Hicks & Trustee of the Bankrupt Estate of Hicks
[2021] FamCAFC 19
FAMILY COURT OF AUSTRALIA
| HICKS & TRUSTEE OF THE BANKRUPT ESTATE OF HICKS | [2021] FamCAFC 19 |
| FAMILY LAW – APPEAL – PROPERTY – Where the primary judge set aside consent orders pursuant to s 79A(1)(a) of the Family Law Act 1975 (Cth) and made orders in substitution – Where the husband did not participate in the proceedings – Adequate reasons – Whether the primary judge had proper regard to the husband’s application of substantial funds – Where the husband has not given any explanation as to the transfer of significant amounts overseas – Where the husband’s debts proven in bankruptcy are to be paid solely by him – Where the primary judge emphasised the limitation that existed by reason of the husband’s non-disclosure and non-participation in the proceedings – Non-disclosure – Whether, without information about the husband’s circumstances, it is possible to identify a just and equitable settlement of property – Where recent Full Court authority supports the principle that a party should not be able to take advantage of his or her own non-disclosure – Appeal dismissed – No order as to costs. FAMILY LAW – CROSS-APPEAL – PROPERTY – Credibility – Whether the primary judge ought to have found that the wife was an unreliable witness – Where the primary judge’s findings were open on the evidence – Bankruptcy – Whether the primary judge ought to have found that the husband’s debts were joint debts – Where the wife did not have any involvement in the transaction that created the debt – Where it was within the ambit of a legitimate exercise of discretion for the primary judge to deal with the husband’s debts in the manner in which his Honour did – Cross-appeal dismissed – No order as to costs. |
| Bankruptcy Act 1966 (Cth) s 81 Family Law Act 1975 (Cth) ss 79, 79A(1), 93A(2) |
| Abalos v Australian Postal Commission (1990) 171 CLR 167; [1990] HCA 47 Af Petersens and Af Petersens (1981) FLC 91-095; [1981] FamCA 50 Antmann and Antmann (1980) FLC 90-908; [1980] FamCA 64 Australian Securities and Investments Commission and Rich & Anor (2003) FLC 93-171; [2003] FamCA 1114 Bennett and Bennett (1991) FLC 92-191; [1990] FamCA 148 Biltoft and Biltoft (1995) FLC 92-614; [1995] FamCA 45 Black and Kellner (1992) FLC 92-287; [1992] FamCA 2 CDJ v VAJ (1998) 197 CLR 172; [1998] HCA 67 Commissioner of Taxation& Worsnopand Anor(2009) FLC 93-392; [2009] FamCAFC 4 Devries v Australian National Railways Commission (1993) 177 CLR 472; [1993] HCA 78 Efthimiadis and Efthimiadis (1993) FLC 92-361; [1993] FamCA 15 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 Kimber and Kimber (1981) FLC 91-085; [1980] FamCA 83 Kowaliw and Kowaliw (1981) FLC 91-092; [1981] FamCA 70 Monte and Monte (1986) FLC 91-757; [1986] FamCA 1 Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17 Oriolo and Oriolo (1985) FLC 91-653; [1985] FamCA 54 Prince and Prince (1984) FLC 91-501; [1984] FamCA 7 Rowell and Rowell (1989) FLC 92-026; [1989] FamCA 3 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 Stay v Stay (1997) FLC 92-751; [1997] FamCA 20 Suiker and Suiker (1993) FLC 92-436; [1993] FamCA 141 Trustee of the Bankrupt Estate of Hicks & Hicks and Anor (2018) FLC 93-824; [2018] FamCAFC 37 Weir and Weir (1993) FLC 92-338; [1992] FamCA 69 |
APPELLANT/ FIRST CROSS-RESPONDENT: | Ms Hicks |
| RESPONDENT/ CROSS-APPELLANT: | Mr Thomas as Trustee in Bankruptcy of the Estate of Mr Hicks |
| SECOND CROSS-RESPONDENT: | Mr Hicks |
| FILE NUMBER: | SYC | 2372 | of | 2013 |
| APPEAL NUMBER: | EAA | 112 | of | 2019 |
| DATE DELIVERED: | 18 February 2021 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney (via video link) |
| JUDGMENT OF: | Ryan, Aldridge & Kent JJ |
| HEARING DATE: | 8 July 2020 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 27 September 2019 |
| LOWER COURT MNC: | [2019] FamCA 695 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT/ FIRST CROSS-RESPONDENT: | Mr Coleman SC |
| SOLICITOR FOR THE APPELLANT/ FIRST CROSS-RESPONDENT: | Russell C Byrnes Solicitor |
| COUNSEL FOR THE RESPONDENT/ CROSS-APPELLANT: | Mr Alexander |
| SOLICITOR FOR THE RESPONDENT/ CROSS-APPELLANT: | Marsdens Law Group |
| THE SECOND CROSS-RESPONDENT: | No appearance |
Orders
The appeal from the orders made on 27 September 2019 be dismissed.
The cross-appeal from the orders made on 27 September 2019 be dismissed.
There be no order as to costs of the appeal or of the cross-appeal.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Hicks & Trustee of the Bankrupt Estate of Hicks has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EAA 112 of 2019
File Number: SYC 2372 of 2013
| Ms Hicks |
Appellant/ First Cross-Respondent
And
| Mr Thomas as Trustee in Bankruptcy of the Estate of Mr Hicks |
Respondent/ Cross-Appellant
And
| Mr Hicks |
Second Cross-Respondent
REASONS FOR JUDGMENT
On 1 September 2011, Mr Hicks (“the husband”) and Ms Hicks (“the wife”), perpetrated a miscarriage of justice within the meaning of s 79A(1)(a) of the Family Law Act 1975 (Cth) (“the Act”) by supressing evidence of a substantial liability when obtaining property settlement orders made by the Court with their consent.
On 10 April 2012, primarily as a consequence of the non-disclosed liability referred to, the husband was made bankrupt on his own petition and Mr Thomas was appointed trustee of his bankrupt estate (“the trustee”).
On 3 May 2013 the trustee initiated proceedings pursuant to s 79A(1)(a) of the Act to have the consent orders made on 1 September 2011 set aside. Following a trial (“the first trial”), a judge dismissed that application by order made on 10 June 2016. However, the trustee successfully appealed that dismissal and on 26 February 2018, the Full Court (Strickland & Murphy JJ, with Austin J dissenting) remitted the proceedings for partial rehearing “with such rehearing to proceed on the basis that there has been a miscarriage of justice pursuant to s 79A(1)(a)”.[1]
[1]Trustee of the Bankrupt Estate of Hicks & Hicks and Anor (2018) FLC 93-824 (“Trustee of the Bankrupt Estate of Hicks & Hicks and Anor”).
The primary judge determined the remitted proceedings (“the second trial”) by orders made on 27 September 2019. Pursuant to s 79A(1) of the Act his Honour set aside the consent orders made on 1 September 2011 and made orders under s 79 of the Act in substitution of the orders set aside.
By an Amended Notice of Appeal filed on 28 May 2020 the wife appeals from all of the orders made by the primary judge including the order that the consent orders made on 1 September 2011 be set aside (Order (1)). However, at the hearing of the appeal senior counsel for the wife abandoned the wife’s challenges directed to the primary judge’s exercise of discretion to set aside the consent orders made on 1 September 2011 and her challenges as to the just and equitable requirement (s 79(2) of the Act) for the making of s 79 orders in substitution. The remaining challenges the wife pressed on appeal were directed to the magnitude of the adjustment of property interests the primary judge made in favour of the trustee/husband.
