involving notions of "commonsense" causation, that the order under 79A brought about what was the cause, as it were, of that disposition.

MR MYERS: Yes.

BELL J: That is in essence the approach taken by the primary judge. Is that right?

MR MYERS: Yes, that is correct.

BELL J: Was that the approach Justice Logan adopted?

MR MYERS: Yes, it was.

BELL J: Yes.

MR MYERS: If your Honours want references to the decision of the primary judge that deal with this matter that your Honour Justice Bell has raised, paragraphs 106, 112, 123 and 125 of the primary judgment all amount or include in effect findings that the transfer was made at the direction of Ms Ellison and would not have been made were it not for the 2010 orders.

BELL J: Yes.

MR MYERS: The other fact, if it be correctly described as a fact, that one is dealing with now or has been, the manner in which Sandini was described in the order was a "mis-description", according to the primary judge at paragraph 165, and as I understand his Honour's reasons, he described it as a mis-description because it was otiose and it added nothing to the capacity of Sandini to do what it was directed to do and did not limit its capacity and furthermore, it did not affect the capacity of the court to make the order. Now, for those unacquainted with Family Court orders - and that would not include your Honours but it does include some of us - Order 3 is expressed:

Within 7 days of orders being made Sandini do all acts and things and sign all documents necessary to transfer to [the wife] 2,115,000 [MIN Shares].

Now that, one gathers, is the common form in which orders under section 79 of the Family Law Act are made, although they effect an immediate transfer of beneficial interest.

GORDON J: Because of Part VIII.

MR MYERS: Yes, and, for example, in Jones and Mateo, two of the cases that are referred to, that is the form in which the order is made. So we say that that is not to be treated as a direction merely to do something but it has effect as an immediate transfer of the property, or at least the beneficial interest in the property which gets - - -

BELL J: Yes. The Commissioner accepted that the transfer of the beneficial interests sufficed ultimately.

MR MYERS: Correct. Yes, he did. Paragraph 164 of the reasons for decision of Justice Jagot set out the nub of her Honour's conclusions and your Honours might glance at it:

I consider the preferable construction is that the orders do not concern shares that Sandini in fact owned for the reasons already given.

Now, that is a construction which is very much at odds with the mechanisms provided for by the Family Court Act. Those orders relate to the property of the marriage, not property that might otherwise be thereafter acquired and we say, with respect, that that is a mistake.

But if they do concern such shares, I do not accept that the effect of the orders was to make Ms Ellison the beneficial owner as to her relevant proportion of the share pool.

Now, what was the share pool? It was 38 million or 35 million shares in MIN, if I could use the stock exchange acronym for this company, held by Sandini. That is a single parcel of shares. The shares are undifferentiated. What Sandini has is one property interest constituted by that parcel of shares and that property interest, or that parcel of shares, define the extent of Sandini's interest in the issued capital of MIN. This order says a part of that is hereby beneficially transferred to Ms Ellison.

GORDON J: So, it is an order under 90AE, is it not, of the Family Law Act, directing a third party, on your terms, in relation to the property of the marriage and altering the rights, liabilities or interests in that property of the third party?

MR MYERS: Yes, it is, and - - -

GORDON J: An express statutory power.

MR MYERS: Express statutory power and the effect, the effect is to change that beneficial interest upon the making of the order, notwithstanding the way it is expressed and there is a lot of authority for that which your Honours will be familiar with. So, that is the first way we put it and there is no difficulty about understanding it that way. Once one understands the nature of the shareholding, then the order is effective in relation to part of that, immediately. It is a transfer of part of a single beneficial interest from Sandini to the wife and - - -

BELL J: Accepting for present purposes that that is so, it hardly raises a question of the general import suggested in paragraph 5.1 of your application, does it? Does it not turn on the construction placed on the order?

MR MYERS: But the difficulty is that there are many such parcels of shares and many such parcels of shares that could be subject to Family Court orders. This is a matter which, one does not know how often it arises, but it probably arises daily or more daily and there is, we say with respect, a fundamental error in the decision of the majority of the court below.

