Official Trustee in Bankruptcy & B and G (Deceased)

[2005] FamCA 1163

FAMILY LAW ACT 1975

FAMILY COURT OF AUSTRALIA
AT LAUNCESTON

IN THE MATTER OF:

OFFICIAL TRUSTEE IN BANKRUPTCY

(Applicant)

and

(First Respondent)

and

G (deceased)

(Second Respondent)

JUDGMENT DELIVERED BY

THE HONOURABLE JUSTICE YOUNG

Date of Hearing: 10 and 11 May 2005, 13 August 2005 and with final oral and written submissions on 5 October 2005 and 22 November 2005

Date of Judgment: 1 December 2005

Appearances: Mr D. Smith for the applicant
The first respondent in person
Ms C. Gibson for the second respondent

ISSUE

The Official Trustee in Bankruptcy filed proceedings in the Hobart Registry of the Family Court of Australia on 5 November 2003 seeking orders against each of the first and second respondents, who previously were first respondent and second respondent, pursuant to s.79A(1)(a) of the Family Law Act 1975 (Cth) (“the Act”) for orders earlier made pursuant to s.79 of the Act, by consent, to be set aside due to suppression of evidence causing a miscarriage of justice and for their costs of and incidental to that application to be paid by the respondents. In summary the effect of those orders, if made, would be to restore the first respondent, the previously bankrupt first respondent, to a legal situation of joint ownership of the property D, subject to an acknowledged mortgage encumbrance of $10,000.00. A sequestration order was made on a creditors petition against the first respondent and it is argued that his two pre-separation debts remain outstanding and should be payable. If those consent orders are set aside the issue is then whether there should be a discretionary order made in substitution therefore pursuant to s.79 of the Act and if so what should be the terms and financial conditions of any such order. The proceedings are part heard in the Federal Court and the other available outcome of this hearing would be for that Court to resume its hearing.
Such application and any consequential orders were primarily opposed by each of the respondents who presented their case to the Court on the basis of upholding the existing consent orders of the Family Court whereby the second respondent became the sole registered proprietor of property D, subject to its mortgage encumbrance to Westpac Banking Corporation. The specific orders sought by them are detailed hereafter.

THE HEARING

That matter proceeded as a defended hearing on 10 and 11 May 2005 in a circuit hearing at Launceston. Evidence was concluded and the hearing was adjourned to enable final submissions to be prepared and delivered to the Court on a date to be fixed.
The orders that I then made were:
(i)that the further hearing of these proceedings be adjourned part-heard before Young J to be relisted on a date and time to be fixed in July/August 2005;
(ii)that written submissions from all parties both as to the evidence, s.79A issues and other legal issues the subject of the application made by counsel for the second respondent be filed and served by 14 June 2005;
(iii)that all submissions in reply be thereafter filed and served by 1 July 2005;
(iv)that the Court arrange a further date for the parties to formally address their submissions to the Court, such further hearing to be either by video link transmission or otherwise by a resumption of the case in the Launceston Registry of the Court.
The second respondent died suddenly and tragically from a motor vehicle collision in June 2005.
The further hearing of this matter was then listed before me on various dates in July and August of 2005 but the solicitors previously acting for the second respondent were then not in a position to proceed and were awaiting instructions to act in the administration of her estate and in the continuance of this hearing.
On 13 September 2005 an order was made for one of the sons of the deceased and an executor to her Will, S, to be substituted as a party to the proceedings in substitution for the deceased mother. That specific consent order provided:
“THAT [S] of [address], [occupation], the eldest son of the [second] respondent (deceased) and one of the two executors pursuant to her Will … be substituted as a party to the proceedings in place of the deceased secondnamed respondent”.
On that day orders were made for written submissions both as to jurisdiction and case law and otherwise final submissions on trial to be filed and served on or prior to 20 September 2005 by the respondents and on or before 28 September 2005 by the applicant. All parties had the right to make, file and serve any submissions in reply on or prior to 3 October 2005.
The matter was then to be listed for a one day hearing by video link between the Launceston Registry and the Melbourne Registry to conclude final submissions and argument in the proceedings.
That listing was on 5 October 2005. Further orders were made at the request of legal practitioners for all parties to make, file and serve a minute of the specific orders sought and to file any written responses in reply to the submissions made that day. Further submissions were thereafter filed by all parties, including the first respondent, and these have been considered and evaluated in this Judgment and in the orders subsequently pronounced.

ORDERS SOUGHT

Official Trustee in Bankruptcy

The final orders sought by the applicant were as follows:
(i)that pursuant to s.79A(1)(a) of the Family Law Act 1975 (as amended) the orders of the Family Court of Australia made 20 July 1992 be set aside;
(ii)that the orders made 17 December 1992 be dismissed;
(iii)that within thirty days of the making of these orders the heirs, executors and/or assigns of the secondnamed respondent (deceased) do all acts and things and execute all such deeds, documents, instruments and writings necessary to transfer to the firstnamed respondent fifty per cent of her right, title and interest in property D and that the firstnamed respondent take such transfer subject to the existing mortgage to Westpac Banking Corporation;
(iv)that the firstnamed respondent be and is hereby restrained from disposing of or in any way encumbering any interest in property D pending determination of the Federal Court of Australia, or as otherwise ordered by the Family Court of Australia;
(v)that each of the firstnamed and secondnamed respondents pay the applicant’s costs of and incidental to these proceedings, such costs to be taxed if not agreed.
In support of their application the Official Trustee relied upon the affidavit of A, Insolvency & Trustee Service of Australia (“ITSA”).
By a Notice of Objection as to admissibility filed 5 May 2005 counsel for the second respondent did initially raise numerous objections to that filed affidavit of A. Ultimately almost all of those objections were withdrawn save and except that it is agreed between all parties that paragraphs 30 and 31 of the affidavit were to be deleted. I made that order in the trial and I will have no regard to each of those paragraphs. Otherwise all of the annexures to his affidavit are now in evidence without objection.
First Respondent
The final orders sought by the first respondent were in accord with those sought by the second respondent and his final written submissions endorsed their submissions.
Second Respondent
The final orders sought on behalf of the estate of the second respondent were as follows:
A.“In the event that the Court finds that the Official Trustee in Bankruptcy is not, in the circumstances of this case a person affected within the meaning of s.79A of the Family Law Act 1975:
(i)That the Application filed by the Official Trustee in Bankruptcy on the 5^th November 2003 be dismissed.
(ii)That the Applicant pay the Second-named Respondent’s costs of and incidental to the Application.
B.That in the event that the Court finds that the Official Trustee in Bankruptcy, in all the circumstances, is a person affected within the meaning of s.79A and that there has been a miscarriage of justice within the meaning of s.79A(1)(a) but that it is not appropriate in all the circumstances including delay and hardship of the Second-named Respondent to exercise its discretion to set aside or vary the original Order:
(i)That the Application filed by the Official Trustee in Bankruptcy on the 5^th November 2003 be dismissed.
(ii)That the Applicant pay the Second-named Respondent’s costs of and incidental to the Application.
C.That in the event that the court finds that it would have been appropriate to exercise its powers under Section 79A(1) if the second respondent had not died but is not satisfied that it is still appropriate to exercise its powers under sub-section (1) in relation to the Order:
(i)That the Application filed by the Official Trustee in Bankruptcy on the 5^th November 2003 be dismissed.
(ii)That the Applicant pay the Second-named Respondent’s costs of and incidental to the Application.
D.That in the event that the Court finds that it would have been appropriate to exercise its powers under Section 79A(1) if the second respondent had not died and is satisfied that it is still appropriate to exercise its powers under sub-section (1) in relation to the Order:
(i)That the Order made in the Family Court of Australia on the 20^th July 1992 be varied in such terms as the Court deems fit; or
(ii)That the Order made in the Family Court of Australia on the 20^th July 1992 be set aside and such Order as the Court deems fit be made in substitution for the Order so set aside”.

FEDERAL COURT PROCEEDINGS

On 17 September 2003 the Official Trustee instituted proceedings in the Federal Court of Australia against the second respondent seeking a declaration that the transfer of property D which occurred on or about 15 July 1992 be held to be void as against the applicant. Those proceedings have been adjourned, presumably on a part-heard basis, to 5 December 2005 pending the outcome of the hearing in this Court. One of the orders sought by the applicant is to restrain the first respondent from disposing of or encumbering any interest in property D pending conclusion of those Federal Court proceedings.

DOCUMENTS FILED

By consent on or about 20 September 2005 an agreed statement of facts was prepared by the executors of the second respondent’s estate and that document has been received by agreement in evidence by the Court. That statement confirms that the last Will and Testament of the deceased was dated 3 February 2004 and that it was on or about 27 August 2005 that the solicitors formerly acting for the second respondent received instructions to act on behalf of the administration of her estate and in these part-heard proceedings.
A statement of assets and liabilities of the estate was prepared and by agreement provided to the Court. It detailed that the estate may likely receive, subject to the acceptance of claim, a sum of $100,000.00 arising from the second respondent’s death. In final submissions I was asked by all parties to disregard that potential insurance claim and accordingly that sum of $100,000, or any lesser sum received, has been excluded both from any pool of assets and from my consideration of all of the issues now before the Court. Otherwise that document summarises the financial position of the deceased, as at the date of her death to have been, in summary (and excluding that sum of $100,000.00):
§ assets of $597,000.00; and
§ being responsible for liabilities of $125,135.00;
§ with an available net estate of $473,865.00.
The first respondent is the former first respondent, B. He appeared at the hearings in person. The first respondent filed and formally relied upon a Response filed 4 February 2004 where he seeks a dismissal of the order sought on behalf of the applicant and for his costs in the proceedings to be paid.
On 3 December 2003 the second respondent instructed her solicitors to file a Response to the orders sought by the Official Trustee seeking a dismissal of their application, for her costs to be paid or, in the alternative, if the consent s.79 orders pronounced 20 July 1992 were in fact set aside then an order to exclude the liability of her former first respondent to pay to her the sum of $20,000.00 as was provided for in those Orders.

BACKGROUND FACTS

The first respondent and the second respondent married in 1972. There were three children of that marriage.
There were numerous separations within their marriage between 1989 and 1992 and I accept that on various occasions property settlement issues were discussed by them.
The first respondent and the second respondent finally separated in 1992 and were subsequently divorced. The second respondent later remarried.
In the primary hearing before me on 10 and 11 May 2005 the issue of the second respondent’s health was the subject of considerable evidence. In her evidence the second respondent had spoken of her then current state of health and that was supported by the unchallenged evidence of her medical practitioner Dr S. The second respondent had been first diagnosed with Multiple Sclerosis in or about April 1999. Thereafter her health deteriorated substantially and she was not able to walk unaided, was permanently confined to a wheelchair and in need of constant care. In giving her evidence she was emotional, quite understandably so. I would have wholly accepted her evidence, particularly based upon my observations of her and her severe restrictions in movement and her substantial level of disability. She had given evidence that it would take her up to 2½ hours to arise from bed in the morning and to dress for the day, without assistance. In April 2003 she had been hospitalised for six weeks and thereafter could not return to her previous employment as a clerk. She had been unable to work since that date. I would have found that she was incapable of obtaining any gainful employment. I further would have accepted that her stress levels were significant, had aggravated her medical condition and that the stress was in part caused by the court proceedings and their financial effect upon her and her new marriage.
In May of this year the second respondent was living with the first respondent at the property N and that property was registered solely in his name. It had been specifically modified to her physical requirements. That property is encumbered by a separate mortgage liability to Westpac of approximately $130,000.00.