The trustee opposed the wife’s appeal and, by Notice of Cross-Appeal filed on 7 November 2019, challenged the sufficiency of the adjustment of property interests made in favour of the trustee/husband. The wife opposed the trustee’s cross-appeal.
The husband did not participate in either the first trial, the successful appeal from the orders then made; nor the second trial, nor in this appeal.
For the reasons which follow, each of the appeal and the cross-appeal must be dismissed.
Background
The husband was born in 1944 and is now 76 years old. The wife was born in 1955 and is now 65 years old. The parties married in 1978 and divorced in September 2011. The date of their final separation was the subject of dispute. The wife contended separation occurred on 9 September 2009 whilst the trustee contended that the parties’ marriage continued after that date. In the result the primary judge found there to be insufficient reason to reject the evidence of the wife on this issue (at [136]).
The parties’ 31 year marriage produced three now adult children.
At the time of their meeting, both parties were employed in the finance industry. The husband brought a property at Suburb G into the relationship whilst the wife had savings of $15,000. Shortly after marrying, in 1979, the parties purchased a property at H Street, Suburb I (“the Suburb I property”). In 1980/1981, the wife loaned a friend $45,000 and when the friend could not repay that loan, the friend transferred the wife his business known as “Company 1”. Company 1 was a business at Suburb J which the wife managed from then on whilst maintaining her job in the finance industry. Later in 1981 the parties purchased a property at E Street, Suburb F (“the Suburb F property”) which became the matrimonial home and is still retained.
The husband ceased external employment in 1988 having taken over Company 2 in 1985 with two others. The wife ceased her employment in the finance industry on 17 November 1993.
In April 1994, the parties purchased a property at B Street, C Town (“the C Town property”) for $380,000.
In 1995 the husband and the wife bought a retail business in partnership with another couple. They borrowed the sum of $617,058 to fund the purchase and the husband commenced working in the business. In 1999 or 2000 the partnership broke down and was dissolved and under a settlement in December 2000 the wife received $90,914.25 in superannuation and $181,828.50 was received into a joint account of the husband and the wife. The wife gave evidence that out of that transaction she made a capital gain of $363,655 on which she paid tax.
In 2000 the wife employed a full time manager for the Company 1 business and she ceased her own part time employment/management in that business.
In July 2000 the husband’s mother died and the husband inherited a property at Suburb N (“the Suburb N property”) which he later sold, in December 2002, for $775,000.
From January 2002, the husband began regular travel to Country Q to pursue business ventures. In July 2003, the husband began withdrawing money to fund his ventures in Country Q including the purchase of land in Country Q for $80,000. In 2005, the husband purchased another Country Q property known as Country Q Property 1.
In December 2003, the husband purchased a property at O Street, Suburb P for $325,000 which was funded by the proceeds of sale realised from the Suburb N property. The Suburb P property was later sold at a loss for $290,000 in November 2009.
In 2006, the husband borrowed $210,000 secured over the Suburb P property which paid back another loan of the husband and was utilised in his ventures in Country Q. That same year the husband bought a business known as R Pty Ltd at Suburb I for approximately $146,500 using the C Town property as security. That business was sold in September 2007 realising $193,323.
In 2007, another property was purchased in Country Q, known as Country Q Property 2. Later that year, in November 2007, an $800,000 line of credit with the Macquarie Bank was set up using the Suburb F property as security. This line of credit was used to fund the husband’s ventures in Country Q and to pay mortgage commitments.
In January 2008, an agreement was struck between the husband, a man named Mr T and a man named Mr S for Mr S to provide a $560,000 investment to a project known as U Pty Ltd. It was to be repaid by 1 June 2009, which date was later amended to 1 June 2010. It is that debt to Mr S which was the subject of Supreme Court proceedings resulting in judgment being obtained against the husband on 8 September 2011 in the amount of $605,567.12.
In late 2008, the wife became aware that the husband was living with another woman when he travelled to Country Q. The wife’s evidence was that the parties separated on 9 September 2009.
The husband’s father passed away in July 2010 after being cared for by people including the wife for some years prior to his death. On 23 March 2011, the husband’s father’s property, which was bequeathed to the parties (after they had paid the husband’s step-siblings $190,000 in July 2003 for their future share in the husband’s father’s estate), was sold realising $714,880.92 which was deposited to the parties’ joint account.
Mr S commenced Supreme Court proceedings on 14 October 2010. On 1 August 2011, the husband entered into a loan agreement with a Mr V for 900,000,000 Country Q currency with Country Q Property 2 provided as security.
On 1 September 2011, the parties entered into final consent orders which provided for, in summary:
a)The wife to retain the Suburb F property, the C Town property and pay to the husband an amount of $55,000 “by way of Bank Cheque … drawn from the wife’s St George Bank account”; and
b)The parties otherwise retain the property in each of their names (meaning the husband was to retain the Country Q properties).
When filing their Application for Consent Orders on 24 August 2011, the parties committed a fraud on the Court by concealing that there existed a third party whose interests could legitimately be impacted by the making of the orders (Mr S). In the event, on 8 September 2011, only seven days after the consent orders were made, the Supreme Court judgment in favour of Mr S against the husband in the amount of $605,567.12 was handed down.
On the wife’s case, she paid more than the required $55,000 under the consent orders to the husband such that by 2 December 2011, she had paid him $59,300 over the course of 16 separate payments,[2] including three payments which predated the consent orders and one made on the day of the consent orders being made.[3]
[2]Trustee of the Bankrupt Estate of Hicks & Hicks and Anor at [188].
[3]Ibid at [190].
The s 79A proceedings
As already noted, on 10 April 2012 the husband was declared bankrupt on his own petition, and on 3 May 2013 the trustee commenced the s 79A proceedings. On 27 October 2015 the husband pleaded guilty to bankruptcy offences reported to the Australian Financial Security Authority by the trustee.
As earlier noted, on 10 June 2016 a judge dismissed the trustee’s s 79A application but on 26 February 2018, the Full Court allowed the appeal and remitted the proceedings.
The remitted proceedings were heard by the primary judge on 15-16 August 2018 and 14 September 2018. His Honour delivered judgment on 27 September 2019 in which his Honour set aside the consent orders made on 1 September 2011 and made s 79 orders in substitution.
The decision of the primary judge
At [19] to [91] of the reasons the primary judge sets out the factual history of the marriage including the facts surrounding the purchase and sale of businesses and real properties, and the respective employments and self-employments of the husband and the wife. Within that discussion appears the facts as to the husband’s investments in Country Q, and the details surrounding the U Pty Ltd project involving the husband’s dealings with Mr S (commencing at [55]) and including the Supreme Court proceedings resulting in the judgment debt earlier referred to. Within that discussion the primary judge also records the husband’s inheritance of the Suburb N property (at [38]), that it was sold in December 2002 for $775,000 (at [41]), and the husband’s inheritance in 2011 from his father yielding the sum of $714,880.92 (at [71]).
The primary judge identified at [92] the matters relied upon by the trustee for the contention that the wife was not a reliable witness but his Honour recorded a finding that those matters did not support that conclusion (at [93]).
The primary judge found that the wife knowingly or recklessly misled the Court by joining in the application for the consent orders made on 1 September 2011 by wrongfully failing to disclose the debt claim of Mr S against the husband (at [122] and [124]). However, the primary judge also found there to be no evidence to suggest that the wife had any direct or indirect involvement in the U Pty Ltd project in respect of which the debt to Mr S was incurred, or that any significant portion of that debt “made its way to the wife” (at [137]). The primary judge recorded that he was unable to find that the wife had any involvement in the transaction that created the debt (at [138]).