GORDON J: It comes back, I think, to the two matters I raised with you at the beginning, Mr Myers, and that is the form of the order. I mean, if there is any doubt about it, then this is not a question of principle, it is question of drafting.

MR MYERS: With respect, your Honour, there is no doubt about the effect of the order. That is how Family Court orders - - -

GORDON J: Well, there is obviously, because that is the way in which - Justice Jagot took a different view. I mean, you say she is wrong but there is clearly debate and argument about what the contents of the order are and the effect of it.

MR MYERS: Well, your Honour, in Jones and Mateo, two of the leading decisions of the Federal Court concerning the effect of these orders, we are dealing with orders expressed in exactly the same way and the courts have said that the effect of the order is that there is an immediate effective transfer of beneficial interest and that is what Justice Jagot denies. That is a matter of importance, in our respectful submission, and of course, assuming that what I have put is correct, your Honours, then it falls within the terms of section 104-10(2) of the Income Tax Assessment Act as a disposal.

BELL J: Yes.

MR MYERS: The alternative concerns the meaning and effect of some provisions of the Income Tax Assessment Act - - -

GORDON J: Is this your paragraph 5.2?

MR MYERS: Paragraph 5.2 - - -

GORDON J: Because 5.2 is very broad. That cannot be a special leave question, can it?

MR MYERS: Well, that is the question that is raised in the general sense, your Honour. It may need to be refined but that is the question that arises out of the way in which the majority below decided the matter. Paragraph 5.6 - - -

BELL J: Except whilst the majority below - I understand the controversy respecting the analysis, but when one turns to paragraph 157 of their Honours' analysis, it comes back the form of the orders. Is that not at the crux of the majority's decision?

MR MYERS: We respectfully say no, your Honour. Dealing with paragraphs 155 through to 158 and, in particular 157, what is said there is the error that we identify in 5.5 - no, it is not 5.5. It does not matter, your Honour. What is said there in what paragraph 156:

Orders in matrimonial causes, however, appear to be a special case.

We contest that.

GORDON J: I do not know how you can contest it, given the language of the Act. You have these very peculiar powers and orders to deal with property and third parties and they are peculiar. I mean, they are peculiar in terms of the parties that could be joined to the proceedings and the extent to which the orders can be made.

MR MYERS: They are but that is not the point that is being dealt with in 156, that in construing orders of the Family Court, one takes a different approach. Maybe, your Honour, I am misunderstanding your Honour. If it is said that in construing the orders, one has to take into account the terms of the Family Law Act, I respectfully agree but if it is said that there is a different approach to the construction of an order of the Family Court, given that it is an order of the Family Court, validly made within the powers and so on, is different from other orders and we contest that. We say that there is no justification for that and there is nothing within the authorities that suggests that that is so.

I see that I have almost exhausted my time. I simply want to direct your Honours attention to section 126-5 and section 126-15 and say that construction issues arise there as to the meaning of "involved in" and what we say in relation to the reasoning below which depends upon the words "transferee" and "transferor".

Those words do not control the meaning of the provisions. They are simply words chosen to identify in a shorthand way the persons whom the provisions operate upon. The words "oranges" or "apples" could have been chosen and it would not change the effect of the provision. This is simply a description of the person upon whom the provision operates and we say that both those events in section 126-5 by itself or assisted by 126-15 are satisfied on the facts as found concerning involvement. If your Honours please.

BELL J: Yes, thank you, Mr Myers. Yes, Ms Symon.

MS SYMON: If your Honours please. If I could start with the matter raised by your Honour Justice Gordon with regard to the so-called mis-description issue, special leave question 5.3 and question 5.5 both involve that issue, firstly because there is challenge to the approach to the construction of Family Court orders which was taken below and then there is the question of the mis-description itself.

Special leave question 5.5 implies that the majority found the order to be ineffective because of that mis-description. The ultimate point that I want to make about both those matters is the point really that fell from your Honour, that ultimately if there is a mis-description then it is a matter for the Family Court to deal with, that arises firstly because - - -

GORDON J: And has power to deal with?

