The world's largest property settlement?

Ah, those Russians.

If you saw the news last week you may have seen a story or two about this case.

Dmitry Rybolovlev and Elena Rybolovlev's property settlement has been finalised by a Swiss Court - and the sums involved are staggering.

According to the media reports Mr and Mrs Rybolovlev met as university students in Perm, Russia and married in 1987. Mr Rybolovlev trained as a doctor but made his fortune by developing the potash company Uralkali and transforming it into one of the world's biggest fertiliser producers. Mr Rybolovlev sold his controlling interest in Uralkali for a reported $6,500,000,000.

The couple separated in 2008 and have been contesting their property division in the Swiss courts ever since.

While the Court earlier froze their assets, apparently the proceedings did not stifle Mr Rybolovlev's spending/investing. According to media reports trusts in the name of their eldest daughter, Ekaterina, have purchased items including a 66% share in the Monaco Football Club (which last year spent £146,000,000 on player signings), Skorpios - the private Greek island previously owned by Aristotle Onassis - for $150,000,000, Donald Trump's former mansion in Palm Beach and an US$88,000,000 penthouse apartment in New York. Mr Rybolovlev also apparently has a 9.7% stake in the Bank of Cyprus and lived in a $300,000,000 penthouse in Monaco.

The Court ordered that Mrs Rybolevlev receive $4,500,000,000 - almost half of the couples net worth. The ruling includes ownership of two homes in Cologny, Geneva, a property in Gstaad, and items of art, antique furniture and jewellery.

While Mrs Rybolovlev's lawyer said that the result was "a complete victory" apparently there may be a problem getting the cash portion of the judgement as much of the couple's assets were transferred to Cyprus in 2005 and there are questions surrounding the Swiss Courts ability to order the transfer of funds. 

Indications are that the decision is going to be appealed by Mr Rybolovlev.

Whether it's the largest property settlement or not is debatable - so many property settlements are by their nature private matters not reported on in the media. But this one has to be right up there towards the top.

Use of family law court documents by the ATO

In 2009 the Australian Taxation Office (ATO) commenced an investigation into the activities of a man given the pseudonym of Mr Darling. At that time Mr and Mrs Darling were involved in litigation before the Family Court in relation to their property division dispute.

In December 2010 Mr and Mrs Darling consented to their property division matter being dismissed by the Court without resolution. However, prior to the dismissal of proceedings various documents had been filed with the Court by both parties and the ATO had (without the knowledge of the parties) sought and been given access to the Court file. 

On 3 July 2012 the ATO Commissioner sought an Order that the Commissioner of Taxation by released from the implied obligation not to make use of documents filed in the proceedings for purposes other than those of the proceedings, and to make use of the documents for the administration of the Income Tax Act 1936 and/or the Taxation Administration Act 1953 in relation to Mr Darling and his related entities in respect of the income years ending 30 June 1991 to 30 June 2010 and the determination of any objections to assessments of tax, penalties or interest issued in respect of those tax years.

In March 2013 the ATO's application was rejected by the Court.

The Court held that the Commissioner remained under an implied obligation not to make use of the documents for a purpose not related to the family law litigation.

The Judge said the purpose of the implied obligation was “to preserve the parties’ privacy and to encourage full and frank disclosure”, both of which concepts were “of particular importance and sensitivity in relation to proceedings in this court”.

Her Honour noted that a person may be released from the implied obligation if there are “special circumstances” but that there was "very real force in the submission made on behalf of the husband that the Commissioner has not specified the purpose for which the documents are required and on that basis I could not be satisfied that there [are] “special circumstances” nor whether the release from that obligation is necessary and in the public interest to enable the Commissioner to fulfil his statutory function."

The ATO appealed that decision. Which brings us to the case of the Commissioner of Taxation and Darling [2014] FamCAFC 59.

On appeal the ATO's application succeeded.

The Court held that "In our view the most important consideration is whether or not granting the Commissioner relief from the obligation is likely to discourage litigants from making a frank disclosure. There is already a heavy obligation on litigants in Family Court proceedings to make such a disclosure, and they are required to provide a written undertaking to the court that they have done so. Most importantly, it is vital to recognise that there is already a disincentive to litigants to be frank with the Family Court about tax evasion because it is (or should be) well-known that the Court can and does refer such matters to the authorities for investigation."