The husband did not participate in any of the first trial, in the appeal from the orders then made nor in the second trial. The primary judge found that “[w]ithout the evidence of the husband it is not possible to identify the assets and liabilities of the husband and therefore it is not possible to construct a reliable balance sheet” (at [139]). Subject to that expressed caveat, the primary judge determined that the identifiable net assets, including the wife’s modest superannuation, totalled $1,592,419 (incorrectly transcribed at [159] as $1,594,419), as follows:
158. I find that the assets are:
Assets
Owner Description Value 1 W E Street, Suburb F $2,500,000 2 W Ms MM Hicks $30,137 3 W Motor vehicle 2 $2,000 4 W Motor vehicle 3 $1,000 5 W Furniture $25,000 6 W Jewellery $2,000 7 W Interest in business W Pty Ltd $30,990 8 H Motor vehicle 1 $1,000 9 H St George Bank $4,430 10 H Comsec account $8,100 $2,604,657 Liabilities
Owner Description Value 1 W Macquarie Bank – Suburb F property $307,781 2 W Capital Gains Tax – C Town property (estimated) $60,000 3 W Ms PP $2,860 4 W NAB $10,622 5 H Mr S $605,567 6 H SS Company $1,925 7 H Commonwealth Bank of Australia $5,165 8 H Australia and New Zealand Banking Corporation $25,560 Total $1,019,480 Superannuation
Owner Description Value 1 W Super Fund 3 $7,242 Total $7,242 Net assets
159. With the caveat referred to earlier in these reasons, on the basis of those figures the net assets are $1,594,419 ($2,606,657 - $1,019,480 + $7,242).
The primary judge recorded a finding that each of the husband and the wife made significant contributions during their (long) marriage and that the wife continued to make contributions after separation (at [160]).
His Honour recorded that “[t]he husband inherited about $1.275 million from his parents” and set out the detail of that (at [161]), but his Honour also recorded, in relation to the husband’s application of “very significant sums to projects in Country Q” (at [162]) that:
163.More than $1,000,000 was applied to those projects and to servicing the related debts. It is the unchallenged evidence of the wife that she objected to at least some of those investments.
At [164] the primary judge recorded that the husband made 35 trips to Country Q between 2002 and 2009 leaving the wife to manage the parties’ household and business affairs in Australia.
It is not in issue that on the “artificial” balance sheet constructed by the primary judge there is nothing reflecting any of the “[m]ore than $1,000,000” the husband directed to his ventures in Country Q.
The primary judge referred to the respective submissions of the wife and of the trustee concerning the assessment of contributions in percentage or specific terms (at [165]). However his Honour declined to express a contributions assessment in percentage or precise terms. Taken from the reasons, his Honour took the view that in the absence of evidence from the husband, the balance sheet able to be constructed was “artificial” and his Honour recorded a finding to the effect that on the known facts and, given the artificiality of the balance sheet, that it was not possible to express a contributions assessment in precise or specific terms. His Honour recorded the conclusion that the wife’s contributions “were greater than those of the husband” (at [166]).
Importantly, his Honour referred (at [167]) to the principle that, where there has been a failure of proper disclosure by a party to s 79 proceedings, the Court should not be unduly cautious about making findings in favour of the innocent party.
Having expressed a conclusion that the contributions of the wife were greater than those of the husband (at [166]), the primary judge expressed a further conclusion that any adjustments pursuant to s 79(4)(d), (e), (f) and (g) ought favour the wife. However, his Honour expressed the clear finding that “whatever the adjustment, it should not prevent those creditors being paid” (at [170]), being a reference to the creditors of the husband, including Mr S.
The primary judge referred to the trustee’s contention that the debts proved in the bankruptcy ought be paid out, that the costs of the trustee be paid and that “the balance of the matrimonial assets be divided equally between the trustee (presumably for the husband) and the wife” (at [174]).
The primary judge expressed these conclusions as to the orders to be made:
175.As is indicated earlier in these reasons, in my view the wife should not be liable for the debt to Mr S. Nor for that matter should she be liable for the other debts proved in the husband’s bankruptcy. No link has been established between the marriage and any of the debts proved in his bankruptcy.
176.Nevertheless, in my view the debts should be paid. Without information about the husband’s circumstances it is not possible to identify a just and equitable settlement of property between the husband and the wife but in my view a conservative exercise of discretion would allow to the husband sufficient property settlement to discharge the bankruptcy debts.
177.I will order that the husband’s debts be paid and that the husband and the wife retain what they own and responsibility for what they respectively owe. Although it has been consistently anticipated that the Suburb F property will have to be sold, I will make a bare order for payment with an order for sale if the payment is not made. Rather than 28 days, I will give the wife three months to make the payment. The trustee has proposed a regime of orders aimed at achieving the best reasonably attainable price for the Suburb F property. In my view that will not be necessary. There will be no one more motivated to maximise the value of the property than the wife and those matters can be left to her discretion. The only issue will be the need to realise the property in a timely way.
178.The trustee included a claim for costs in the orders sought. I will leave the issue of costs to be raised and argued once the parties have had an opportunity to consider the outcome of the substantive proceedings.
Conclusion
179.There was a miscarriage of justice in the making of the orders of 1 September 2011. Taking into account the husband’s debts, the orders should be set aside and new orders made that provide for a payment to the trustee in an amount of $638,217. Otherwise the assets and liabilities will remain with the party who owns or is responsible for them. On the basis of the evidence before the Court, that is an outcome that meets the requirements of ss 79A and 79.
In summary, out of identifiable non-superannuation property interests worth $2,604,657 in gross value, the husband (in effect) received $638,217.03 (which amount satisfied the husband’s proven debts in bankruptcy) and a vehicle worth $1,000 as well as cash at bank totalling $12,530. In total then, the husband’s estate in bankruptcy received the equivalent of $651,747.03. The wife received the Suburb F property worth $2.5 million, other assets worth $91,127 and liabilities of $381,263, such that after paying the husband’s estate $638,217 the total amount retained by the wife (including her modest superannuation of $7,242) equates to about $1.5 million.
When the reasons for judgment are read as a whole it is tolerably clear that his Honour determined that after making due allowance for the husband’s
non-disclosure and non-participation in the proceedings, the husband’s entitlement overall should be sufficient, but not exceed, an amount sufficient to see his proven debts in bankruptcy satisfied (in addition to his motor vehicle and modest bank deposits). The primary judge achieved that outcome by orders providing for the amount of the husband’s proven debts in bankruptcy to be paid out to the husband’s trustee with the wife to otherwise retain the parties’ property interests, subject to other existing liabilities.
Application in an Appeal to adduce further evidence
On 22 June 2020 the trustee filed an Application in an Appeal to adduce further evidence. That further evidence comprises a bundle of documents in an annexure to the affidavit of the solicitor for the trustee. The bundle of documents contains the following:
a)Evidence of conversations between a process server and the wife in which the process server deposed to his attempting to serve the husband with documents on 31 January 2012 and being told by the wife that the husband “is currently in Country Q”. This document is to support the trustee’s case that the husband and the wife did not separate in 2009. It must be noted in passing, however, that when the process server returned on 26 February 2012, the wife said “[l]ike I have told you before, he does not live here, he is in Country Q …”;
b)Documents in relation to the Supreme Court claim of Mr S, the bankruptcy of the husband and tax;
c)Bank statements evidencing funds received into a National Australia Bank (“NAB”) account held jointly by the husband and the wife. This document is intended to show that the wife benefited from the husband’s Country Q ventures such that his debt to Mr S ought be a joint debt;
d)Loan agreement between the husband and Mr V in the amount of $100,000;
e)Westpac bank statements of the wife and ANZ bank statements related to a joint account of the husband and the wife. Again, these are in support of the trustee’s contention that the wife derived benefit from the husband’s Country Q ventures;
f)Documents in relation to W Pty Ltd;
g)Incoming passenger cards for the husband. This document is intended to show that the husband remained living at the Suburb F property after the separation date alleged by the wife;
h)Extracts from previous affidavits of the husband and the wife. These seem to relate to the circumstances surrounding the loan from Mr S as well as the wife’s employment history; and
i)A NAB application dated 13 April 2011.