CONSENT ORDERS – 20 JULY 1992

The orders pursuant to s.79 of the Act were made by consent by a Registrar in Chambers on 20 July 1992. Those orders provided for, in summary:
(i)The first respondent transferring to the second respondent his right, title and interest in property D, subject to the existing Westpac Banking Corporation mortgage;
(ii)The second respondent retaining the majority of the furniture, chattels and personal effects save as were expressly identified in paragraph 3 of the Order;
(iii)the first respondent transferring to the second respondent the Nissan motor vehicle;
(iv)the second respondent transferring to the first respondent the Toyota motor vehicle subject to the first respondent being responsible to pay out the existing loan;
(v)the second respondent transferring to the first respondent her right, title and interest in the lake-side property;
(vi)the first respondent having no right, title or claim to the second respondent’s superannuation fund or other investments and the second respondent having no claim to the first respondent’s superannuation fund and other investments;
(vii)the second respondent paying a debt of $6,300.00 to her brother;
(viii)the second respondent transferring to the first respondent and thereafter having no right, interest or entitlement to the first respondent’s building business, tools of trade and the like;
(ix)the second respondent paying to the first respondent by way of property settlement $20,000.00 payable by four annual equal payments over four years and without interest, the first of such payments to be made on or before 1 July 1993.

THE LAKE-SIDE PROPERTY

The lake-side property was acquired by certain of the children of their marriage who, between November 1993 and August 1994 paid a sum of approximately $15,000.00 to the first respondent. In August 1994 that property was transferred to S. Subsequently a fire destroyed the property and in due course it was on sold to a bona fide purchaser with settlement occurring in October 1997. I have had regard to that sum received by the first respondent.

THE FIRST RESPONDENT’S BUILDING AND FINANCIAL TRANSACTIONS

The first respondent was by occupation a builder. He undertook substantial building works in 1979 on a property subsequently purchased in 1986 by M. M commenced legal proceedings against him in 1987 alleging negligence and seeking rectification of the building works and payment of moneys. Ultimately, and after contested proceedings, a judgment was delivered in the Supreme Court of Tasmania in 1992 in favour of the plaintiff whereby the first respondent was ordered to pay her a sum of $34,464.00 plus costs to be taxed.
The first respondent was represented in those court proceedings by his former solicitors. Their legal fees of and related to those Supreme Court proceedings were $26,044.20. Those solicitors sought to recover such costs and obtained a judgment against the first respondent.

THE SECOND RESPONDENT – FULL AND FRANK FINANCIAL DISCLOSURE

In the s.79 proceedings seeking alteration of property interests the second respondent filed on 17 July 1992 a Form 17 Statement of Financial Circumstances. She did not disclose the judgment debts of the first respondent owing in favour of M and his former solicitors. It is now conceded by her solicitors, and is said to be common ground between all parties, that the financial disclosure then made to the Family Court was inadequate and misleading as it excluded each of the judgment debts.
A memorandum of agreed facts was also prepared and filed on 17 July 1992 by the first and second respondents under their respective signatures and witnessed by the then solicitors for the second respondent. That document again made no disclosure of the financial liabilities then owing by the first respondent. Paragraph 6 of that agreed statement of facts advised the court that:
“the total assets the parties then had were approximately $248,450.00 and liabilities as at date of separation of $24,692.00. This produced a net equity of $223,758.00 approximately”.
The basis of settlement outlined to the Family Court Registrar in Chambers on behalf of the parties on 20 July 1992 was for the second respondent to receive 60% and the first respondent 40% of the net disclosed pool of assets. What that meant was that the second respondent would receive a transfer of property D subject to a mortgage of approximately $10,000.00, some furniture, a motor vehicle and modest savings and superannuation subject to her payment of a debt to her brother and an allowance of $20,000.00 for moneys to be paid on instalments to the first respondent.
A memorandum of consent orders was submitted to the Court on the basis of those negotiated orders and final orders were made by Registrar Gallagher on 20 July 1992, that is only three days after the filing of the application and the proposed consent orders. I further observe that the first respondent’s acknowledgement of service and a copy of the Marriage Certificate were only subsequently filed, on 22 July 1992.
The second respondent’s submissions to the Court were that each of the substantial liabilities owing to M or to the first respondent’s former solicitors were omitted from the documents prepared by her then solicitor either because:
(a) she did not know of the specific amount of the judgment debt; or
(b)she took it to be a financial responsibility solely of the first respondent to make such disclosure; or
(c)in any event each of the judgment debts was subject to appeal and the first respondent was confident that the primary decisions would or could be overturned; and
(d)she did not know of the existence of the liability to the first respondent’s former solicitors.

I do not accept such evidence as was given by the second respondent. I find that she then knew of those debts and simply failed to disclose them. She may not have known the exact dollar sum, but I am wholly confident she well knew of the approximate sums of both debts.
The second respondent acknowledged under cross‑examination that she was aware of the first respondent's preparation for trial and the hearing in the Supreme Court involving her then first respondent and the claim brought against him by M. The second respondent said she attended court on two afternoons. She was aware the trial ran for up to two weeks in duration. She described her then marriage as very troubled and that her then husband was in a difficult and aggressive mood. They were living together, under the one roof, but I accept there were serious conflicts and real issues within their marriage.
The second respondent conceded that she had attended at the office of the first respondent’s former solicitors, in preparation for the hearing. Further, she was aware that there was no building insurance cover available to meet the claim of M, if it were to be successful.
On 29 May 1992 judgment was entered against the first respondent on the action of M in the sum of $34,464. I find that the second respondent was aware of that judgment debt and certainly aware of the outcome of the proceedings.
Subsequently the solicitors who had acted for the first respondent in the court proceedings obtained judgment against him in the sum of $26,044. That account remains unpaid. I find that the second respondent most certainly should have been aware and in all probability was actually aware of a liability to pay the solicitors who acted for the first respondent and that she would have known of the approximate quantum of that debt.
The Family Court file is before the court in evidence. On 17 July 1992 the second respondent filed with the court an application seeking final property orders, a Form 17 financial statement and the agreed memorandum of facts, together with a draft of the proposed orders signed by herself and the first respondent and countersigned by her then solicitor, J.
In her financial statement sworn 15 July 1992 and acknowledged by the second respondent to be under her signature, she disclosed her income, assets and liabilities, both as to herself and as to the family. What was intentionally omitted from that document was the judgment debt owing to M and the debt for legal fees owing to the solicitors.
The financial statement was, I find, prepared with some care, as otherwise it identified the loans of each of the parties and other assets including racked timber, tools, machinery and trailer and an investment account.
I find that the timber, the tools and the machinery were very likely items owned by the first respondent but part of his then business as a builder. The fact that they were included as assets highlights the obligation on the second respondent and the first respondent to then have disclosed other business dealings, in particular the debts, which were the subject of judgments against the first respondent.
I am wholly satisfied that the second respondent and first respondent had prior discussions and elected to exclude those liabilities from the financial statement.
The further document filed is the memorandum of agreed facts which largely presented the pool of assets and liabilities and the submission to the court for orders to be made in chambers by a Registrar. It was incumbent upon both respondents to include in that document a proper disclosure of the judgment debt and the solicitor's fees owing. That was not done. The document accordingly was both inaccurate and misleading to the court in that it quantified the second respondent was then to receive 60 per cent of the pool of assets calculated to be a sum of $134,255.00. In reality with the first respondent not disclosing and therefore retaining those other debts the second respondent's percentage of the disclosed net pool of assets was substantially greater.
The s.79 orders were made in chambers by Registrar Gallagher on 29 July 1992. On the basis of the financial information before him and bearing in mind the obligations of the court following upon the decision in Harris v Calladine (1991) FLC 92-217 it appeared to be a reasonable and proper order on that disclosed financial material. Of some particular significance is paragraph 12 of the order whereby the second respondent agreed to pay to the first respondent a sum of $20,000.00 in four equal instalments over four years with no interest. Those payments were never made and the second respondent explained to the court that the reason was that the first respondent ceased to pay child support and ultimately they struck an agreement that the capital sum would not be paid and, for his part, the first respondent would not and did not contribute to the care, financial welfare and upbringing of the children.
There was a very real and necessary requirement at that time for the first respondent and second respondent to present accurate financial information to the court. Their liabilities were known and should have been fully disclosed. I find that their omission from the financial statement and the agreed statement of facts were both intentional and deliberate and that there was a suppression of evidence and a failure to disclose relevant financial information.

M – ACTIONS AND PROCEEDINGS

Judgment was obtained by M against the first respondent in the Supreme Court of Tasmania in May 1992.
In August 1992 M lodged a caveat against the title to property D and this prevented the second respondent from registering the transfer of the first respondent’s interest in that property to her sole name.
The first respondent and second respondent did not advise M of their s.79 proceedings before the Family Court and she therefore had no knowledge of that application or of the final orders made in this Court on 20 July 1992. Likewise the first respondent’s former solicitors were not notified of such Family Court proceedings.
On 30 November 1992 a Writ of Fi Fa was issued out of the Prothonotary’s Office of the Supreme Court of Tasmania on the instructions of M and directed to the financial interests and assets of the first respondent.
On 7 December 1992 M instructed her solicitors to apply to the Family Court to set aside the orders earlier made on 20 July 1992 pursuant to s. 79A of the Act.
On 17 December 1992 orders were made by consent by this Court as follows:
(i)That until further order B and G personally and by their agents are hereby restrained from taking any steps whatsoever in connection with the implementation of the orders as and by way of property settlement made by the Family Court of Australia on 20 July 1992;
(ii)That the aforesaid Application be adjourned until the sitting of the Practice Court on 25 February 1993.
The first respondent and second respondent were legally represented at these injunctive proceedings and consented to the interim order. This was a first return date. The orders were negotiated out of Court and on the basis of an express denial that there was any basis for M being given leave to intervene in the proceedings.
On 23 February 1993 the first respondent filed an affidavit in this Court denying any merit to the claim made by M and advising this Court that he had lodged an appeal against the judgment of the Supreme Court which was soon to be heard by the Full Court of the Tasmanian Supreme Court. The first respondent advised this Court that he was seeking to have the judgment set aside in the Supreme Court and was opposing the intervention order as sought by M in the Family Court.
On 25 February 1993 there were discussions out of Court as a result of which the proceedings in the Family Court were adjourned until 24 March 1993. On that date with counsel jointly appearing for each of the first respondent and second respondent and counsel appearing for M consent orders were submitted to the Court in the following terms:
(i) that the application to intervene by M be adjourned sine die;
(ii) that the application be removed from the active pending cases list.
The injunctive order was pronounced on 17 December 1992. Such order was made by consent at a time when M had an intervention application before the court but where an order for her intervention had not been pronounced. On 25 February 1993, by consent, that intervention application was adjourned sine die but the intention of all parties was for the earlier pronounced consent injunction to remain alive. Counsel for the second respondent has now submitted that M had no standing in the proceedings. She was not and is not a party and the injunctive order should not have continued beyond 25 February 1993. Whilst I conclude that the adjournment on that latter date was somewhat ill conceived it does not, in my opinion, negate the pronouncement and effect of the earlier consent injunctive order. I conclude that such injunction made as against the then first respondent and second respondent was intended to remain and that they consented to such injunction continuing. I reject the submission that such injunction is ultra vires.
That is the last order and indeed the last document on the matrimonial file of the first respondent and second respondent, which is in evidence before me.
The first respondent appealed the decision of the Supreme Court of Tasmania and was funded in that process by the Housing Industry Association. That appeal was unsuccessful and subsequently a further appeal to the High Court was also unsuccessful.
M subsequently petitioned for the first respondent to be made bankrupt and that occurred upon the making of a sequestration order on 17 September 1997, the amount then proved being $70,739.00.
The date of the act of bankruptcy relied upon by M was agreed by all parties to be 18 August 1995.
On 25 November 1997 the first respondent’s former solicitors lodged a proof of debt with the Official Trustee in Bankruptcy claiming the sum of $26,044.20.
The first respondent was subsequently discharged from bankruptcy on 14 October 2000.