MS SYMON: Indeed, your Honour. The court would have power to deal with the matter under section 79A. The way our learned friends put it, the court would have power to deal with the matter under the slip rule, if it is a mere mis-description. But either way, it is a matter for the Family Court to deal with.

The court's approach to the construction of the orders began with paragraph 155. The authority they relied on there was not a Family Court order and it was not a Family Court decision and it was an authority relied on for the proposition that unless there is ambiguity on the face of an order, then there is no reason to go behind it. It was open to the court to find of course, as it did at paragraph 157 that there was not any ambiguity on the face of the order.

At paragraph 156, the majority then turned to Langford and Coleman, a Family Court decision. It stated the principle and is expressed in the extracted passage at paragraph 156 that:

once any financial agreement reached between the parties is embodied in consent orders, it is to these orders alone that the court must look. The court cannot take into account whatever agreement might or might not have been reached between the parties which led to the making of the consent orders -

The Court in Langford and Coleman relied for that principle on Privy Council authority de Lasala v de Lasala and noted that that principle had been followed and applied in Australia. We would also draw the Court's attention to Justice Merkel's reasons in the Mateo Case beginning at paragraph [131]. He stated the same principle, relying on the same Privy Council authority and at paragraph [132] referred to decision of this Court, Harris v Caladine which was to the same effect, concluding with a pithy statement from Justice Dawson that:

"it is the order itself which is of legal significance".

GORDON J: Well, if we go to the order, I understood Mr Myers' argument to be that notwithstanding that Sandini as trustee of the Ellison Trust was joined as a party to the proceedings, in a sense that could be put to one side and one could regard the direction in paragraph 3 of the orders as a direction to Sandini in a different capacity - or Sandini as Sandini, as I understood the submission.

MS SYMON: In our submission, it ought not to be read that way, your Honour. The reason for naming and joining the party, one might read paragraph 1 as a definition clause. The party that is joined is the party that is referred to in paragraph 3 to which the order is directed. Otherwise, there is no particular point in paragraph 1.

BELL J: Mr Myers tells us that paragraph 3 of the order is in the standard form in relation to section 79 orders made by the Family Court and that it is to be understood as taking effect on the day of the order, notwithstanding that on one view it is directing Sandini to do things within the stated period. Do you accept that Order 3, having regard to the form of orders by the Family Court, is understood to take effect?

MS SYMON: There are two answers to that, if your Honour pleases. The first is we do not quarrel with the principle that a section 79 order takes effect on the day that it is pronounced.

BELL J: On the day of its making.

MS SYMON: However, one must then ask what is the effect of the order because our learned friends have to establish that the effect of the order was to transfer beneficial ownership.

BELL J: Yes.

MS SYMON: The language of section 79 is couched in terms of interests and, indeed, all the authorities upon which our learned friends rely are also couched in terms in terms of interests. So, they beg the question as to whether the order is effective to transfer beneficial ownership and that is why ultimately, as your Honour Bell, with respect, has pointed out, this case comes back to the terms and effect of this order.

The other aspect about the particular language of - well, there are two other aspects, in fact, about the language of this particular order. The first is that it concerns a parcel of shares. So when one considers that language - and it was used in the Mateo Case and the Jones v Daniel Case - it operates rather differently because in those cases there was certainty of subject matter. They were cases which dealt with the matrimonial home. This case deals with a parcel of shares and - - -

BELL J: Are you embracing the Dickensian argument as Justice Logan identified at - - -

MS SYMON: Well, I am not sure if it is Dickensian but one must take the orders as one finds them - - -

BELL J: Yes.

MS SYMON: - - - and one must construe them in the context and in the context of the subject matter that they are dealing with.

BELL J: Yes.

MS SYMON: In the context of the subject matter that is being dealt with; that is, our learned friends say, a part of a larger parcel of shares there must be certainty of subject matter.

BELL J: Yes.