The trustee identifies those documents as being relevant to the issues of credit and, in particular, Grounds 1, 2 and 5 of the cross-appeal (discussed below).
The principles governing the discretion to admit further evidence as to fact on appeal pursuant to s 93A(2) of the Act are well-known (see CDJ v VAJ (1998) 197 CLR 172). In the result, the wife raised no objection to this Court receiving the further evidence the subject of the application and indeed much of this material comprised documents that were in fact in evidence before the primary judge, rather than being further evidence as such. In other words, some of this material simply supplements the appeal record to include documents that were before the primary judge. To the extent necessary the documents admitted by way of further evidence will be referred to in discussing the substantive grounds of appeal and cross-appeal.
The appeal – the wife’s Amended Notice of Appeal
The wife’s Amended Notice of Appeal filed on 28 May 2020 contains seven grounds of appeal with one ground (Ground 6) being abandoned in the wife’s Summary of Argument filed on 28 May 2020. We will deal with each of the remaining grounds.
Ground 1 – The primary judge’s decision was infected with jurisdictional error and/or was erroneous in principle by the failure to have any regard to whether it was just and equitable to alter the interests of the [wife] and the [husband’s] in their property in some manner, or to make findings of fact that doing so was just and equitable
Ground 1, framed as a challenge in the form of jurisdictional error, fell away when it was acknowledged at the hearing of the appeal that once the consent orders made on 1 September 2011 were set aside the parties were restored to their ownership position as regards their property including, for example, their joint ownership of the Suburb F property.
Senior counsel for the wife confirmed that there was in fact no challenge pursued as to the primary judge’s exercise of the discretion to set aside the consent orders, nor to the discretion being exercised to make property orders in substitution of the orders set aside. Senior counsel for the wife confirmed that the central challenge on appeal is confined to a challenge as to the extent to which the primary judge adjusted property interests in favour of the husband/trustee.
Implicit in these acknowledgements is that in the circumstances of the case the just and equitable requirement in s 79(2) of the Act was fulfilled and we note that there was no suggestion to the contrary before the primary judge. Both the wife and the trustee actively propounded property adjustment orders before the primary judge.
Despite these acknowledgements, senior counsel for the wife did not abandon Ground 1 suggesting only that both Grounds 1 and 2 had “subsided”. For our part we fail to see how anything of substance remains of Ground 1 given that, as senior counsel for the wife acknowledged, it was obviously a legitimate exercise of discretion for the primary judge to set aside the consent orders obtained as a consequence of a miscarriage of justice and likewise for his Honour to make property adjustment orders in substitution.
We find no merit in Ground 1.
Ground 2 – The primary judge’s revelation of the process of reasoning which led to his [Honour’s] decision with respect to whether it was just and equitable to alter the interests of the parties in their property in some manner, and, if it was, his Honour’s decisions for the outcome determined by him were inadequate and/or revealed that his Honour had failed to give genuine, proper and realistic consideration to the merits of the [wife’s] case
Ground 3 – The primary judge erred in principle by failing to determine whether any alteration of the [wife’s] and the [husband’s] interests in their property was just and equitable by reference to the totality of the property of the parties as that was revealed by the evidence and/or, if it was, to determine a just and equitable division of property of the [wife] and the [husband] in Australia by reference to such totality
Senior counsel for the wife acknowledged at the hearing of the appeal the overlap of these grounds and addressed them conjointly. We will adopt the same approach.
It is trite to observe that the extent of the obligation to provide reasons depends upon the circumstances of the case and the issue to be determined (see, for example, Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247).
As we have already noted, the relevant circumstances in this case included that neither party via their respective counsel raised any argument to the effect that the just and equitable requirement in s 79(2) of the Act for the making of further orders was not fulfilled. As already noted, each party propounded the making of such orders.
At [152]–[157] of the reasons, his Honour considered Commissioner of Taxation& Worsnopand Anor(2009) FLC 93-392 (“Worsnop”) and the references in that case to other decisions including those of the Full Court,[4] in expressing the conclusion that the creditors, represented by the trustee, do not have priority over the wife (at [154]). His Honour noted at [155] the following conclusions emanating from Worsnop:
[4]Kowaliw and Kowaliw (1981) FLC 91-092 (“Kowaliw”); Rowell and Rowell (1989) FLC 92-026; Biltoft and Biltoft (1995) FLC 92-614 (“Biltoft”) and Australian Securities and Investments Commission and Rich & Anor (2003) FLC 93-171 (“ASIC & Rich”).
…
•the use to which the borrowed funds were put may carry weight in the determination of a property settlement;
•the Court would normally take into account any contribution made to the acquisition of matrimonial assets and the lifestyle of the parties by a creditor;
•it would normally be expected that a party who has had the benefit of the funds should share the burden of repayment of the debt;
•The comment of the Full Court in Johnson: “unless there were compelling circumstances to the contrary, a just outcome demanded that the wife take the good with the bad” was directed to the emphasis in the “consideration” that must be given by the trial judge to the claim of the unsecured third party creditor and was not to be taken as a matter of principle beyond that;
•Altering the interests of the parties to the marriage in the property does not mean that an intervening third party creditor acquires by intervention some rights based on s 79(2) for a just and equitable remedy, that are additional to the creditor’s other rights at law;
•the aspect of a creditor’s position to which the Court must have regard under s 75(2)(ha) are not rights to recovery but the practical prospects of recovery from a debtor spouse’s property.
(Footnote omitted) (As per the original)
Having noted that the wife was not a party to the contract with Mr S, nor that she was found by the Supreme Court to be liable for the debt (at [156]), his Honour determined to include the debt of Mr S in the balance sheet as a debt of the husband (at [157]).
The primary judge emphasised the limitation that existed by reason of the husband’s non-disclosure and non-participation in the proceedings to which we have already referred. Having noted that limitation his Honour plainly did refer to “the totality of the property of the parties as that was revealed by the evidence”.
Whilst senior counsel for the wife sought to emphasise that the trustee had not exhausted all of his powers under the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”), including in particular causing the husband to be publicly examined pursuant to s 81 of the Bankruptcy Act (a matter the primary judge took account of at [95]), the evidence established that the trustee had pursued other avenues of enquiry. The affidavit of the trustee filed on 7 June 2018 provided evidence of the significant enquiries of the trustee which, apart from the husband’s statement of affairs, included examinations of the husband, the production of notices served upon various banks and enquiries the trustee had pursued in Country Q.
The evidence before the primary judge included that the three Country Q properties referred to in the consent orders made on 1 September 2011 were of little or no value. Country Q Property 2 was the subject of a legal dispute resolved in favour of a Mr OO. Country Q Property 2 had been sold without the husband receiving any funds from that sale. The interest in a property known as Country Q Property 3 was a leasehold interest and at most was a contingent asset of no value to the husband.