LITIGATION HISTORY

I conclude that the importance of the litigation history of the first respondent in his various appeals and requests is that for a period of approximately three years subsequent to the judgment of the Supreme Court of Tasmania there were ongoing court proceedings and contested and much publicised litigation. This provided a very real barrier to enforcement proceedings and to any course of action being undertaken to commence proceedings to bankrupt the first respondent.
As part of that litigation history and on the basis that they were only tendered by consent of all parties, a bundle of newspaper cuttings were produced to the Court covering the period February and March 1996. These articles were from a local newspaper prominently highlighting the legal proceedings and claim by M and the fact that the first respondent refused to pay the judgment sum as ordered by the court. Indeed the headline in that exhibit quoted the first respondent as saying, ”I am on the run and I do not intend to co-operate with the Courts”. There were four such articles presented to the Court, again I emphasise without objection from counsel or the first respondent.
The second respondent was cross examined upon this litigation history and what she had read or seen in the newspapers. I accept that the claim and court proceedings instituted by M were newsworthy, received considerable publicity and the reality is that the second respondent then lived in the community together with her children, friends and relatives and she must have known of the detail and statements of the first respondent and his total refusal to make payment of his debts or co-operate in any reasonable and appropriate manner. The reality is that all of these headlines and statements by the first respondent at this time were a very real background to the subsequent actions of the second respondent in transferring the title of property D, as soon as she was able so to do, from joint names to her sole name.

TRANSFER OF PROPERTY D

The Caveat lodged by M on the title of property D lapsed in August 1997. By that date the second respondent had discharged the whole of the previous Westpac Housing Loan, the final payment by instalment having been made on or about 18 October 1996.
On 1 September 1997 the first respondent’s 50% legal interest in property D was transferred to and registered in the sole name of the second respondent. I find that the second respondent had made prior inquiries of the Recorder of Titles and had prepared herself and her documents to act immediately upon the lapse of that Caveat and then effect a transfer of property D to her sole name. The actual discharge of the mortgage to Westpac was effected on that same day. The second respondent lodged the original consent orders made by this Court pursuant to s.79 at the Office of Titles, the purpose for such action being that the transfer would then be marked as exempt from duty. That was a very deliberate action undertaken by the second respondent to her considerable financial advantage and with her having full knowledge of the ongoing legal events and Court orders to that date.
The transfer document was lodged notwithstanding the continuance of the injunctive order of the Family Court obtained by consent on 17 December 1992. The second respondent well knew of that injunction and I find that she had acted at all relevant times with the knowledge that she was restrained by the Court, and with her consent, from dealing with property D. I find she certainly knew that she was restrained from any transfer of that property from joint names to her sole name.
On 26 April 1995 the second respondent had written to the solicitors for M requesting that the caveat lodged on the property D title be withdrawn and for that purpose the second respondent specifically enclosed “a Withdrawal of Caveat” form. In that letter the second respondent explained that she had made inquiries of the Office of Titles, had ascertained that the caveat was current and would not lapse for a period of five years after having been lodged.
The second respondent’s evidence in the hearing was that property D had become simply overwhelming for her in terms of its maintenance, upkeep and her occupancy thereof. The children, or some of them, had left the home and she could not cope with the property. She said that she had acted in frustration. Her evidence was that she had attended at the Office of Titles, sought advice and learnt the procedure in relation to the caveat and its removal and also what was required of her to implement the transfer or property D from joint names to her sole name.
Her evidence was that she held a signed document of transfer from the first respondent which, as I best understood her evidence, had been signed at or about the date when the consent orders were first pronounced on 20 July 1992. She gave no explanation as to why there had not been a transfer of property D to her sole name prior to the caveat being lodged by M on 18 August 1992.

SEQUESTRATION REVIEW

On 8 October 1997 the first respondent reviewed the sequestration order in the Federal Court at Hobart. That review was unsuccessful. Subsequently, on 10 December 1997 the first respondent’s then legal practitioners advised the Official Trustee that they would be instituting proceedings for an annulment of the sequestration order. In those circumstances and pending that further court proceeding, it was determined on behalf of the Official Trustee not to commence active administration and management of the first respondent’s estate.
In early 1999 the Official Trustee determined to aggressively intervene in and manage the estate of the bankrupt first respondent and subsequent investigations led to an application for funding being made to the Inspector General pursuant to s.305 of the Bankruptcy Act, such funding being approved on 25 September 1999.
The Official Trustee lodged a caveat on the title to property D on 28 January 2000.
Thereafter negotiations continued, altogether out of court, between the Official Trustee and the second respondent seeking a resolution of all outstanding financial issues and the payment of the judgment debts owing to M and to the former solicitors. All such negotiations were wholly unsuccessful and accordingly proceedings were thereafter instituted in the Federal Court on 17 September 2003 and then in the Family Court on 15 November 2003 where the orders were sought pursuant to s.79A of the Act.
Prior to instituting those proceedings in the Family Court the Official Trustee had by letter dated 21 March 2000 advised the second respondent that they claimed an interest in property D and subsequently by letter dated 11 October 2001 had further advised the second respondent that they maintained “strong legal advice” that an action was available to them to recover the interest of the bankrupt first respondent in property D.

PROPERTY D

Pursuant to the statement of assets and liabilities filed by the first respondent and second respondent on 17 July 1992 property D was estimated, by agreement, to be valued at $155,000.00 and subject to a Westpac mortgage of $10,873.00. At the hearing in May 2005 property D had an estimated value of no less than $240,000.00. There was no sworn valuation of property D in evidence before me.
The second respondent continued to live at property D and paid off that Westpac debt, at the rate of $60 per week so that by 18 October 1996 the whole of the debt had been paid but the mortgage instrument not then discharged, which occurred on 1 September 1997, seventeen days prior to the actual pronouncement of the sequestration order.
Annexed to the affidavit of A, exhibit “G” is the result of the search of the Office of Titles showing the various dealings with property D. The search, which is in evidence, confirms that a document evidencing the discharge of the Westpac mortgage was lodged on 1 September 1997. Subsequently there are two other mortgages lodged against property D, on behalf of the second respondent and to secure advances by her to buy two additional properties. The first of those mortgages was registered on 11 December 1997, the second registered on 22 February 1999. Those mortgages secured the purchase by the second respondent of the following properties:
(i)on 28 November 1997, with her son N, property I; and
(ii)on 31 March 1999 property N.
The totality of the borrowings pursuant to each of those further mortgages was initially $180,721.00. At the date of hearing before me it was agreed that the then liability under each of those mortgages totalled approximately $160,000.00 and was then secured over each of these properties and property D.

UPDATED AGREED FACTS AND FINANCIAL STATEMENT

On or about 20 September 2005 the executors of the estate of the deceased prepared an agreed statement of facts including an updated valuation of property D and the Westpac mortgage encumbering its title. Additionally a solicitor from the firm representing the second respondent filed a further signed statement confirming that the current Government valuation of property D as at 20 January 2005 was, in fact, $357,000.00. In final submissions I was asked by all parties to accept this sum as the current market value of property D notwithstanding the earlier date of this valuation and the tacit agreement as to value that was before me in the hearing. The Westpac mortgage debt as at 20 September 2005 was actually only $113,588.00 and therefore the net value of property D is now $243,411.00.
Each of those agreed statements formed part of the documents filed by the second respondent, and adopted by the first respondent, as part of final written submissions. Those documents were served upon the applicant. I have accepted and relied upon those documents and the financial information contained therein.

22 NOVEMBER 2005 - MENTION

I relisted this matter for a telephone link-up hearing on 22 November 2005. Both counsel and the first respondent participated in the hearing. I raised the following issues:
(i)the relevance of the ground of fraud as causing a miscarriage of justice within s.79A;
(ii)the impact and relevance of s.153 of the Bankruptcy Act;
(iii)the relevance and effect of the date of bankruptcy agreed to have been 18 August 1995;
(iv)whether the rules for bankruptcy now provided for in Chapter 26 of the Family Law Rules (2004) are of relevance in this hearing and the effect and impact of s.35 of the Bankruptcy Act 1966;
(v)costs and whether I should, with the agreement of the parties make any appropriate order for costs in this judgment without separately relisting the matter.
I subsequently ordered that all further submissions were to be filed by 3:00 p.m. on Friday 25 November 2005 with any right of reply to be exercised no later than Monday 28 November 2005. I have read and evaluated those submissions.

WILL OF THE SECOND RESPONDENT

The last Will of the deceased was made on 3 February 2004 appointed her son S and her new husband, D, as her executors. The property at property D, subject to the Westpac mortgage, was left to her three children and the whole of the residue of her estate was bequeathed to her new husband.

$20,000.00 PAYMENT REQUIRED BY SECOND RESPONDENT

Pursuant to the 1992 consent orders the second respondent was required to pay to the first respondent, as part of the property settlement a sum of $20,000.00 payable by four annual instalments, without interest with the first of such payments to be made on or before 1 July 1993.
The second respondent did not make any of these annual instalment payments to the first respondent. The first respondent or the Official Trustee has not enforced payment. The second respondent sought to offset the first respondent’s failure to pay any child maintenance or support for the three children, or otherwise to contribute to education costs and other costs of upbringing of the children. This was detailed in paragraph 50 of the submissions filed on behalf of the second respondent. I accept those submissions. I accept that there was effectively an agreement between the first respondent and second respondent to discharge the requirement for this capital payment. I will discharge that financial obligation imposed upon the second respondent or her estate.