The Full Court concluded that while there is a range of competing considerations discretion should be exercised in favour of the Commissioner having use of the documents for the following reasons including:

1.      The Commissioner is performing an important public duty. The public interest is advanced by ensuring all taxpayers pay their fair share of tax.

2.      The Commissioner is engaged in a substantial, targeted audit. It is not a “random audit”.

3.      Although many of the annexures to the affidavits may be available to the Commissioner from other sources, the parties’ own assertions about the history of acquisition of assets would be available only to the Commissioner by interview with the parties in which they may have an incentive not to be frank.

4.      There are restrictions on the way in which the Commissioner can use the information obtained from the court file which would ensure that the documents do not venture into the public arena, thus ensuring there is no breach of section 121 of the Family Law Act.

5.      The affidavits and financial statements were sworn by the parties for the purposes of the proceedings and therefore in the expectation that they might be read in open court.

6.      Albeit brief, and expressed in general terms, the officer of the ATO sufficiently stated the purpose for which the documents were required.

Despite success in this case it does not necessarily correspond that there will be a flood of applications by the ATO to make use of family court documents. According to an article in the Sydney Morning Herald by Michaela Whitbourn, a spokesman for the ATO said it did not expect an increase in the number of cases in which the Commissioner sought access to Family Court documents.

What is a de facto relationship?

Usually when people come to me for advice about property division, and they aren't married, they acknowledge or assume that they were in a de facto relationship. But occasionally a matter comes along where careful consideration has to be given as to the legal nature of a relationship. 

The Family Law Courts have power to make orders in relation to property division between people who are or were married and those who are or were in a de facto relationship - outside of those circumstances the Court does not have power to makes orders.  It is therefore paramount, if there is any question as to the legal definition of a relationship that you carefully consider the definition of a de facto relationship. 

Section 4AA of the Family Law Act provides the definition of a de facto relationships. 

According to that section a person is in a de facto relationship if:

• the persons are not legally married to each other; and
• the persons are not related by family; and
• having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.

It is important to note that a person can be in a de facto relationship while married to another person or while in a de facto relationship with another person. 

Section 4AA goes on to say that the circumstances of the relationship may include:

• the duration of the relationship;
• the nature and extent of their common residence;
• whether a sexual relationship exists;
• the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
• the ownership, use and acquisition of their property;
• the degree of mutual commitment to a shared life;
• whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
• the care and support of children; and
• the reputation and public aspects of the relationship.

International child abduction

You may remember the sad case involving four sisters – the “Italian case” as it was sometimes referred to in the media.

The case involved a dispute between the parents as to whether their children should live in Italy (where they were born, where they had lived throughout their young lives and where the father was from) or Australia (where the mother was from). The mother had removed the children from Italy to Australia, where she wished for them to remain, without the consent of the father and the father wished for the children to be returned to Italy. The proceedings before the Court involved an application for the children to be returned to Italy – not to determine how much time they should spend with either parent.

Cases such as this – where a child has been removed from one country to another – involve complex issues above and beyond standard family law considerations.

The Hague Convention on the Civil Aspects of International Child Abduction is an international agreement which provides for children abducted or retained in another country to be returned to their former country of residence.

An application under the Convention - made by the Central Authority from each country, not by the parent themselves - can only be made to or from a country that has signed the Convention. 

Australia is a signatory to the Convention. As are 91 other countries:

Albania, Argentina, Austria, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Burkina Faso, Canada, Chile, China, Costa Rica, Croatia, Cyprus, Czech Republic, Denmark, Ecuador, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Republic of Korea, Latvia, Lithuania, Luxembourg, Malta, Mauritius, Mexico, Monaco, Montenegro, Morocco, Netherlands, New Zealand, Norway, Panama, Paraguay, Peru, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Macedonia, Turkey, Ukraine, UK and Northern Ireland, USA, Uruguay, and Venezuela.

Japan is the most recent addition to that list – it only joined on 1 April 2014.

Australia also has bilateral agreements with two other countries: Egypt and Lebanon. The Federal Government will provide assistance to families affected by abduction to those two counties.

Cases involving the Convention are obviously highly emotional and difficult cases – but the Convention’s role is to provide some framework for the dispute and reflects an agreement amongst 92 countries that the “home” country is the correct forum for the dispute to be resolved in.

In cases involving countries that are not signatories to the dispute parties find themselves at the mercy of the laws of the country that the children have been taken to.