Referenced in the reasons at [140] is the fact that Country Q Property 1 was included in both the wife’s and the trustee’s balance sheet at trial as having a “[n]il” value. At [144] the primary judge made reference to, with apparent acceptance, the trustee’s evidence in respect of Country Q Property 2 resulting in the primary judge excluding that item from the balance sheet.
Two of the Country Q properties were listed in the Application for Consent Orders filed on 24 August 2011 at a combined value of $800,000. In addition, the application records the husband as having bank accounts in Country Q in the sum of $124,650 and in Australia in the sum of $130,000. The investigations of the trustee revealed that the husband borrowed heavily against these properties. No explanation was given by him as to what happened to those funds or to the very significant amounts he transferred from Australia to Country Q. All that was known was that the trustee could find nothing of value.
Further it was not known how the husband supported himself after the bankruptcy. His income, if any, or means of support remained a mystery. Nothing was known about his current circumstances.
In argument of these grounds, emphasis was placed on the findings the primary judge recorded as follows:
162.On the other hand the husband applied very significant sums to projects in Country Q. In July 2003 the husband began withdrawing money from the joint account for business ventures in Country Q. The properties at Country Q Property 2 and Country Q Property 1 were bought. On 2 November 2007 an $800,000 line of credit was set up with Macquarie Bank using the Suburb F property as security. This money was mainly utilised to fund the husband’s projects in Suburb F and pay mortgage commitments.
163.More than $1,000,000 was applied to those projects and to servicing the related debts. It is the unchallenged evidence of the wife that she objected to at least some of those investments.
His Honour was therefore clearly aware of these matters. The central contention in support of these grounds is that, having expressed the findings at [162] and [163], his Honour failed to have proper regard to those findings in evaluating the wife’s claim.
We are unable to accept that contention. The opening words of [162], “[o]n the other hand”, draw an obvious link to the finding immediately preceding it at [161] that the husband “inherited about $1.275 million from his parents” That is, having referred to the relatively significant inheritances of the husband at [161], his Honour saw that significant contribution as being balanced out by the husband’s application of substantial funds to ventures in Country Q. That approach is consistent with the submissions made at trial on behalf of the wife by senior counsel then appearing for the wife. That is, it can be seen from the submissions made at trial that senior counsel for the wife argued that the husband’s inheritances were offset by the husband’s use of money in Country Q. That is the approach the primary judge adopted.
Submissions by senior counsel for the wife on appeal appeared to proceed on the assumption that the whole, or virtually the whole, of the $800,000 line of credit obtained by the parties in November 2007 was drawn down and applied by the husband to his ventures in Country Q. However, we accept the submission of the trustee that on the evidence no more than $450,000 was drawn down on the line of credit and an unspecified proportion of that was used to pay the mortgages on the C Town property and the Suburb F property, aside from its application by the husband to ventures in Country Q. It is to be noted that the balance sheet constructed by the primary judge reflects that the debit balance of the line of credit stood at $307,781 as at the trial before the primary judge.
We consider it was entirely open to the primary judge, in assessing contributions, to take the approach of offsetting the husband’s significant inheritances against his significant application of funds to his Country Q ventures commencing from about 2003. We do not accept that the primary judge failed to take account of the findings at [162] and [163] in undertaking the assessment for the reasons identified.
When the reasons for judgment are read as a whole it can be seen that particular weight was given to the husband’s business affairs in Country Q, the lack of any explanation as to what happened to the funds raised and the absence of any information as to the husband’s current circumstances. The approach his Honour ultimately took as to the alteration of property interests is apparent. In short, the path of reasoning to the conclusions ultimately expressed by the primary judge is discernible (see, Bennett and Bennett (1991) FLC 92-191 at 78,266–78,267).
The primary judge reasoned to the conclusion that the husband’s proven debts in bankruptcy ought be paid from the parties’ joint assets with the wife thereafter to retain essentially all of the remaining property. That conclusion fell within the ambit of reasonable discretion exercised by the primary judge (see, Norbis v Norbis (1986) 161 CLR 513 at 539).
We find no substance in these grounds.
Ground 4 – The primary judge erred by making orders which have the effect of requiring the [wife] to pay one half of the [husband’s] debt to the [trustee] in circumstances where his Honour:
a. Found that the evidence did not “support a finding that the wife … was an unreliable witness”;
b. Was “unable to find that the wife … had any involvement in the transaction that created the relevant debt”;
c. Recorded that the “creditors do not have automatic priority over the wife …”;
d. Recorded that there was “no evidence to suggest that the wife … had any involvement, direct or indirect in the U Pty Ltd project”, or that “any significant portion of the payment made by Mr S made its way to the wife …” or that the “wife … had any involvement in the transaction that created the relevant debt”;
e. Found that the “wife … was not a party to the contract (which created the relevant debt), nor was she found by Supreme Court Judge to be liable for the debt”;
f. Found that the $800,000 Macquarie Bank facility obtained in 2007, of which $307,781 remained to be paid by the wife … was “mainly used to fund the husband’s projects in Country Q and pay mortgage commitments”, “more than $1,000,000” being “applied to those projects”, such investments and that [t]he “unchallenged evidence” of the wife … was that she “objected to at least some of those investments”;
g. Did not find that the [wife] benefitted, or stood to benefit from the husband’s “projects”;
h. Determined to “include the debt to Mr S in the balance sheet as a debt of the husband”.
This ground of appeal is founded upon the premise that the primary judge made orders requiring the wife to pay one half of the husband’s bankruptcy debts. The particulars provided in support of this ground (added to by senior counsel for the wife in argument of the appeal) and the wife’s Amended Summary of Argument filed on 28 May 2020, do no more than identify the findings of the primary judge said to be inconsistent with that premise. However, analysis of the reasons reveals that the premise is misconceived.
It is clear that the primary judge found that the wife should not be responsible for the payment of any of the husband’s bankruptcy debts (at [157] and [175]). However, in addressing this ground, it is first necessary to establish whether the wife was in fact required to pay half of the husband’s debts. The wife does not explain why it is she contends this was the outcome beyond noting where his Honour said:
177.I will order that the husband’s debts be paid and that the husband and the wife retain what they own and responsibility for what they respectively owe…
The effect of the orders made by the primary judge was that the wife, being the party who would retain control of what was previously the property of the marriage, was required to pay an amount equivalent to the debts proven in the husband’s bankruptcy. That, of itself, does not mean the wife was responsible for those debts.
It is presumed that the basis for the wife’s complaint is that in his Honour’s table of assets, the primary judge includes the debts which his Honour said should be the responsibility of the husband (at [158]) and the subsequent calculation determining the value of the total assets (at [159]) which does not differentiate between the liabilities to be included in the balance sheet and which ought be the responsibility of the husband, achieved by omitting those liabilities from the balance sheet.
However, the balance sheet constructed by the primary judge taken with the effect of the orders requires further elaboration in addressing this ground. Firstly, the table below sets out the assets determined by the primary judge in accordance with the party who is to retain each asset under the orders:
Husband
Wife
Value
Suburb F property
$2,500,000
Ms MM Hicks
$30,137
Motor vehicles
$3,000
Furniture/Jewellery
$27,000
Interest in W Pty Ltd
$30,990
Superannuation
$7,242
Motor vehicle
$1,000
St George Bank
$4,430
Commsec Account
$8,100
Cash payment from wife
$638,217
The same process is repeated below for liabilities, assuming the husband is to retain the proven bankruptcy debts:
Husband
Wife
Value
Suburb F property mortgage
($307,781)
CGT – C Town property
($60,000)
Ms PP
($2,860)
NAB
($10,622)
Mr S
($605,567)
SS Company
($1,925)
CBA
($5,165)
ANZ
($25,560)
It is revealed then, that the primary judge effectively determined it just and equitable that the husband receive an amount slightly more than his proven debts by way of property settlement. That is, on the above calculations, the wife retains $1,578,889 and the husband retains $651,747. That total is $2,230,636. (As earlier noted, the primary judge’s calculation at [159] erroneously adopts the figure of $2,606,657 as representative of the assets of the parties when, in fact, it is $2,604,657 as identified in [158]). The total pool of assets then is $1,592,419 in net terms.