PROPERTY I

This property was purchased on or about 28 November 1997. I find that the primary purchaser of the property was the child N. Because of his age and his then financial circumstances Westpac would not fund him to purchase this property in his sole name. It was therefore purchased in the name of his mother and himself. N lives in this home. I accept the evidence given by the second respondent that she has no equity nor any legal or equitable interest therein, notwithstanding that she is registered on title as to fifty per cent ownership thereof. The current mortgage debt on this property was then approximately $44,000.00 and N is solely responsible for and has paid and continues to pay that liability to Westpac. I therefore exclude from my consideration in this case the second respondent’s legal ownership of a fifty per cent interest of this property and I record that the Official Trustee has sought or claimed no interest or financial entitlement as against this property.

RELEVANT LEGISLATION AT MAY 2005

Bankruptcy Act 1966

The relevant sections of the Bankruptcy Act 1966 to which counsel directed attention were:
Section 5: Interpretation
“Bankrupt” means a person:
(a)     against whose estate a sequestration order has been made; or
(b)who has become a bankrupt by virtue of the presentation of a debtor’s petition
“Property” means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property
“Provable debt” means a debt or liability that is, under this Act, provable in bankruptcy.
“The commencement of the Bankruptcy”, in relation to a bankrupt, means the time at which his or her bankruptcy is, by virtue of section 115, to be deemed to have commenced
“The Date of the Bankruptcy”, in relation to a bankrupt, means the date on which a sequestration order was made against his or her estate or, if he or she became a bankrupt by virtue of the presentation of a debtor’s petition, the date on which he or she became a bankrupt by force of sections 55, 56E or 57, as the case requires.
Section 35
Section 35: Family Court’s jurisdiction in bankruptcy where trustee is a party to property settlement or spousal maintenance proceedings etc.
35.(1)     If, at a particular time:
(a)a party to a marriage is a bankrupt; and
(b)the trustee of the bankrupt’s estate is:
(i)a party to property settlement proceedings in relation to either or both of the parties to the marriage; or
(ii)an applicant under section 79A of the Family Law Act 1975 for the variation or setting aside of an order made under section 79 of that Act in property settlement proceedings in relation to either or both of the parties to the marriage; or
(iii)a party to spousal maintenance proceedings in relation to the maintenance of a party to the marriage;
then, at and after that time. The Family Court has jurisdiction in bankruptcy in relation to any matter connected with, or arising out of, the bankruptcy of the bankrupt.
(2)     Subsection (1) does not limit the Family Court’s jurisdiction under section 35A.
(3)     In this section:
“property settlement proceedings” has the same meaning as in the Family Law Act 1975.
“spousal maintenance” means proceedings under the Family Law Act 1975 with respect to the maintenance of a party to a marriage.
[S 35 insrt Act No 20, s 3 and Sch 1.]
Section 58
58.     (1)     Subject to this Act, where a debtor becomes a bankrupt:
(a)the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and
(b)after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
Section 115
“115.(1)     If a person becomes a bankrupt on a creditor’s petition and subsection (1A) does not apply, then the bankruptcy is taken to have relation back to, and to have commenced at, the time of the commission of the earliest act of bankruptcy committed by the person within the period of 6 months immediately before the date on which the creditor’s petition was presented.
(1A)If:
(a)a person becomes a bankrupt on a creditor’s petition that was based on breach of a bankruptcy notice, and
(b)the time for compliance with the notice was extended under subsection 41(7); and
(c)the Court making the sequestration order considers that the application under subsection 41(7) was frivolous, vexatious or otherwise without substantial merit;
then the bankruptcy is taken to have relation back to, and to have commenced at, the time that would have applied under subsection (1) of this section if the time for compliance had not been extended.
Section 116
“116. (1)     Subject to this Act:
(a)all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge;
(b)the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge;
(c)property that is vested in the trustee of the bankrupt’s estate by or under an order under section 139D; and
(d)money that is paid to the trustee of the bankrupt’s estate under an order under section 139E;
is property divisible amongst the creditors of the bankrupt.
(2)Subsection (1) does not extent to the following property:
(a)property held by the bankrupt in trust for another person;
(b)….
I will separately consider s.153 of the Bankruptcy Act 1966.

FAMILY LAW ACT 1975 (CTH)

Section 79A provides :
79A. (1) Where, on application by a person affected by an order made by a court under section 79 in proceedings with respect to the property of the parties to a marriage or either of them, the court is satisfied that:
(a)there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including the failure to disclose relevant information), the giving of false evidence or any other circumstance; or
(b)in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or
(c)a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order; or
(d)in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the marriage, the child or, where the applicant has caring responsibility for the child (as defined in subsection (1AA)), the applicant, will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution for the order; or
(e)…
the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.
Section 79A (1C) provides :
[Proceedings in relation to deceased estates] Where, before proceedings under this section in relation to an order made under section 79 are completed, a party to the marriage dies:
(a)the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings;
(b)if the court is of the opinion:
(i)that it would have exercised its powers under subsection (1) or subsection (1A) in relation to the order if the deceased party had not died; and
(ii)that it is still appropriate to exercise its powers under subsection (1) or (1A) in relation to the order;
the court may vary the order, set the order aside, or set the order aside and make another order under section 79 in substitution for the order so set aside; and
(c)an order varied or made by the court pursuant to paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.

THE BANKRUPTCY & FAMILY LAW LEGISLATION AMENDMENT ACT 2005

This amending Act commenced, in its entirety, on 18 September 2005. At that date the hearing of evidence in this case had concluded but the matter remained part heard pending the obtaining of further instructions and resolution of the issues of and related to the estate of the late second respondent who had died after the conclusion of the hearing on 4 June 2005 and final submissions.
As the s.79 order, the act and period of bankruptcy of the first respondent, the issuing by the Official Trustee of the s.79A application and the hearing itself, save for procedural orders and submissions, had all been concluded prior to that commencement date of the amending legislation I decided, and all counsel and the first respondent agreed, that this case be determined on the then existing legislation without regard to the amendments which are prospective in their operation.

s. 35 BANKRUPTCY ACT 1996

Section 35 of this Act was inserted by Act No. 20, 2005, s.3 and Schedule 1. It confers upon the Family Court jurisdiction in bankruptcy in the circumstances that are required to be satisfied in sub-sections (a) and (b) thereof. Those sub-sections require, in summary, a party to be then a bankrupt and for s.79A proceedings to be then before the Family Court. Those requirements would not be satisfied on the facts of this case as the first respondent was a discharged bankrupt at the filing date of the s.79A application and the Official Trustee was not a party to the property settlement proceedings during the period of bankruptcy.
However the Family Court is, on the facts of this case, not being asked to exercise bankruptcy jurisdiction. The Court is determining a s.79A application pursuant to the Family Law Act. It is the part heard Federal Court proceedings that was considering this and related matters under the Bankruptcy legislation and prior to the case being stayed pending an application in this Court.
I gave counsel for both parties and the first respondent the opportunity to provide further written submissions on this issue. Those submissions were received.
The Official Trustee’s position is that the Family Court does not have the power to exercise jurisdiction pursuant to s.35 of the Bankruptcy Act and the case should return to the Federal Court to be resolved. The second respondent’s submissions are that this section has no application in this case before the Family Court. They highlight that the Federal Court proceedings have simply been adjourned pending the outcome of proceedings in this Court and I accept that this is a correct statement of position.
I conclude that s.35 of the Bankruptcy Act 1966 is not applicable to the issues in this hearing when I am exercising jurisdiction under the Family Law Act 1975.
I have not received argument upon s.35A of the Bankruptcy Act 1966 which deals with the transfer of proceedings to the Family Court. In this case those proceedings have not been transferred from the Federal Court to the Family Court. If so it may be that the Family Court would then be jointly exercising jurisdiction under both the Family Law Act and the Bankruptcy Act. I express that preliminary view, without argument, on the basis of ss.35A(3) and 35(2).

100.I now propose to evaluate and determine the following issues:
(i) was there a suppression of evidence?;
(ii)if so, did such suppression of evidence bring about a miscarriage of justice within the meaning of s.79A of the Act?;
(iii)are there other s.79A(1) grounds, such as a wilful concealment amounting to fraud, that would create a miscarriage of justice?;
(iv)was the Official Trustee a person affected by a s.79 order?;
(v)does s.116(2)(a) of the Bankruptcy Act 1966 apply and exclude property D from being divisible among creditors?;
(vi)should discretion be exercised pursuant to s.79A of the Act and, as part of such an exercise what is the impact thereon of delay, hardship and the need for finality of these proceedings?;
(vii)the impact of s.79A(1C)(b);
(viii)the impact of s.153 of the Bankruptcy Act 1966;
(ix)should the s.79 order be varied or set aside and should any order be made in substitution therefore?

MISCARRIAGE OF JUSTICE

101.The submission of the Official Trustee was that the evidence before the Court supported a finding that there was a miscarriage of justice on the basis of suppression of evidence, including the failure to disclose relevant financial information, and also by virtue of “any other circumstance”.
102.The term “suppression of evidence” in s.79A was clarified by an amendment made 27 December 2000 by the addition of the phrase (“failure to disclose relevant information”). This then specifically spelt out what further conduct is covered by the ground of “suppression of evidence”. Prior to that amendment a simple failure to give relevant evidence was most probably excluded from “suppression of evidence” as had been held by the Full Court in cases such as Taylor and Taylor (1977) FLC 90-226 (p.76,197):
“Suppression of evidence which, in our view, and in the context of s.79A which speaks of ‘fraud’, ‘duress’ and ‘false evidence’, must go beyond the mere giving of one-sided evidence an amount to a wilful concealment of matters which it was a party’s duty to put to the Court …”.

103.In T v T (unreported) (2003 CA 1006 – Judgment date 24 October 2003) the Full Court (Kay, Holden and Mullane JJ) said in dealing with this addition to the phrase “suppression of evidence”:
142.“The words in brackets were added by an amendment introduced by the Family Law (Amendment) Act 2000 that came into effect on 27 December 2000. Mr Brereton SC submitted that the 2000 amendment was a substantive amendment that could not be applied retrospectively in the circumstances of this case. Mr Broun QC submitted that it merely clarified the existing law.
143.It was further submitted that as the dispute between the parties had never reached a litigious stage requiring either of the parties to provide any evidence to the Court, it could not be said that the failure to disclose relevant information in the course of their negotiations fell within the provisions of the legislation as it stood prior to the amendment.
144.The explanatory memorandum that accompanied the Family Law Amendment Bill stated:
“Existing paragraph 79A(1)(a) sets out a number of circumstances in which a property order may be set aside. Item 6 clarifies that ‘suppression of evidence’ includes the failure to disclose relevant information.”