MS SYMON: So one must be able to say, transfer of what. Now, the language in which the order was couched does not actually, on its face, presuppose the existence of a parcel of shares. It can be read equally to permit Sandini - it does not constrain Sandini to transfer part of a particular parcel. Indeed, there is no parcel of shares referred to. One has to take the order as one finds it. At the end of the day, all the court, on the face of the order, appears to be doing is to effect a change in the interests in relation to two million shares. There is no indication that the court was aware either, that the Karratha Rigging Unit Trust was in fact the true owner of shares or of a larger parcel of shares.

Now, that is why, coming back to the initial point, the mis-description is fundamental. Because the Family Court made the order and because the Family Court - if I could go back a step - the principle is that a consent order of the Family Court embodies the agreement of the parties and one looks to the consent order but the order of the Family Court also embodies all the considerations that the court must take into account and they are prescribed by the statute in section 79(4) and, indeed, the provisions that your Honour Justice Gordon has referred to in relation to third parties.

GORDON J: Section 90AE.

MS SYMON: So, another court coming to the order of the Family Court must take the order as it finds it. Our learned friends and the applicants ask the Court to take into account matters which do not appear on the face of the order, namely, that it was in fact that the Karratha Rigging Unit Trust owned a parcel of 35 million shares and the intention was, at least on the part of the applicants, that it was part of that parcel of shares that would be transferred.

Now, the difficulty with another court going behind what appears on the face of the court's order is illustrated by this very case. The majority below considered these issues in the context of the mis-description and thought about, well, how does the mis-description affect a claim to beneficial ownership? On the face of the order, there can be no claim to beneficial ownership. The order is simply ineffective to transfer beneficial ownership because of that mis-description. If regard is had - - -

BELL J: The view taken by the primary judge and Justice Logan was to say in the events that happened Sandini transferred at the direction of Ms Ellison two million plus shares. That occurred by reason of the making of the section 79 order. That was the - - -

MS SYMON: Well, your Honour, in our submission, that is too wide a reading of section 126-5 and section 126-15. That is not what those provisions do. Those provisions provide a roadmap. If you want rollover relief, this is how you do it and if you do not do it that way - - -

BELL J: Rollover relief has a beneficial, if you like, policy behind it and, as I understand the primary judge and Justice Logan that was the approach they took to the construction of the provisions.

MS SYMON: Well, it may be so, your Honour, but what one has to bear steadily in mind here is that the applicants came to the Federal Court, asked it to give effect to their asserted intention that it was the KRUT which was to transfer some of a pre-existing parcel of shares to Ms Ellison. Now, if regard is had to those matters and if what is being done is to give effect to a different order than that made by the Family Court and it is that court which is charged with the responsibility of considering whether a particular proposed course is just and equitable, having regard to a wide range of factors - and this case provides a very good example - - -

BELL J: But the things that inform the Family Court in making orders have nothing to do with whether an effect of an order made by the Family Court attracts the rollover provision, surely.

MS SYMON: Well, it does in this sense, your Honour, because our learned friends effectively asked the Federal Court to take into account matters which do not appear on the face of the Family Court order and one does not know whether the Family Court was aware that there was a larger parcel of shares, one does not know whether the Family Court was aware that in fact it was the KRUT which owned the shares and it may not have been aware that the intention was that that party pass the shares and it was not aware - - -

GORDON J: But assume for the moment that the order is to be interpreted in the way which Mr Myers contends for. I had understood you to contend that it did not fall within the rollover relief for 126-5 and 126-15.

MS SYMON: It does not, your Honour. The transfer which was made is a different transfer than the one that was ordered. The word "because" in section 126-15 is not to be read as importing a "but for" test. There is another reason for that. To import a "but for" test ignores paragraphs (d) to (f) in sections 126-5 and 126-15. The words "because of" have a great deal of work to do in those sections. Whilst paragraphs (a) and (b) refer to orders and maintenance agreement, the later paragraphs refer to something done under various forms of agreement or an arbitration award.

So, they might apply to wide range of circumstances so the connection to be made is between something which has to be identified and a causal relationship with a CGT trigger event. So, "because of" has to be read in the context of the whole of the section. It has work to do within a wider ambit in paragraphs (d) to (f) but in paragraphs (a) and (b) one can go directly to the order and, in our submission, the majority below was quite right in saying, what one must do is to carry out the terms of the order.