Then, when the husband’s liabilities are removed from the total of $2,230,636 (effectively removing them from consideration and leaving the husband solely responsible for them) the result is $1,592,419; the net property pool as found by the primary judge.
It follows that the effect is that the husband remains solely responsible for his bankruptcy debts. Expressed in percentage terms, the husband retains 29.2 per cent and the wife retains 70.8 per cent of the identified property. Put another way, the primary judge’s determination was that the husband receive an amount sufficient to permit him to extinguish his liabilities amounting to about 29 per cent of the assets. It follows that the contention that the wife was made responsible for paying one half or any proportion of the husband’s proven debts in bankruptcy is misconceived. The debts are to be paid in whole, and solely, from the husband’s s 79 entitlement as determined by the primary judge.
We find no merit in this ground.
Ground 5 – In the alternative to Ground 4, the primary [judge] failed to adequately reveal why, having made the findings identified and relied upon in support of Ground 4, and determined that the Mr S debt was to be included in the balance sheet “as a debt of the husband”, such debt was visited upon the [wife] and the husband equally
This ground fails for the same reasons as the failure of Ground 4. That is, this ground repeats the misconception that the wife was ordered to pay any proportion of the husband’s debts.
We repeat our reasons for rejecting Ground 4 in rejecting this ground.
Ground 7 – The primary judge erred in principle by:
a. finding that the husband’s share was substantially lower than would have been justified by the assessment of contributions as adjustments required by s 79(4) in circumstances where his Honour found that without information about the husband’s circumstances it is not possible to identify a just and equitable settlement of property between the husband and the wife, and;
b. notwithstanding finding that it was not possible to identify a just and equitable settlement of the parties’ property, making orders for property settlement.
It is trite that the integrity of the s 79 process heavily depends upon the absolute duty of parties to meet their obligations of full and frank disclosure of all information relevant to the case, including disclosure of their financial position both as to assets and liabilities.[5]
[5]Oriolo and Oriolo (1985) FLC 91-653; Black and Kellner (1992) FLC 92-287; Suiker and Suiker (1993) FLC 92-436 and Weir and Weir (1993) FLC 92-338 (“Weir”).
Whilst at one time this Court appeared to adopt the approach in non-disclosure cases that the jurisdiction under s 79 of the Act was limited to making orders with respect to identified, identifiable or quantified assets (see, for example, Monte and Monte (1986) FLC 91-757), more recent Full Court authority supports the principle that a party should not be able to take advantage of his or her own non-disclosure such that it may be appropriate to make an order beyond the ascertained property, provided that any order made on this basis can be seen to achieve substantial justice relative to the subject non-disclosure (Weir at 79,593).
Where there exists sufficient evidence of non-disclosure, Weir supports the approach that the Court should not be “unduly cautious” in making findings in favour of the other party (Weir at 79,593). The primary judge referred to that approach at [167] in assessing contributions.
Importantly, failure by parties to provide credible evidence relating to aspects of their financial affairs does not entitle the Court to dismiss applications or to relieve the Court of the responsibility of applying the provisions of the Act in the light of such findings as can be made.[6]
[6]Efthimiadis and Efthimiadis (1993) FLC 92-361 and Stay v Stay (1997) FLC 92-751.
In this case the primary judge recorded that the husband had notice of the proceedings and had elected not to take part in them and his Honour was satisfied that, to the extent necessary, it was appropriate to make orders on an undefended basis as against the husband (at [15]). The primary judge noted that the consequence of the husband’s non-participation in the proceedings was that “a very important witness was missing” (at [94]). The primary judge recorded that “without evidence from the husband, the task of identifying a just and equitable distribution of property is virtually impossible” (at [102]). At [166] the primary judge referred to the same difficulty in assessing the contributions of the married parties.
The findings made by the primary judge referable to the husband’s absence or non-participation in the proceedings must be read in their full context. What the primary judge did was place emphasis on the obvious limitations imposed upon the s 79 process by reason of the husband’s non-disclosure and non-participation. However, it is plain that his Honour was satisfied that he could make orders, and ought make orders, albeit within the constraints of those limitations.
After finding that the wife’s contributions were greater than the husband’s, and referring to the approach open to be taken in non-disclosure cases his Honour recorded:
Any adjustments that should be made pursuant to paragraphs s 79(4)(d), (e), (f) and (g)
168.The only evidence about the current circumstances of the married parties relates to the wife. She is 64 years of age and is in poor health. In the affidavit sworn 11 February 2016 the wife referred to having depression, drinking a lot of alcohol and being very unwell in around September 2009. In the beginning of 2012 she saw a general medical practitioner and found that she had high blood pressure and severe depression. She does not have paid employment. The wife lives with the daughter of the marriage, Ms RR Hicks, who shares the household expenses. The wife has had to borrow funds to make ends meet. The wife does not have paid employment and intends to apply for the aged pension when she qualifies for it. As at July 2018 the wife had applied to Centrelink for a Newstart Allowance but had not commenced to receive the allowance.
169.The husband is about 12 years older than the wife but there is no evidence of his circumstances. On those facts, although the contribution based finding would leave her with a greater share of the assets, there should be an adjustment in favour of the wife.
170.That said, the original orders meant that it was made impracticable for the husband’s creditors to be paid. In my view whatever the adjustment, it should not prevent those creditors being paid.
The ultimate property settlement and a comparison with the outcome under the 2011 orders.
171.Due to the absence of evidence from the husband the identification of a property settlement based on the current circumstances is necessarily vague. Two things can be said about the original division of property in favour of the husband. First, in practical terms the husband’s share was substantially lower that would have been justified by the assessment of contributions as adjustments required by s 79(4). Second, the property settlement did not allow the discharge of the debts proved in the husband’s bankruptcy.
…
176.Nevertheless, in my view the debts should be paid. Without information about the husband’s circumstances it is not possible to identify a just and equitable settlement of property between the husband and the wife but in my view a conservative exercise of discretion would allow to the husband sufficient property settlement to discharge the bankruptcy debts.
(Emphasis added) (As per the original)
It is notable that as part of the consent orders entered into by the parties, to which the primary judge specifically referred at [171] quoted above, the husband was to retain $1,441,650 (of which $1,055,000 was attributed to Country Q properties) out of combined property interests (on the wife’s case) amounting to $2,956,650. That equates to 48.76 per cent. In other words, the wife was joining in the promulgation of orders which would see the husband receive slightly less than 50 per cent on the combined assets then advanced.
It is difficult, then, to see how the wife can now reasonably argue that the primary judge was in error in finding that conservatively the husband would be entitled to a division of property which, if accepted, effectively equates to a 71 per cent/29 per cent division in the wife’s favour as earlier outlined.
The primary judge was obliged to undertake the exercise of the s 79 discretion both in determining the identifiable assets and in reaching a resolution of the appropriate orders to be made in the context of the case. No error is demonstrated by the primary judge, having emphasised the limitations imposed by the husband’s non-disclosure and non-participation, in proceeding to determine the matter in the manner in which his Honour did.