145.Having regard to our findings on fraud, it is strictly unnecessary for us to presently resolve this dilemma on the proper interpretation of the statute as amended and its application to allegations of suppression of evidence that occurred prior to the amendment. On the face of it Mr Broun QC’s submission appears to be correct. The general cannon of interpretation being that Acts that declare or interpret the meaning of earlier Acts are regarded as forming an exception to the presumption against retrospectivity. (See D C Pearce and R S Geddes, Statutory Interpretation in Australia, 5th ed., Butterworths, pp 257-258.)”

104.The written submissions of the second respondent, adopted by the first respondent make a very significant concession, in paragraph 56 thereof, where it is stated:
“It is clear that in the circumstances of this case the failure to disclose to the court the debts of [the first respondent’s former solicitors], together with the failure to advise those persons of the proposed property settlement could be the basis of a finding that there has been a miscarriage of justice”.

This concession is that there could have been a miscarriage of justice. It does not necessarily identify suppression of evidence and on the basis of that failure to disclose it could be open to find that there was a wilful and deliberate deception by one or both of the respondents which could be a fraud, as a grounds of confirming a miscarriage of justice.
105.In oral submissions to the Court and in support of her written submissions counsel for the second respondent acknowledged that there had been a failure by the respondents to make full and proper financial disclosure and, whilst then preserving her submission that the Official Trustee should not be regarded as a person “affected by a relevant order” nevertheless elected to direct her primary submissions to the issue of discretion, including delay and hardship.

106.Suppression of evidence is the wilful concealment of matters where it is the duty of one or both parties to disclose that information to the Court. This duty of accurate and proper disclosure applies both in contested proceedings and in consent orders. A party must not knowingly create a false impression or allow the Court, even on the making of consent property orders, to draw a false inference: In the marriage of Kokl (1981) FLC 91-078. A party must not deliberately conceal evidence which should be before the Court although there is no obligation to put evidence to advance the interests of the other party.
107.The arguments and submissions of the Official Trustee have not asserted fraud as one of the grounds in s.79A for establishing a miscarriage of justice. Fraud requires a conscious wrongdoing and a form of deceit: Taylor v Taylor (1979) FLC 90-647 at 78,589. On the facts of this case and given my findings as to the knowledge and actions of the first respondent and second respondent I would likely have found that they did act together to wrongly conceal existing liabilities from the Court. Their actions were deceitful and accordingly I would probably have found that a ground of fraud could be made out giving rise to a miscarriage of justice.
108.For the purposes of determining a miscarriage of justice I will specifically act upon the suppression of evidence in the preparation and submitting of financial and other documents to the Court. Fraud may well be specifically relevant and necessary to establish that the proven debts of the first respondent remain payable following his discharge from bankruptcy subject to s.153 of the Bankruptcy Act and for such purpose I find that there was both a conscious wrong doing and a deceitful action by each of the respondents.
109.I find that the facts of this case support a finding of a deliberate and intentional suppression of evidence and its wilful concealment was considerably more than a failure to disclose relevant information. I therefore do not have to concern myself with the December 2000 amendment to s.79A.
110.Having arrived at that conclusion, assisted by the very considerable concession of the respondents that there was a suppression of evidence it is therefore unnecessary to consider the further arm of the miscarriage of justice argument, that is “by any other circumstance” and in particular the failure to notify M and the first respondent’s former solicitors of the proceedings and of those consent orders. I would have concluded in this case that there was a miscarriage of justice because of these other circumstances.
111.A Court can only vary or set aside or substitute a further order if it is satisfied that there has been a miscarriage of justice. In Morrison and Morrison (1995) FLC 92-573 the Full Court said:
“The constant emphasis of the cases is that in order for there to be a just and equitable and an appropriate order altering the interest of parties in their property there must be a full and frank disclosure between them of all circumstances which may be relevant to the determination of their true financial position both presently and in the foreseeable future … we take this opportunity once again to re-enforce the view that the duty of disclosure is a basic duty. Ordinarily, a failure to comply with that duty will amount to a miscarriage of justice”.

112.The obligation on a party to make full and frank disclosure is directed both towards the other party and the Court. This was emphasised in Morrison (supra) at (p. 81,665) where the Full Court said:
“1.In order for there to be a just and equitable and an appropriate order altering interests of parties in property, there must be a full and frank disclosure between them of all circumstances which may be relevant to the determination of their true financial position both presently and in the foreseeable future.
2.The obligation to make full and frank disclosure is regarded as so crucial that the deliberate failure by one party to meet that obligation may result in the court drawing adverse inferences against the non-disclosing party where there is material by which such inferences can be based.”

113.I have considered the question of a miscarriage of justice as the initial legal issue because, in my opinion, it is directly relevant to a determination of whether the Official Trustee “is a person affected by a section 79 order”.

A PERSON AFFECTED BY A S.79 ORDER

114.The central facts to the determination of this issue of “a person affected”, in summary, include:
§that a judgment was obtained by M in the Supreme Court of Tasmania against the first respondent on 29 May 1992;
§the Family Court consent orders were pronounced by a Registrar in Chambers on 20 July 1992 upon inaccurate and misleading financial disclosure to the Court;
§no notice of the proposed orders were given in advance to M or to the first respondent’s former solicitors;
§a Judgment was obtained by the first respondent’s former solicitors against him;
§on 7 December 1992 M commenced s.79A Family Court proceedings;
§on 18 August 1992 M lodged a Caveat on the title to property D;
§on 17 December 1992 restraining orders were pronounced by consent of all parties and M;
§the date of the act of bankruptcy agreed by counsel and relied upon was 18 August 1995;
§the sequestration order was pronounced on 17 September 1997;
§the first respondent’s former solicitors lodged a Proof of Debt on 25 November 1997;
§the first respondent was discharged from bankruptcy on 14 October 2000;
§2000 – 2001 there was correspondence and out of Court negotiation between the second respondent and the Official Trustee;
§proceedings were commenced by the Official Trustee in the Federal Court of Australia on 17 September 2003 and in the Family Court of Australia on 5 November 2003.

115.The Full Court of the Federal Court in The Official Trustee in Bankruptcy v Mateo (2003) FLC 93-128 clearly determined that the proper course of action available to a Trustee in Bankruptcy is to apply pursuant to s.79A of the Family Law Act 1975 (Cth) to this Court to set aside or vary final property and financial orders. Given this requirement, the very specific facts of this case and the appropriate concessions made as to a miscarriage of justice, I have carefully examined the question of whether the Official Trustee has standing to make this application and specifically should be found to be “a person affected by a section 79 order”.
116.The comments of Merkel J in Mateo’s case (supra), paragraph 146 at p.78,207 are of assistance:
“146. In the present case, the Family Court was not accurately informed by the bankrupt of the extent of his liabilities as the Form 12A application did not disclose that the bankrupt was insolvent or that the alteration in property interests would result in the bankrupt being unable to pay his creditors. Thus, the Official Receiver would appear to be in a strong position to apply to the Family Court under s 79A(1)(a) of the Family Law Act for a variation of the orders.”

117.In Daniel v Daniel & Jones (Trustee in Bankruptcy)(2004) FLC 93-187 at p. 79,163 the trial Judge, Emmett J, commented:
“31. In the present case, to the extent that there is a justifiable complaint by the Trustee on behalf of unsecured creditors, there is a remedy available. The orders were made by the Family Court following a contested hearing. Nevertheless, if the effect of the orders, notwithstanding that contested hearing between first respondent and second respondent, is to prejudice third party interests, namely unsecured creditors, that is a matter that should have been brought to the attention of the Family Court. To the extent that the Family Court made orders per incuriam, so to speak, by reason of the failure to draw its attention to the possible consequences of the orders that were made, s 79A of the Family Law Act may have some application.
32. Section 79A(1) relevantly provides that where, on an application by a person affected by an order made by a Court under s 79, the Court is satisfied that there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence, the giving of false evidence or any other circumstance, the Court may, in its discretion, vary the order or set the order aside, and if it considers appropriate, make another order under s 79 in substitution of the original order. Section 92 of the Family Law Act provides that, in proceedings other than a proceeding for principal relief, any person may apply for leave to intervene in the proceedings and the Court may make an order entitling that person to intervene in the proceedings.
33. If it be the fact that, in a situation such as this, an order is made by the Family Court that results in a miscarriage of justice so far as concerns unsecured creditors of a party, it may well be open for those unsecured creditors, or the trustee in bankruptcy representing them, to make an application. That, of course, is not a matter before me. Nevertheless, the existence of such a regime gives some comfort to the conclusion that I have reached that the effect of an order made by the Family Court under s 79 is to vest a beneficial interest in one party or, at least, an interest of a proprietary nature such that it may still be enforced by that party, notwithstanding the intervening bankruptcy of the other party.”

118.Here there is a prejudice to unsecured creditors and the true financial circumstances and all liabilities should have been brought to the attention of the Family Court in July 1992. On the issue indicated in paragraph 33 of the above judgment I conclude that it is proper and it should be open to the Official Trustee to have standing in this case.
119.In evaluating that question I have considered both of these above cases and the decision in Official Trustee in Bankruptcy v Donovan & Donovan & Stevens (1996) FLC 92-703 (a decision of the Full Court of the Family Court, Ellis, Kay and May JJ) heard on appeal from the Judgment of Moss J (1995) FLC 92-596. At first instance his Honour had concluded that, on the particular grounds of that case, the application of the Official Trustee pursuant to section 79A should be dismissed.
120.The Full Court had found it unnecessary to resolve the issue on the basis that they concluded that they would not, in any event, exercise discretion in favour of the Official Trustee. That is a conclusion based on the very specific facts of that case and the issues then under appeal.
121.In Donovan’s case (supra) s.79 orders had been made following upon a short hearing on the papers. The husband and wife were each represented. No viva voce evidence was called. The wife’s application and evidence were unchallenged. The husband, a sole legal practitioner, had been struck off the roll of solicitors in New South Wales a month earlier following upon his admission of misappropriation of moneys from his trust account. There was evidence before the Court given by the wife of the husband’s admissions and also that a Receiver had been appointed to his legal practice. Additionally the wife’s solicitors had rung and had advised the Law Society, in non-specific terms and without identifying the particular parties, of a Family Court action and had sought advice in respect of the Fidelity Fund.
122.Orders were made by the trial Judge, the effect of which was to transfer the only asset of value, the jointly owned matrimonial home and its equity of approximately $120,000.00 to the sole name of the wife. Upon registration in her name she then sold a fifty per cent interest in the home to her mother (Mrs Stevens) on the basis of its then current market value.
123.Mr Donovan’s sequestration order was made in about November 1986 and he was thereafter discharged from bankruptcy in November 1989. The Official Trustee issued proceedings thereafter in the Federal Court in May 1990 and in the Family Court, pursuant to s.79A in August 1990. Seemingly there was no discussion or agreement upon the issue of whether or not the Official Trustee should have standing as his application was also filed after the conclusion of the period of bankruptcy. S.153 of the Bankruptcy Act 1966 was not there considered.
124.After an initial hearing before Cohen J where the application of the Official Trustee was dismissed the matter was then heard on appeal by the Full Court who remitted the application for hearing before a single Judge as expeditiously as possible. The husband was then joined in the proceedings pursuant to a Court order and the matter was then listed for re-hearing before Moss J in late 1995, almost ten years after the making of the original s.79 property order.
125.In paragraphs 47 and 50 of his Judgment Moss J had, in considering this issue stated that:
“47. In my opinion, the provision itself supplies the answer to what must be demonstrated by a person, such as the present applicant, who is a stranger to the relevant section 79 proceedings, but who claims to be a person relevantly affected by the making of those orders. What such an applicant must show, in my opinion, is that the applicant has been affected by the making of those orders, in that vis-à-vis the applicant, the making of the orders has caused a miscarriage of justice within the meaning of the provision. It is in this sense, in my opinion, that the applicant must demonstrate that it is a person affected by those orders. (My underlining).
50. But the question that seems to me to arise is this: where an order is made under s.79A(1)(a) setting aside orders earlier made under s.79, which has the effect of vesting in or divesting from a party proprietary rights in respect of property, does not the creation of such rights spring from the making of the s.79A order as at the date the order is made? If, as will usually be the case, where such an order is set aside, a further order is made pursuant to s.79, then the same question arises as to proprietary rights in property which arise because of the terms of the s.79 orders. The relevance of this inquiry seems to me to be crucial to the Applicant’s case, because if such proprietary right in property owe their existence to either the making of the s.79A orders or the subsequent s.79 orders, then those rights come into existence at the date of the relevant orders. In the circumstances of this case, this would mean that any proprietary rights in property created by any such order in favour of the second Respondent would not vest in the Applicant, because such property would not be property which was vested in the second Respondent at the commencement of the bankruptcy or which was acquired by him prior to his discharge from bankruptcy.”