The other reason why our learned friends fail on the construction of the paragraphs is because they give too wide a meaning to the word "involves". Again, below, the majority quite rightly, in our submission, took the view that section 126-5 and 126-15 are confined to the named transferors. That is, as her Honour Justice Jagot put it, the word "involves" is circumscribed by the language of the sections themselves and that is particularly so because what is necessary in order to create the, if I might call it the roadmap, is both sections 126-5 and section 126-15. Section 126-5 allows a CGT trigger event involving an individual as a transferor and a spouse or former spouse as a transferee. Section 126-15 - - -

BELL J: Can you just tell me what page of the book I find 126-15?

MS SYMON: Yes, your Honour, page 126.

BELL J: Thank you.

MS SYMON: I am sorry, 226 - 228. Page 226 is 126-5.

BELL J: Yes, I have it, thank you.

MS SYMON: Perhaps it is worthwhile starting there, but what I was referring to was the opening words. Transferor is an individual in 126-5 and transferee is spouse or former spouse in 126-5. Section 126-15 makes only one change and it allows the transferor involved to be a company or a trustee. Now, if our learned friend's argument is correct, then section 126-15 would be otiose. If the language - because on their argument the language of section 126-5 would be wide enough to permit the individual named as transferor to direct a company or trustee to make the transfer required by the order.

GORDON J: Your short point is that there is no provision within either 126-5 or 126-15 which permits transfer from entity to entity.

MS SYMON: Well, there is, your Honour - yes, you are right, yes, your Honour. Yes, one can have entity to spouse or former spouse, and that is it.

GORDON J: That is your point. That is your short point.

MS SYMON: Yes, your Honour. If I could conclude, your Honours, with an explanation of why the court below or the majority below was correct in not going behind the orders as they found them on their face. This case provides a very good illustration of why the Family Court must deal with any mis-description and not another court. The order that concerned the courts below replaced an earlier order. By the earlier order, Ms Ellison was to receive a cash payment of some $18 million and a quantity of MIN shares.

The order of 21 September substituted the cash payment for shares to a roughly equivalent amount. Were Sandini to become entitled to rollover relief because another court permitted, formally or informally, substitution of the Karratha Rigging unit trust for the Ellison family trust in the order, then the CGT liability on the transfer of the shares would be rolled over to Ms Ellison. That means that what she received by the order would no longer be the equivalent of the cash payment that had previously been ordered, and that is why we submit that another court is not free to substitute the party named with the party the appellants say they intended. That is going behind the terms of the order on their face.

In our submission, if there was a mis-description, it is a matter that the applicants must put to the Family Court and the majority below quite rightly dealt with the order as they found it on its face. If the Court pleases.

BELL J: Yes, thank you. Yes, Mr Lloyd.

MR LLOYD: I will start with the two points of construction and then go on to the other one. The first point is the deeming provision. It deals with the construction of section 103-10. It is a deeming provision. It is addressed by the majority at paragraphs 199 to 213. We contend that that analysis is plainly right. The deeming provision is directed to a concept and language repeatedly used in the legislation, namely, where a person has received money or received property and then it deems certain things that might not otherwise fall within that concept to be within that concept.

The sections that use that language are in Parts 3-1 and 3-3 as the learned - as Justice Jagot pointed out in her reasons at paragraphs 203, 204 and 205 and that is the function of the deeming provision. It was unambiguous. My friends have not even addressed that orally and we say that there should be no grant of special leave in relation to that matter, in any event.

The next one is the involvement issue. That involves the construction of section 126-15. The majority held that this provision is engaged only where the spouse or former spouse is the transferee and that conclusion is reached at 176. We generally embrace what is said between 175 and 183. We also say that there is no prospect of success on that matter.