In short, there was no error of principle made by the primary judge and there is no merit in this ground.
Conclusion on appeal
There being no merit in any ground of appeal the appeal must be dismissed.
The cross-appeal – the trustee’s Notice of Cross-Appeal
Ground 1 – His Honour erred in that he found that the evidence did not support a finding that the Appellant was an unreliable witness
Ground 3 – His Honour erred in that, having determined that it was possible that the Appellant paid the Husband more than he was due under the property settlement orders because the orders were a device to defeat the husband’s creditors, and the wife having made no attempt to explain why she did that, he did not find that the wife was an unreliable witness
Ground 4 – His Honour erred in determining that the date of separation of the Appellant and the husband was of uncertain relevance insofar as the Wife claimed that the Husband no longer resided in the matrimonial home after separation
Ground 5 – His Honour erred in failing to make a finding in relation to the claims of the Appellant that the Husband lived on the Central Coast or that the Appellant and the Husband had not cohabited since that time
It is convenient that these grounds be dealt with together as common to each is a challenge to the primary judge’s findings concerning the wife’s credit or her reliability as a witness.
By these grounds, the trustee contends his Honour ought to have found that the wife was an unreliable witness and that his Honour’s finding that she was not is an appellable error.
These grounds, and the arguments agitated in support of them, amount to a
re-agitation of the same contentions that were advanced before, and determined by, the primary judge.
Demonstrating that other, different or further findings might have been open, or might permissibly have been made, does not justify appellate interference. As the trustee’s submissions demonstrate, the primary judge engaged with each of the matters advanced by the trustee in challenging the wife’s credibility or reliability as a witness.
Grounds 3 and 4 are specific in their terms challenging the primary judge’s conclusion of the wife’s credit against the background of the wife’s payments in accordance with the consent orders (Ground 3) and the dispute over the date of separation (Ground 4).
Plainly, the primary judge was aware that the trustee sought a finding that the wife was an unreliable witness (at [92]). One of the supporting factors, on the trustee’s case, was the issue surrounding the parties’ date of separation. The trustee presented a case that the parties remained in a relationship after the wife’s alleged date of separation in September 2009. The primary judge set out those matters at [92]:
… The particular matters highlighted on behalf of the trustee were:
·The wife deposed (AB 197 paragraph 7) that after separation the husband lived on the HH Region. However:
oIn oral evidence (AB1973.5) she said that he lived in Suburb JJ from “around July or August of 2011 onwards. Previous to that …. he lived here, there and everywhere, but a lot of the time he lived with Ms KK at Suburb Y”.
oThe husband’s incoming passenger cards have the Suburb F property as his address in Australia on cards dated 20 February 2010 (AB1711), 24 April 2010 (AB1727), 29 June 2010 (AB1737), 18 October 2010 (AB1693), 26 February 2011 (AB1731), and 8 December 2012 (AB1665). The husband did not change his address on passenger cards from the Suburb F property until 18 August 2011 (AB1691);
oAfter the asserted date of separation the husband’s bank statements for accounts in his sole name continued to be delivered to the Suburb F property;
oOn 31 February 2012 a process server looking to serve the husband at the Suburb F property was told “He is currently in Country Q” rather than, for example, “He no longer lives here”;
·The wife had represented that during the period 2008 to April 2012 she used a prepaid mobile and service 042******* “from time to time”. In her oral evidence she contended that she meant “from a time to a time” (AB1983).
(As per the original)
The primary judge went on to say:
93.In my view, those matters do not support a finding that the wife was an unreliable witness. The wife was not responsible for the husband’s conduct in making representations about his residence. The other matters are suggestive but do not establish that the wife lied …
The next factor is the wife’s conduct pursuant to the consent orders. It was accepted that the wife paid more than the consent orders required. The trustee argued that the wife’s evidence “was a contrivance, seeking to assert that moneys that left her accounts went to the husband as part of her asserted obligation to him” (at [93]). The primary judge further stated:
93.…It is possible that the wife paid the husband more than he was due under the property settlement orders because the orders were simply a device to defeat the husband’s creditors and were irrelevant as far as the real position of the wife and husband were concerned.
The last specific factor referred to is the date of separation. Again, the primary judge was plainly aware of this dispute and discussed it separately (at [125]–[136]). His Honour considered the argument of the trustee that the wife’s date of separation was a contrivance. His Honour accepted there was evidence of “the cooperation, communication and co-location between the husband and the wife after their asserted separation” (at [134]) but also highlighted that, in his Honour’s opinion, the date of separation is not as important as was perhaps pressed. His Honour said this:
133.As I have said, the issue before me is less related to the breakdown of the consortium vitae of the married parties but more to the extent, if any, of the wife’s collusion with the husband to mislead the Court and or defeat a creditor. In my view it would not be inconsistent with them colluding in those ways, that they had separated.
His Honour identified the factors said to support the conclusion that the separation date was a contrivance at [135] before concluding:
136.Even taken at its highest the evidence on those matters is not conclusive. Singly or together, those matters do not exclude the possibility that the husband and wife were separated when they sought the consent orders. In my view there is insufficient reason to reject the evidence of the wife or the finding on which the divorce decree was based.
It is important to recall the advantage a trial judge has in observing and hearing witnesses directly. For example, in the oft-cited case of Abalos v Australian Postal Commission (1990) 171 CLR 167, the High Court said at 178-179:
…[W]here a trial judge has made a finding of fact contrary to the evidence of a witness but has made no reference to that evidence, an appellate court cannot act on that evidence to reverse the finding unless it is satisfied “that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge’s conclusion”: Watt or Thomas v. Thomas.
…
…[W]hen a trial judge resolves a conflict of evidence between witnesses, the subtle influence of demeanour on his or her determination cannot be overlooked…
(Footnote omitted)
Further, in Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479, the High Court said:
More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against – even strongly against – that finding of fact. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge “has failed to use or has palpably misused his advantage” or has acted on evidence which was “inconsistent with facts incontrovertibly established by the evidence” or which was “glaringly improbable”.
(Emphasis added) (Footnotes omitted)
The fact that the primary judge made an adverse finding to the wife concerning her knowing or reckless misleading of the Court in the Application for Consent Orders filed on 24 August 2011 did not render axiomatic the conclusion that the wife’s evidence as a whole was to be rejected or that she was to be treated as a wholly unreliable witness. Undoubtedly the wife’s conduct in this respect was a relevant consideration to be brought to account in determining the credibility and reliability of the wife. However, this is precisely what the primary judge can be seen to have done in examining, and resolving, each and every complaint mounted by the trustee attacking the reliability or credibility of the wife. We are not persuaded by anything raised by the trustee to a conclusion that the primary judge has palpably misused the advantage his Honour enjoyed, as compared with this Court, in seeing and hearing the wife give her evidence. Nor are we persuaded that the primary judge has acted on evidence which was “inconsistent with facts incontrovertibly established by the evidence” or which was “glaringly improbable”.[7]
[7]See also Fox v Percy (2003) 214 CLR 118.
It follows that we are not persuaded of any merit in these grounds.
Ground 2 – His Honour erred in that he found that there was no link between the marriage (of the [wife] and the husband) and any of the debts proved in the bankruptcy of the husband
By this ground, the trustee contends that the primary judge erred in finding that there was “[n]o link … established between the marriage and any of the debts proven in the [husband’s] bankruptcy” (at [175]).