126.I agree both with the question as asked by his Honour and with the requirement of the applicant to demonstrate how they have been affected, to prove a miscarriage of justice and further that the s.79 order be proved to be inequitable and unfair. The primary obligation of the Official Trustee was to recover from the assets or financial resources of the first respondent’s bankrupt estate a sum sufficient to payout the debts of M and his former solicitors.
127.The timing of the s.79 order and the urgent manner in which the consent orders were prepared, together with supporting documents and rushed before the Court, in Chambers, and the substantial failure to make full and proper financial disclosure to the Court and other interested persons convinced me that a primary intent of each of the respondents was both to deceive and to obtain for themselves an unfair and improper financial advantage.
128.The applications of the Official Trustee in both the Federal and Family Courts were filed in September and November 2003 respectively. It is argued by the respondents that as the first respondent was discharged from bankruptcy on 14 October 2000 the Courts should not entertain any initiating application filed by the Official Trustee beyond that date. As I understand the submission of counsel for the second respondent the Official Trustee should be found to have no standing before the Courts and further not to be “a person affected by a section 79 order”. I reject that submission.
129.I find that a central issue was always, and remains, the proper and lawful ownership of property D. The s.79 order transferring its title to the sole name of the second respondent was obtained in circumstances which caused a miscarriage of justice to occur. The Court was misled. The legal and financial entitlements of both interested parties to recover monies from the first respondent’s bankruptcy estate, and from his assets, were compromised and denied. For over thirteen years, initially those interested parties and then the Official Trustee on their behalf have pursued through the Courts, albeit with varying degrees of urgency, the outstanding financial claims. The property D property has been legally preserved. Subject to findings on legal issues and to a proper exercise of discretion this Court is in a position to discharge the whole or part of the consent orders, and subject to discretion, to make s.79 orders in substitution therefore.
130.I observe that in Donovan’s case the s.79 proceedings were also issued by the Official Trustee after the conclusion of the first respondent’s period of bankruptcy. As the property D has been preserved its title can be restored by this Court, if appropriate, to the joint names of the respondents. The obligations of the Official Trustee remain. The first respondent’s past debts remain outstanding. There is no after acquired property issue. The first respondent’s interest, if restored, in property D is divisible among his creditors. Whilst I will hereafter consider all of the discretionary issues, including delay, hardship and finality, I find that there is no primary legal hurdle to the Official Trustee instituting these s.79A proceedings after the discharge of the first respondent from his three year period of bankruptcy. It may be that further and different considerations will apply if an order was then to be made in substitution pursuant to s.79 of the Act. In light of the orders that I have ultimately determined to be appropriate it is unnecessary for me to resolve that issue.
131.I am satisfied on the facts of this case that it is proper to find that the Official Trustee is a person affected by the 1992 consent s.79 orders pronounced in Chambers.
132.I accept that the effect of the s.79 order whilst it remained alive was to vest in the second respondent an equitable interest in property D. What then remained after the pronouncement of the consent order in Chambers, in the name of the first respondent, was a legal interest only in property D. It was the consent orders of the Family Court that altered the interest in property D of the first respondent and second respondent by transferring the whole of the equitable interest to the second respondent. The transfer took effect by reason of the Court order and not the consent of the parties. The pronouncement of the Court order however, because of the suppression of evidence, resulted in a miscarriage of justice and therefore upon a setting aside or variation of the Court order the second respondent should not and would not retain the whole of the equitable interest in property D. The Official Trustee would stand in the shoes of the first respondent, as to his restored equitable interest, subject to any further orders of this Court or the Federal Court.
133.Unlike in Donovan’s case the first respondent remained on title as a registered proprietor of property D as at the agreed date of the act of his bankruptcy. The caveat lodged by M remained alive on title and there were additionally the injunctive orders of the Court pronounced by consent. The transfer to the sole name of the second respondent was not made until the caveat lapsed and she effected the registration on 1 September 1997, some sixteen days prior to the date of the sequestration order. These facts significantly distinguish this case from Donovan’s case and, together with the concession made as to the miscarriage of justice properly answer the question to be asked and confirmed, in my opinion, that the Official Trustee is a person affected by these s.79 orders made on 20 July 1992.

EQUITY – “CLEAN HANDS”

The general equity principle is that stated in Kettles & Gas Appliances Ltd v Anthony Hordern & Sons Ltd (1934) 51 WN (NSW) 190; (1934) 35 SR (NSW) 108 at 129 per Long Innes J
“in order to obtain any relief he must come into Equity and invoke the discretionary remedy, in which case he is subject to the Equity maxim that he who comes into equity must come with clean hands.”

135.This case was applied by the more recent cases of Zobory v Federal Commissioner of Taxation (1995) 64 FCR 86; (1995) 129 ALR 484; (1995) 95 ATC 4251; (1995) 30 ATR 412 and Cadwallader v Bajco Pty Ltd [2002] NSWCA 328.
136.Elliot J in the decision of Hannah and Hannah; Tozer and Tozer (1989) FLC 92-052 at 77,593 cites with approval the rule in Brooke v Lord Mostyn (1864) 33 Beav. 457 at p 462:
“This is an equity which extends far beyond the case of inference, and extends to every case where the Court has been intentionally deceived, and has been made the involuntary instrument of depriving others of their just rights . . . In all such cases, the Court will afterwards, if possible, set aside the transaction as against the innocent party; or if that be not possible, will, as far as it can, prevent the further operation of it upon him. But in order to induce the Court to take this step, it must be shown that the parties to the transaction have intentionally suppressed truth or suggested error, in order to mislead the Court.”

137.Because of the respondents’ suppression of evidence and deceitful conduct a miscarriage of justice thereby occurred and as they have not been open and honest they could not expect and should not receive the benefit of any equitable assistance.

SECTION 116(2)(a) – BANKRUPTCY ACT 1966

138.Section 116(2)(a) of the Bankruptcy Act 1966 excludes from property divisible amongst creditors specific property which is held in trust for another person.
139.Where a s.79 property order is set aside on the grounds of a miscarriage of justice and exercise of discretion such an order should, subject to the rights of any bona fide third party, operate to discharge any rights or entitlements, legal or equitable, created by those initial orders. That would mean, on the facts of this case, that there was no equitable interest established to the benefit of the second respondent whereby she held the first respondent’s original one half legal share, on title, of property D. Accordingly no property would be held on trust for another person and this sub-section of the Bankruptcy Act would not be here applicable.
140.If I am wrong in that primary conclusion then I would still conclude that this sub-section does not apply on the particular facts of this case. It has been held in Jones v Daniel (2004) FLC 93-146 that the effect of an order of the Family Court under s.79 made prior to bankruptcy that one spouse transfer his or her right, title and interest in property to the other spouse can create a trust even if the transfer has not taken place as at the commencement of the bankruptcy and that this would prevent the property then to be transferred from being available for distribution amongst creditors. In that reported case there was no issue of there being a lack of full and frank financial disclosure or deceitful actions or concealment causing a miscarriage of justice or of the parties acting in concert to obtain a consent order which had the effect of defeating the enforcement of a judgment debt by another person. Because of all of the circumstances surrounding the s.79 order including the wilful deception upon and misleading of the Court and the other interested persons I conclude that this sub-section does not apply on the facts of this case. The disposal of the first respondent’s equitable interest in property D as a co-owner and the retention by him of a legal interest, as his name remained upon title, was achieved only with the active co-operation of the second respondent and upon a misleading and wilfully deceptive basis with the failure by each of them to make full and proper financial disclosure of facts known to each of them.
141.In Mateo’s case (supra) each of the Judges of the Full Court expressed a specific opinion upon the effect of an order made pursuant to s.79. The qualified opinion of Branson J was that:
“It was probably implicit in the terms of the order that the interest of the parties to the marriage and their matrimonial home were altered by the operation of the order”.

Wilcox J described such an order as “vesting an equitable interest” and Merkel J as “transferring an equitable interest”.
142.In Jones v Daniel (supra), Moore J stated:
“16. I refer to statutory construction because ultimately this appeal involves reconciling the operation of two Commonwealth laws. The Act vests in a trustee in bankruptcy the property of the bankrupt for distribution amongst creditors. However, s 116(2)(a) provides that property held by the bankrupt in trust for another person is not property available for distribution. Under the Family Law Act 1975 (Cth), the Court is empowered by Part VIII, and specifically s 79, to order the alteration of property rights. In issue in this appeal is whether s 116(2)(a) comprehends property in respect of which an order has been made under s 79 for the benefit of a party to proceedings under Part VIII. In Anscor Pty Ltd v Clout (Trustee) [2004] FCAFC 71 Lindgren J observed at [41]:
`` ... the effect of ss 58(1), 116(1) and (2)(a) and the definition of `the property of the bankrupt' in s 5(1) is that the property which vests in the trustee in bankruptcy is to be identified as at the commencement of the bankruptcy ... and that there is excluded property which the bankrupt held in trust for another person as at that date.''
The matter was discussed more comprehensively, though with different emphasis, by Beaumont J in Sonenco (No 77) Pty Ltd v Silvia (1989) FLC ¶ 92-051 at 77,575; (1989) 24 FCR 105 at 112 .
17. In my opinion, there are no compelling reasons for this Full Court to adopt an approach to the interaction of these legislative provisions different to that adopted by the Full Court in Mateo . It is true that the members of the Full Court approached the matter by considering whether an equitable interest vested when an order was made under s 79 altering the interests, of the parties to a marriage, in property. It is not necessary to determine whether the transfer of an equitable interest creates a trust enforceable in equity or an interest of some other character deriving from statute: see, for example, Registrar of the Accident Compensation Tribunal (Vic) v Federal Commissioner of Taxation (1993) 178 CLR 145 at 181 and Wik Peoples v State of Queensland (1996) 187 CLR 1 at 187 per Gummow J. It is sufficient that the Full Court concluded in Mateo that it was an interest which defeated the rights of a trustee in bankruptcy to the property for distribution amongst creditors.