My friend says, well, the words "transferor" and "transferee" could have been apple and orange. There is two points to be made about that. First of all, really on the logic of his argument that he means they could have just been apple and apple because he wants to say, well, it does not matter, anyone could be anyone. The other problem is that the transferor and transferee are used in other sections of the Act and so different things apply to transferors and different things apply to transferees. Now, the Court does not have the whole Act here - - -

GORDON J: It does not sit with 126-15 does it either?

MR LLOYD: It does not sit with 126-15? No. I mean, if the Court goes to page 226 of the book, I mean both 126-5 and 126-15 use the transferor or transferee language. But just to sort of make the point, on the bottom of page 227, there are some consequences for the transferee in the disposal case. In subsection (4) there is something which happens for the transferor. These provisions are linked in in different ways to different provisions.

GORDON J: Is that saying any more than Ms Symon's submission that there is a roadmap? Is a scheme set out as to the way in which the provisions are to work?

MR LLOYD: Well, it is perhaps just a different way of saying the same thing. I accept that, your Honour. The simple point is that it is not an accident that the spouse in particular is designated as the transferee as opposed to some company that she might want to be a trustee for her down the track. That would engage a different capital gains trigger event.

So then if I come back to the other point which is the court order point. This is the third way that they could have succeeded in the court below. This turns on the construction of section 104-10. Because the order identified that action had to be taken to transfer the shares to the spouse, she would have been the transferee at the time of the order and the rollover provisions would have done on their argument.

Now, we say what the court did was - the majority did, was look at what ownership was, what a change of ownership was. That is addressed at section - sorry, at paragraph 99 of her Honour's reasons and we do not apprehend that the applicants actually dispute that that is what ownership means.

Further, the majority did not deny that a court order could operate to affect a change in transfers. It is not like there is some wholesale rejection of that. One sees that at the end of paragraph 148 on page - - -

GORDON J: I mean, your short point is that there is no question of principle of here. It is just application of principle to unusual facts.

MR LLOYD: Yes, that is the essence of it. All I was seeking to say is that the big issues that the court might think were matters of general importance, do not arise. The court did not say a Family Court order could not do it. In fact, contrary to my friend saying that this is a standard form of Family Court order - now I am not going to say that he is wrong about that because I do not do enough Family Court work to say if he is right or wrong - but the learned trial judge did refer to a different power in paragraph 160 which would be a power which, if exercised, might directly have affected the title more clearly than the formulation that was used.

Also, the formulation that was used, we say, is a significant formulation because of another section of the Family Law Act, and this answers a question your Honour Justice Bell asked my friend which is, what would be the consequences if Sandini failed to carry out the provision.

There is a section 106A of the Act which I am afraid is not in the book but it is mentioned by Justice Jagot in paragraph 195. The essence of that is if an order is made in the form of you must do all steps necessary to transfer shares and they do not do the transfer of the shares, and section 106A empowers the court then to make another order according to which the Registrar can do it in the place and then it becomes effective. So that is the remedy. That is why that order is significant. We say then that when one has regard to that - - -

GORDON J: There is also injunction powers under 90AF directing third parties to do things and here if one looks to exercise that power it would be difficult given the contents of the order.

MR LLOYD: Indeed. And so that is another point made by her Honour in essence. So, we say then that after recognising that the court - that the Family Court could make an order which would have the effect that the applicants want, they considered whether the court order in this case did have that effect and one sees them start considering that at paragraph 149 and following.

The case turned on the construction of the particular Family Court order. What makes it a bad vehicle to even test any general question is because the order in this case is flawed because of the mis-description of the Sandini entity. So one cannot even, in this case, really we say address a question of would this order, if it had of been directed to the right entity, have had the effect they say it had because it is directed to the wrong entity.

We say that the majority gave reasons for rejecting the argument on two bases. The first basis is irrespective of the mis-description. And the reasons irrespective of the mis-description can be seen, first of all, in paragraph 160 which is the fact that there was another kind of order which would have more directly had that effect.

And then also what is said at 161 and 162, and the gist of that is that the form of order was one which would have allowed Sandini to do a whole range of things. It could have sold all of its shares and bought other shares back at the end of the week. None of that would have been a breach of the orders as made.