The trustee’s argument as to why his Honour ought to have found that the debts were joint debts, can be summarised thus:
a)The purpose for which the capital was borrowed was a legitimate business venture undertaken during the parties’ marriage. Indeed, Bergin J in the Supreme Court described it as a “sound one”;
b)The relevant agreement was executed in 2008, during the parties’ marriage;
c)Funds began flowing into a joint bank account from October 2009. They were marked as “Pt Country Q Bintang Prop” (and we note the further documents admitted into evidence on appeal are relevant to this);
d)The wife took several actions to advance the husband’s business ventures in Country Q such as approving two lines of credit secured against the C Town property; and
e)Where there are no exceptional circumstances, Kowaliw makes clear that losses, as well as profit, ought be shared between the parties.
The wife’s argument is that the trustee fails to identify a legitimate basis upon which the wife could have expected to share in the profits of the husband’s business ventures (if there had been any profits) and that the conceded lack of involvement in the business is an important concession. She maintains the finding was open to the primary judge.
We accept the wife’s submission that a fundamental difficulty this challenge confronts is that, without direct evidence from the husband, his intentions as to whether the wife ever stood to gain anything of substance from the investments he solely controlled in Country Q were not established. The wife’s unchallenged evidence was that in late 2008 she became aware that the husband was living with a woman in Country Q (at [61]) and it was in 2008 that the husband entered into the agreement with Mr S (at [54]). Far earlier, from the year 2002 onwards, the husband had been making frequent trips to Country Q for extended periods (at [40] and [164]). Taken with the fact of the separation having occurred in 2009, it could not be assumed that if the husband’s solely controlled ventures in Country Q proved successful in any substantial way that the wife stood to share at all in that success.
At [113] the primary judge extracted a substantial passage of the judgment following the first trial dealing with the same topic and referring to authorities including Antmann and Antmann (1980) FLC 90-908; Kimber and Kimber (1981) FLC 91-085; Kowaliw; Af Petersens and Af Petersens (1981) FLC 91-095 and Prince and Prince (1984) FLC 91-501. Further, in quoting at some length from Worsnop (at [152]), containing within it relevant references to ASIC & Rich, Biltoft and Kowaliw, the primary judge was plainly cognisant of the guidelines emanating from these cases as to the approach to attributing responsibility as between married parties for acquired debts in the s 79 process. It bears some emphasis that these authorities identified guidelines for the exercise of the s 79 discretion, and not binding principles constraining that exercise.
In his Honour’s reasons, where he discusses whether the debt to Mr S ought be treated as a joint debt, his Honour cites extensively from Worsnop before stating that the trustee does not have automatic priority over the wife, and that an intervening third party does not automatically acquire some rights based on s 79(2) of the Act. His Honour also records:
156.The husband had a debt to Mr S arising from a contract he signed. Therefore the debt existed long before the decision of Bergin J. The wife was not a party to the contract, nor was she found by the Supreme Court Judge to be liable for the debt.
157.I will include the debt to Mr S in the balance sheet as a debt of the husband.
In argument of this ground the trustee acknowledges that the wife did not have any involvement in the transaction that created the debt to Mr S, but points to other features of what may be termed the wife’s involvement in joining in obtaining a line of credit secured against property in May 2007, and the later line of credit secured against the former matrimonial home.
Whilst it can be accepted that there was evidence pointing to the wife having some knowledge or some involvement in the husband’s business ventures in Country Q, there is no evidence to demonstrate that the wife could have a legitimate expectation to receive some share of profits from the Country Q ventures. It bears repeating that the wife’s unchallenged evidence at trial was that the husband was pursuing a relationship with another woman in Country Q, a predominate feature for the wife concerning the parties’ separation in 2009.
In our judgment it was within the ambit of a legitimate exercise of s 79 discretion for the primary judge to deal with the husband’s debts in the manner in which his Honour did. We are not persuaded of any merit in this ground.
Ground 6 – His Honour erred in determining that it was just and equitable for the [h]usband to receive only 27.2% of the net assets or that it was just and equitable for the [h]usband to receive almost none of the assets net of his liabilities
By this ground, the trustee contends that the primary judge has erred in determining it was just and equitable to make orders which essentially provided for a division of property 71 per cent/29 per cent in the wife’s favour.
There is an obvious commonality between the complaint in this ground of the cross-appeal and the grounds of the appeal we have already dealt with, directing challenges to the exercise of discretion of the primary judge. We rely upon, without unnecessary repetition here, our foregoing discussion addressing the wife’s grounds of appeal in addressing this ground of the cross-appeal.
The trustee contends the primary judge erred in these ways:
a)By equating the role of the trustee with that of an intervening, unsecured third party;
b)Determining that the final result properly reflected the contributions of the husband; and
c)The final result overstated the wife’s contributions.
In relation to the first of three challenges, the trustee highlights that the case of Worsnop, which the primary judge extensively quoted, involved the Australian Taxation Office as an intervening, unsecured third party. Whereas, the trustee here stands in the shoes of the husband as the trustee in bankruptcy and is, therefore, entitled to rely on the provisions of s 79(2) of the Act.
The trustee argues the husband’s contributions were far greater, including the inheritances he received from his parents (totalling around $1,464,000), his financial support of the wife who did not generate a taxable income from
2002-2012, as well as the contention that the wife benefitted from the husband’s Country Q ventures and that the husband, as at trial, had no legal interest in the properties which he claimed to have an interest in at the time of the consent orders.
The wife’s argument under this ground concedes that, on either the wife’s case, or the trustee’s case, the decision should be set aside and the proceedings remitted. The wife does not contend that the primary judge’s decision fell within the ambit of reasonable discretion.
However, the primary judge’s reasons are to be read in the context that the husband did not participate in the trial and the proceedings were said to be conducted on an undefended basis against him (at [12]–[15]). Moreover, as we have explained there was a lacuna in the evidence due to the absence of the husband. It was accepted by the primary judge that this omission rendered the task of assessing justice and equity “virtually impossible” (at [102]). Further, the primary judge expressed his disquiet at the husband neither being called to give evidence at the hearing nor being the subject of a formal examination under the Bankruptcy Act (at [137]).
As we have already observed in dealing with the wife’s appeal it is readily apparent from the reasons of the primary judge, including his various references to the consequences of the husband’s non-participation in the trial and the feature that any balance sheet constructed was “artificial”, that the primary judge proceeded on the basis that he could exercise the discretion consistent with cases of non-disclosure. His Honour made specific reference, as earlier referred to, to there being no evidence as to the husband’s current circumstances. It was left as an unknown as to whether the husband may in fact have been in possession of some other assets.
In that important context it is not open to the trustee to legitimately argue that the primary judge was bound to afford the husband a greater share of the assets, which in effect would go to the husband’s estate in bankruptcy.
In broad summary, in a lengthy marriage producing children the primary judge took the approach of offsetting the husband’s substantial inheritances against his equally substantial application of capital to his own ventures in Country Q. Absent the husband’s participation in the trial and essentially his non-disclosure of relevant information concerning the case, it was open to the primary judge to exercise the s 79 discretion in the manner in which he did. That is, to take the “conservative” approach to the husband’s assessed entitlement as being sufficient, but no more than, the amount necessary to meet his proven debts in bankruptcy.
We are not persuaded of any merit in this ground.
Conclusion and costs
For the reasons identified each of the appeal and the cross-appeal are to be dismissed.
In that event neither party sought an order for costs and the appropriate order is that there be no order as to costs of either the appeal or the cross-appeal.
I certify that the preceding one hundred and thirty-three (133) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Ryan, Aldridge & Kent JJ) delivered on 18 February 2021.
Associate:
Date: 18 February 2021
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