143.Allsop J agreed with Moore J in Jones v Daniel (supra) and stated:
“In any event the views of the majority (in Mateo) were clear and an equitable interest was, by the order, transferred. A trust was created for the benefit of the other person”.

144.I conclude that there are significant differences in the case now before me and Jones v Daniel (supra). In the present case there is a creditors petition and not a debtors petition that brought about the bankruptcy. Secondly the s.79 orders were agreed to by the parties and made on the documents in Chambers by consent. That is to be contrasted with the orders made by a Judge of the Family Court after a contested hearing in Jones v Daniel (supra). Thirdly there was a lack of full and frank disclosure, wilful concealment and suppression of evidence which led to a miscarriage of justice pursuant to which the s.79 orders, subject to issues of discretion, could be set aside or varied. For those reasons I therefore distinguish the current facts from each of those before the Federal Court. I conclude that it would be contrary to the principles of justice and equity to here permit a trust to be created and maintained for the benefit of the second respondent. She was a knowledgeable party to and involved in the wilful concealment of liabilities and misleading the Court in the pronouncement of the s.79 orders. Sub-section 116(2)(a) was not intended to, and I find does not exclude from the category of divisible property that which has been transferred, albeit pursuant to order, in the circumstances that are present in this case.
145.Where a joint tenancy has existed the bankruptcy of one of the joint tenants severs that joint tenancy and the trustee in bankruptcy and the other joint tenant will thereafter hold the property as tenants in common re Butlers’ Trusts (1888) 38 Ch D 286. I observe however that this Court has the jurisdictional power to order the second respondent to sell, deal with or otherwise comply with Court orders for property D whether they hold their interest in property D as a joint tenant or as a tenant in common.

SECTION 153 – BANKRUPTCY ACT 1966

146.Section 153(1) of the Bankruptcy Act sets out the effect of the discharge from bankruptcy and provides:
“153   (1)     Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his security for the benefit of creditors generally.
(2)     The discharge of a bankrupt from a bankruptcy does not:
(a)     ….
(b)     release the bankrupt from a debt incurred by means of fraud or a fraudulent breach of trust to which he is a party or a debt of which he has obtained forbearance by fraud;
(c)     ….

147.I am determining an application under s.79A of the Family Law Act. This hearing was not transferred from the Federal Court (s.35A of the Bankruptcy Act 1966). This Court therefore does not have the further increased jurisdiction that would flow from such a transfer. This hearing is part heard before the Federal Court resuming 5 December 2005.
148.On the basis that I would be prepared to set aside the transfer of property D pursuant to s.79A it would then facilitate the Federal Court in concluding its hearing given that the ownership of the property would revert to the joint names of the first respondent and second respondent, held as tenants in common in equal shares. It would then be for the Federal Court to determine appropriate orders, including a consideration of s.153 of the Bankruptcy Act 1966.
149.As I sought further written submissions on this issue I record that on behalf of the Official Trustee it was agreed that:
(b)Section 153 of the Bankruptcy Act, 1966 is of no relevance with respect to this particular matter. Upon the first respondent’s discharge from bankruptcy Section 153 operates to ensure that he is released from any liability with respect to any debts which were provable in his bankruptcy unless of course they fall within Subsection 2 of Section 153. Quite clearly the debts owed by the first respondent to M and his former legal advisers are provable debts as defined within the Bankruptcy Act, 1966.
(c)Whilst the first respondent is released from any liability, his estate is not released. Discharge of the first respondent from bankruptcy does not prevent a creditor proving, after the discharge from obtaining a payment out of the undistributed portion of the bankrupt’s estate which vested in the Official Trustee by virtue of the bankruptcy (Re Brealey (1900) 26VLR 209).
(d)Section 153 releases the bankrupt only. The Official Trustee of the bankrupt’s estate must continue to administer the estate despite the release of the bankrupt. This would involve, on behalf of the Official Trustee, prosecuting claims for and on behalf of the estate as in the present case and distributing the proceeds of the estate where and when appropriate. The discharge of the first respondent has no bearing upon the Official Trustee’s duty to continue to administer the estate.
(e)His Honour specifically enquired as to whether Section 153(1)(2)(b) was of any particular relevance to this case. It is the Official Trustee’s submission that it has no bearing or relevance. The effect of Section 153(1)(2)(b) of the Bankruptcy Act, 1966 is to not release a bankrupt from his liability to pay a debt which was incurred by the bankrupt by means of fraud or a fraudulent breach of trust to which the bankrupt was a party or a debt for which the bankrupt has obtained forbearance by fraud. The debts which are relevant to this particular application are the debts incurred by the first respondent in relation to M and the judgment debt thereto and to the first respondent’s liability to his former legal advisers. It is submitted that those debts could not be characterised as being incurred by means of any fraud or fraudulent breach of trust.
(f)The effect of Section 153(2)(b) of the Bankruptcy Act, 1966 is to allow a creditor of a bankrupt to take proceedings in respect of a debt incurred by means of fraud after the bankrupt is discharged from bankruptcy. If the debts to M and the first respondent’s former legal advisers could be characterised as fitting within Section 153 it would mean that M and the legal advisers could commence proceedings against the first respondent for the debt owing to them.
(g)As stated it is not the Official Trustee’s position that the relevant debts come within Section 153(2)(b) of the Bankruptcy Act, 1966.

150.On behalf of the Second Respondent (and adopted by the First Respondent) their submission was that:
a.It is submitted that the effect of s.153 of the Bankruptcy Act 1966 was to release the first respondent from all debts provable in the bankruptcy, including the debts to M and the first respondent’s former legal advisers.
b.There has been no evidence as to the Administration of the Estate to date. Presumably, some property vested in the Official Trustee in Bankruptcy. Nor has there been any evidence as to the cost of the Administration of the Estate to date and therefore what funds would be available for distribution if the Official trustee was successful in these proceedings.
c.It is submitted that it is quite clear that the only debts proved in the bankruptcy are debts arising from the Supreme Court proceedings brought by M for negligence and these could not be considered debts incurred by means of fraud or a fraudulent breach of trust.

DISCRETION – s.79A

151.Having determined that the Official Trustee is a person affected by the s.79 order and a miscarriage of justice has occurred on the facts of this case it is now necessary to fully consider if the discretion of the Court to vary or set aside the existing order, or to make another s.79 order in substitution therefore, should properly be exercised.
152.The operation of s.79A and the considerations to be taken into account in the exercise of that discretion were extensively considered by the Full Court of the Family Court in Prowse and Prowse (1995) FLC 92-557. Establishing a “miscarriage of justice” within s.79A will not necessarily lead to the setting aside of any order. The Full Court said (at page 82,565):
“If there were so, there would appear to be no scope for any exercise of discretion adverse to the applicant under section 79A once a miscarriage of justice within the section had been established. But the legislature clearly gave the court such a discretion and it follows that what the legislator has given the court cannot take away”.

153.The Full Court further observed (at p. 81,566):
“We do not think it would be correct to say that there is even a prima facie entitlement to have consent orders set aside once a miscarriage of justice has been established, because to do so would be to limit the discretion of the Court and to place an onus upon the respondent to show circumstances why the order should not be made. The better view, in our opinion, is that an applicant for an order under section 79A(1) bears the onus of satisfying the court that the original orders should be set aside or varied, and that includes the onus of satisfying the court not just that there has been a miscarriage of justice but also that the appropriate exercise of the discretion is to so order”.

154.The Full Court further observed (at p. 81,571) that:
“All of the circumstances surrounding the making of the consent orders and the circumstances of the parties since that time need to be considered in order to determine whether the justice of the case calls for an exercise of discretion in favour of or against the granting of an extension of time”.

155.I have read and considered the cases on this discretionary issue relied upon by counsel including Morrison and Morrison (supra), Garlick and Garlick (1993) FLC 92-428 and McIntyre and McIntyre (1994) FLC 92-468.
156.I observe that the facts in Garlick’s case (supra) were somewhat similar to the facts now before me in that there was not a full and proper disclosure of the true financial circumstances of a party and that Court was also mislead on the financial information then filed. The deliberate non-disclosure and concealment of a financial liability of a party was a matter that I can properly consider when determining the discretionary aspects as required by this section. What I find to be a matter of real significance is that the second respondent knew or should have known of the true liabilities of the first respondent, of the court proceedings and judgment debt in favour of M and his former solicitors. I therefore conclude that she and the first respondent acted with that knowledge and with the primary intent of avoiding or defeating recovery of those judgment debts in determining their consent property orders.
157.In considering whether I exercise such a discretion the reported cases emphasise the requirement of the Court to consider specific issues such as:
(i) an explanation for delay;
(ii) any significant prejudice or hardship to a party;
(iii)whether it would now be unjust to allow further proceedings which in this case would be close to 13 years from the date of the original consent orders;
(iv)the finality of the Court process.
I will now consider each of these issues.

DELAY

158.The Official Trustee became involved in these proceedings on 17 September 1997 when the first respondent was made bankrupt on the creditor’s petition of M. Thereafter the first respondent sought to review and then seek an annulment of that sequestration order. I accept therefore that it was not until October 1999 that the Official Trustee was then empowered and funded to commence an investigation of the circumstances surrounding actions of the first respondent and second respondent and the consent orders of July 1992. A change of solicitors subsequently occurred. The delay to the end of the 1999 calendar year is therefore, I find, fully and easily explained.
159.There was then limited correspondence commencing in March 2000 and again in 2001 between the Official Trustee and the second respondent. Exhibited to the affidavit of A, without objection, are various letters which passed between the Official Trustee, the second respondent and their legal practitioners. In particular I observe that exhibit “S” to the affidavit is a letter dated 15 January 2001 written to the then solicitors for the second respondent. That was followed up by a letter from the Official Trustee dated 11 October 2001, written directly to the second respondent. Subsequently the second respondent replied to A by letter dated 26 November 2001 and, in the concluding paragraph she“apologised for the length of time taken to answer your letter … but I can only deal with matters on some days due to the effects of Multiple Sclerosis … and I might add that I exaggerate not”.