The orders, without getting into the idea of whether they operated immediately, they did not operate immediately to transfer ownership. That was the question. They provided a time limit, in their own terms, they say within seven days something has to happen, so all of that is irrespective of the mis-description.

Then, when one has regard to the mis-description the trial judge - sorry, not the trial judge - Justice Jagot said that the order was in a form it was in, it did not authorise Sandini to transfer the shares it held in relation to the KRU trust. It may have been a breach of trust for Sandini to have transferred those shares. That is relevant to whether or not it would be appropriate to see the order as itself affecting a transfer of ownership.

In any event, the order as made did not operate on the MIN shares held by Sandini. Her Honour found that at paragraph 153 and we say that is sufficient. Further, order 3 might not only require Sandini to transfer MIN shares not being the shares owned by KRUT but shares it might yet acquire. Her Honour said that in paragraph 157 and used that as a reason to distinguish it from the Mateo and Jones situation where, in that case it would have been a breach for Mateo or Jones to have dealt inconsistently with the orders. But here, Sandini could have sold the shares and bought other shares and still complied with the orders.

We say in those circumstances, this is not a case that provides a good vehicle for even testing whether a Family Court order of this form, but addressed to the right person which actually owned the shares, would create ownership interest but it does not even rise to that level because of a flaw in the order.

May it please the Court.

BELL J: Yes, Mr Myers.

MR MYERS: If your Honours please. The submissions of my learned friends in regard to the first way in which the case was put and dealt with and I have dealt with, simply miss the point. The order was an order directed to Sandini and the order, according to established authority, had the effect of immediately altering the beneficial interest in that which was the subject of the order.

Now, the question whether Sandini had shares or not does not, in a sense, affect the terms of the order. It affects the effectiveness of the order. If Sandini did not have any shares, well that is an order that would not work. But if it had at least the number of shares that the order refers to, the order has immediate effect. And what was the interest - using the words that our friends correctly point out the statutes refer to - what was the interest that Sandini had. Its interest was in the issued share capital of MIN and the amount of its interest was measured by the number of shares.

The effect of the order, Sandini having those shares, was that part of its interest to the extent of the $2 million something was immediately vested in the transferee, the wife. And it is as simple as that. It is not a question of going behind the orders. We do not have to look at the KRUT. We just have to look at the order and see, as in the cases such as Mateo and Jones, that such an order is treated as having immediate effect.

I would be repeating myself to deal with the first of Ms Symon's contentions. We simply say that the mis-description does not affect the power of the Court or the power of Sandini. It is simply a question of the order working on the shares.

Now, questions about whether Sandini could go out and buy some more shares have got nothing to do with the order. The order worked an immediate effect. But there is nothing in the order which would prevent Sandini going and getting more shares if it wants to. That is up to it. That is its business. It does not affect the operation of the order.

As to the construction of the provisions, section 103-10 is a deeming provision which is very simple in its terms. I do no more than assert that it operates in the present case. If you - and this is directed to Ms Ellison - if you had received money or other property, if it had been - sorry, you - it applies as if you had received money or other property, if it has been applied to your benefit or as you direct. That is exactly what happened here if we get to the alternative arguments which is based upon the transaction that occurred between Mr Ellison and his former wife. It very simply applies. She directed that it go to Wavefront.

Now, my learned friend said transferor and transferee, they are terms that are used elsewhere in the legislation. So they may be but they are not asterisked terms which is what his point would or needs to be. And further, it is not a case of apple and apple. Not at all. The trigger event involves one individual and another and they are identified. It is simply two individuals. The fact that they are called transferor or transferee does not limit the operative words of the provision. That is just a designation given to the persons upon whom it operates.

If your Honours please.

BELL J: Thank you. Yes, the Court will adjourn briefly to consider the future conduct.

AT 11:00 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.05 AM:

BELL J: In our opinion, the application is not a suitable vehicle in which to consider the issues of construction that have been debated. Special leave is refused with costs.

AT 11:06 AM THE MATTER WAS CONCLUDED

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