160.I wholly accept the effect of the second respondent’s illness at that time upon her ability to respond to letters and deal with requests from the Official Trustee. I do not particularly attribute any blame to her for that delay in correspondence. It would appear in this case that both the Official Trustee and the second respondent have contributed to the length of time that it has taken until proceedings were instituted in late 2003. I do not accept the submissions made on behalf of the second respondent (paragraph 67) that she responded promptly to all correspondence.
161.In the particular facts of this case I do not find that there has been an “extraordinary delay” on the part of the Official Trustee as submitted in paragraph 59 of the written submissions on behalf of the second respondent. I find that the Official Trustee had and always retained the intention of recovering each of the proven debts. They were slow in their actions, but not unreasonably so.
162.In Morrison’s case (supra), the Full Court said and I accept that (p. 81,675):
“In our view issues such as delay and hardship are not necessarily decisive of the outcome of these proceedings. They are important factors to be taken into account but there may be other factors which nevertheless would make it appropriate to exercise discretion favourably to the applicant”.

163.In McIntyre (supra) her Honour Justice Finn observed and I wholly agree that:
“The critical issue is not the length of the delay but the reason for it”.

164.I do not find any evidence to suggest that the delay has had an unfair or negative financial impact on the second respondent, prior to her death and now upon her estate. Property D has increased in value and was used as security to enable the second respondent to acquire and build two homes. She has received an income from renting property D. Its value has increased substantially. Her retention of property D has been a financial benefit and not a burden to her and her estate.
165.I conclude that there is a reasonable explanation of the delay that has occurred in this case. In any event an explanation for the delay, or the lack of it, is no more than one factor whose weight depends upon all of the circumstances of the case. I therefore balance the delay by the Official Trustee with the ongoing letters and discussions with the second respondent, her then state of health and the whole history of this matter leading up to and then after the pronouncement of the consent orders. On balance, and from the time the Official Trustee appointed solicitors in October 1999 I do not find that the delay until the institution of proceedings was of such a length and so unexplained as to require an exercise of discretion for the s.79A application to be struck out.
166.Whilst the whole proceedings, from July 1992, now occupy more than 13 years that has much to do with the manner of obtaining the s.79 order, the wilful concealment and suppression of evidence and the resulting miscarriage of justice. M and the former solicitors have waited longer for their money and I find that to be a relevant factor.

HARDSHIP

167.The submissions of the second respondent, adopted by the first respondent, are to the effect that neither the Official Trustee nor M, and presumably the former solicitors of the first respondent have suffered any hardship. Those written submissions contained in paragraphs 69 - 77 (inclusive) have somewhat been overtaken by the second respondent’s death. Insofar as they identify a hardship against the estate of the second respondent with the continuing Federal Court proceedings I do not find that to be a hardship that should unduly influence the exercise of my discretion on the issue now before me.
168.The second respondent, during her lifetime had considerable benefits as a result of the transfer of property D to her sole name. She had the use and enjoyment of the property, its increase in market value and the ability to use its title for financing purposes. She was specifically aware of the various claims, judgment debts and Caveats lodged, from time to time, on property D. I contrast the significantly improved financial position of the second respondent’s estate, as is now in evidence before me, with the financial circumstances of the other persons, M and the first respondent’s former solicitors who have not been able to enforce their judgment for monies owing. I find that there is specifically no hardship to the first respondent.
169.I conclude that there is not a level of hardship or injustice that would be suffered by the respondents or either of them, such as not to use the discretionary powers to make appropriate orders pursuant to s.79A of the Family Law Act.

s.79A(1C)(b) – FAMILY LAW ACT 1975

170.This section provides for proceedings to be continued against a legal personal representative of the deceased party and for the Court to make orders to vary, set aside and make other orders pursuant to s.79 if it is of the opinion that:
(i)it would have exercised such powers if the deceased party had not died; and
(ii)it is still appropriate to exercise such powers.

171.The submissions on behalf of the Official Trustee are that:
“There is nothing attached to the unfortunate death of the second respondent which would have had any impact upon whether or not the Court should make the orders now sought by the Official Trustee”.

172.The second respondent, supported by the first respondent submitted that the following matters are relevant to the exercise of the Court’s discretion and as to whether it is appropriate to exercise powers:
(i)the fact that property D was left by the second respondent to her three sons, subject to the mortgage;
(ii)the effect therefore of any order affecting her interest in property D and its impact upon her three adult children in the circumstances in which the second respondent can no longer have the opportunity to vary her Will or make alternate provisions;
(iii)that it is unlikely her estate will be in any position to provide appropriate evidence in the adjourned Federal Court proceedings to properly protect the interests of the estate;
(iv)in all the circumstances the Court ought not to exercise its powers pursuant to s.79A.

173.I would have exercised discretion and made orders pursuant to s.79A if the second respondent had not died and I further find that it is just and proper that such powers be now exercised. I am not otherwise persuaded by the ongoing interest of the estate and the three adult children. I do not accept the validity of the submissions made on behalf of the second respondent.

SUMMARY OF FINANCIAL POSITION OF ESTATE

174.The net financial position of the estate as at 20 September 2005 is of a value of $473,865.00. The equity in property D, save for all expenses of and associated with any sale is $243,411.00.
175.The total sum claimed by the Official Trustee if he were to be successful and comprising the fixed debts to M and to the first respondent’s former solicitors is $96,783.20.
176.As a percentage of the adjusted net pool of the second respondent’s estate ($597,000.00) that total debt represents 16.21%.
177.As a percentage of the equity in property D that total debt represents 39.76%.

s.79A – CONCLUSION

178.I find that there has been a miscarriage of justice and that it is proper, in the exercise of my considered discretion that I set aside paragraphs 1 and 12 of the orders made by consent by a Registrar of the Family Court on 20 July 1992. I propose to set aside only those two paragraphs. I am aware that there were other chattels, motor vehicles, superannuation and the lake-side property, together with liabilities. I do not propose to set aside the orders in relation to that parcel of real property and that other personal property as it is of little value, may not now exist or otherwise has been on-sold, as I have identified in paragraph 27 of this Judgment. It would be largely impractical to set aside those orders. The real value, and contest in these proceedings is a to paragraph 1 thereof but I additionally propose, as I consider it just and proper, to set aside paragraph 12 of those prior consent orders.

SECTION 79 PROCEEDINGS

179.Having set aside the previous orders insofar as they dealt with property D and the payment of the $20,000.00 sum then to be made by the second respondent to the first respondent I must now determine whether, as an exercise of discretion, it is appropriate to make another order under s.79 in substitution for the orders so set aside.

FAMILY LAW ACT 1975 (CTH) and RELEVANT CASE LAW

180.The correct approach to determining a s.79 application is now well established, both by the Family Law Act and by case law (see In the Marriage of LeSteere and LeSteere(1985) FLC 91-626; In the Marriage of Davuat & Raif (1994) FLC 92-503; In the Marriage of Clauson (1995) FLC 92-595).
181.Section 79(2) requires that any order must be just and equitable. Section 79(2) provides:
“(Just and equitable requirement) The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.

182.In considering the alteration of property orders that may be required I must have specific regard to and evaluate s.79(4) of the Family Law Act which provides:
[Matters to be taken into account:] In considering what order (if any) should be made under this section in proceedings with respect to any property of the parties to a marriage or either of them, the court shall take into account:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them;
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of the, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them;
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent;
(d)the effect of any proposed order upon the earning capacity of either party to the marriage;
(e)the matters referred to in sub-section 75(2) so far as they are relevant;

183.Section 79(4) involves a four step exercise, namely:
(a)the identification of the property of the parties, their assets and financial resources net of their liabilities;
(b)the evaluation of the “contributions”;
(c)the evaluation of the matters referred to in s.75(2) (as encompassed by the terms of s.79(4)(e)
(d)a determination as to whether the result is just and equitable by reference to s.79(2) of the Act. In determining whether the outcome is just and equitable it is “the real impact in money terms which is ultimately the critical issue”.

SECTION 79 – EVALUATION

184.The first respondent does not seek any specific order or further alteration of property interests for himself. His final submissions with the Court endorse those of the second respondent and submit that:
“It seems incongruous that my son’s share of their late mother’s estate could be placed in jeopardy when for such a long time ITSA has taken no action whatsoever whilst being fully cognisant of all the facts at all times”.

185.The second respondent, in paragraph B of the orders sought, filed 12 October 2005 seeks, as to the substituted property orders, such order “as the Court deems fit”.
186.As the first respondent previously consented to the transfer of equity in property D to the sole name of the second respondent he cannot be heard to object now if he receives no equity in property D. He seeks no such equity but that the estate of the second respondent retain, upon settlement of the sale of property D, any remaining equity.
187.I do not propose to pronounce a substituted s.79 order. I have carefully considered the facts and circumstances and, upon an exercise of discretion I do not propose to produce a substituted order. I conclude that it is appropriate to allow this matter to be mentioned, and for the hearing to continue before the Federal Court next week. There are specific issues of and related to the first respondent’s discharge from bankruptcy and the effect of s.153 of the Bankruptcy Act 1966 which are best determined in that Court and in those part heard proceedings. I will make orders accordingly.

COSTS

188.It would normally be the outcome of proceedings that each party pay their own costs (s.117) subject to a determination that in all of the circumstances, it would be just to depart from that primary position. The matters relevant to determining a costs order and what is just in all of the circumstances are identified in s.117(2A). In particular I have given careful consideration to sub-paragraphs (a), (c) and (e) of that sub-section. I conclude that, in the exercise of discretion, I am not prepared to make an order for costs. Each party will pay their own costs of the proceedings in the Family Court. I record that all parties agree that this issue should be decided (without further evidence or submissions).

ORDERS

189.Accordingly I order as follows:
1.THAT pursuant to s.79A of the Family Law Act 1975 paragraphs 1 and 12 of the consent orders of the Family Court of Australia made 20 July 1992 be discharged.
2.THAT the orders made 17 December 1992 be discharged.
3.THAT there be no orders made pursuant to s.79 of the Family Law Act in substitution for paragraphs 1 and 12 of the consent orders set aside.
4.THAT the first respondent, B, be and is hereby restrained from disposing of or in any way encumbering any right, interest or title in property D pending determination of the proceedings (No. T7001 of 2003) in the Federal Court of Australia.
5.THAT there be no orders as to costs.
6.THAT otherwise all applications of the Official Trustee and the First Respondent and Second Respondent be dismissed and proceedings be removed from the list of cases awaiting trial in the Family Court.

IT IS CERTIFIED
7.THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Counsel for each of Applicant and Second Respondent.

I certify that the preceding 189 paragraphs are
a true copy of the reasons for judgment herein
of The Honourable Justice Young

………………………………………………………..
Associate:
Date: 1 December 2005

[2005] FamCA 1163

1 December 2005

Key Legal Topics

Areas of Law

Insolvency

Equity & Trusts

Family Law

Legal Concepts

Abuse of Process

Remedies

Procedural Fairness

Res Judicata

Standing

Costs