Trustee Of The Bankrupt Estate Of Hicks and Hicks and Anor
[2019] FamCA 695
•27 September 2019
FAMILY COURT OF AUSTRALIA
| TRUSTEE OF THE BANKRUPT ESTATE OF HICKS & HICKS AND ANOR | [2019] FamCA 695 |
| FAMILY LAW – PROPERTY – Settlement in relation to marriage – Where the trustee of the husband’s bankrupt estate sought to set aside Consent Orders entered into by the husband and the wife – Where the trustee had successfully appealed an order to dismiss that application – Matter remitted for partial rehearing – Rehearing to proceed on the basis that a miscarriage of justice has occurred pursuant to s 79A(1)(a) of the Family Law Act 1975 (Cth) – Consent Orders set aside – Orders for property settlement pursuant to s 79 of the Family Law Act1975 (Cth) – Orders for the trustee to receive a payment from the wife – Declaration that the husband and the wife otherwise own the assets and liabilities in their respective names. |
| Bankruptcy Act 1966 (Cth) Evidence Act 1995 (Cth) Family Law Act 1975 (Cth) ss 49, 79, 79A |
| Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 In the Marriage of Morrison (1994) 18 Fam LR 519 In the Marriage of Pavey (1976) FLC 90-051 Johnson & Johnson 26 Fam LR 475; (2000) FLC 93-039 Jones v Dunkel(1959) 101 CLR 298; [1959] HCA 8 Patching & Patching (1995) FLC 92-585 Prowse and Prowse (1995) FLC 92-557 |
| APPLICANT: | Mr Thomas Trustee in Bankruptcy of the Estate of Mr Hicks |
| FIRST RESPONDENT: | Mr Hicks |
| SECOND RESPONDENT: | Ms Hicks |
| FILE NUMBER: | SYC | 2372 | of | 2013 |
| DATE DELIVERED: | 27 September 2019 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Loughnan J |
| HEARING DATE: | 15 & 16 August and 14 September 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Alexander |
| SOLICITOR FOR THE APPLICANT: | Marsdens Law Group |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr Wilson SC |
| SOLICITOR FOR THE FIRST RESPONDENT: | Russell C Byrnes Solicitor |
| SECOND RESPONDENT: | No appearance |
Orders
The Orders made on 1 September 2011 in proceedings numbered PAC2874 of 2011 between the first respondent (“the husband”) and the second respondent (“the wife”) in these proceedings (“the Consent Orders”) be set aside.
In substitution for those Orders, within three months from the date of these Orders or such further time as is agreed between the wife and the trustee, the wife shall pay to the trustee the following amounts:
(a)$605,567.12 being the judgment debt against the husband in Supreme Court proceedings numbered …, together with the Supreme Court costs;
(b)$1,925.00 being a debt of the husband to SS COMPANY proven in the bankruptcy of the husband;
(c)$5,165.28 being a debt of the Husband and of the wife to the Commonwealth Bank of Australia proven in the bankruptcy of the husband;
(d)$ 25,559.63 being a debt of the husband to ANZ proven in the bankruptcy of the husband.
Upon the payment of all of those amounts, the husband and the wife are declared pursuant to s 79 of the Family Law Act 1975 (Cth) to own the assets in their respective control and to be responsible for any debts in their respective names.
If the wife fails to comply with Order 2 the following provisions will apply:
(a)within 14 days of non-compliance with Order 2 the wife shall take all steps and sign such documents as are required to sell the property situate at and known as E Street, Suburb F (“the matrimonial home”) and for that purpose to:
(i)appoint an agent to act on the sale;
(ii)appoint a lawyer or conveyancer to prepare a contract and take such steps as are appropriate to effect the sale of the property;
(iii)direct the agent to advertise the property at a price the agent recommends or a price agreed between the wife and the trustee;
(iv)accept any reasonable offer;
(v)execute any Contract for Sale, Transfer and any further documents required to transfer the matrimonial home, with such execution to occur within 24 hours of being asked to do so;
(vi)direct the lawyer or conveyancer to direct the proceeds of sale as follows:
•in discharge of any mortgage secured against the property;
•in payment of the costs of sale including but not limited to agent commission, legal fees and disbursements and advertising expenses;
•in payment to the trustee of the amounts set out in Order 2 (if not previously paid by the wife); and
•in payment to the balance to the wife.
If any party fails to execute a deed or instrument required to give effect to these orders, a Registrar of the Court at Sydney is appointed to execute the deed or instrument and to do all acts and things necessary to give validity and operation to the deed or instrument under s 106A of the Family Law Act 1975 (Cth).
Leave is granted to the parties to restore the proceedings within 28 days in relation to costs or the wording of these Orders.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Trustee of the Bankrupt Estate of Hicks & Hicks and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC2372 of 2013
| Mr Thomas Trustee in Bankruptcy of the Estate of Mr Hicks |
Applicant
And
| Mr Hicks |
First Respondent
And
| Ms Hicks |
Second Respondent
REASONS FOR JUDGMENT
Introduction
These are proceedings initiated under s 79A of the Family Law Act1975 (Cth) (“the Act”) by Mr Thomas (“the trustee”) who is the trustee in bankruptcy of the first respondent, Mr Hicks. The second respondent is Ms Hicks. The respondents are now divorced but for convenience I will refer to them as “the husband” and “the wife” respectively.
The trustee seeks that orders for property settlement made by consent on the application of the husband and the wife on 1 September 2011 be set aside and that different orders be made. The trustee’s application was dismissed on 10 June 2016 after an earlier hearing but following a successful appeal, has been remitted for partial re-hearing. The wife seeks that the trustee’s application be dismissed. The husband has not participated in these proceedings and they are conducted on an undefended basis against him.
Applications
The trustee seeks orders in terms of a Minute included in his Case Outline document as follows:
1.That the Consent Orders made on 1 September 2011 in proceedings numbered PAC 2874 of 2011 between the First Respondent (“the Husband”) and the Second Respondent (“the Wife”) in these proceedings (“the Consent Orders”) be set aside.
2.That in substitution for the Consent Orders, Orders be made as follows:
2.1That within 28 days of the date of these Orders, the Wife pay to the Applicant Trustee the following amounts:
(a)$605,567.12 being the judgment debt against the Husband in Supreme Court proceedings numbered …, together with the Supreme Court costs;
(b)$1,925.00 being a debt of the Husband to SS COMPANY proven in the bankruptcy of the Husband;
(c)$5,165.28 being a debt of the Husband and of the Wife to CBA proven in the bankruptcy of the Husband;
(d)$ 25,559.63 being a debt of the Husband to ANZ proven in the bankruptcy of the Husband.
(e)The costs of the Applicant Trustee in these proceedings agreed or taxed on an indemnity basis.
2.2That to determine the value of the pool of assets of the parties the property known as E Street, Suburb F (“the matrimonial home”) be valued by a valuer appointed within 28 days either by agreement between the Applicant and the Wife or, if not agreed, by a valuer chosen by the Wife from a list of three valuers familiar with the value of property in the Suburb F area submitted by the Applicant Trustee (“the valuer”).
2.3That upon receipt of a report by the valuer, the cost of which is to be borne equally by the parties, the value ascribed to the matrimonial home must be used in the determination of the value of the pool of assets of the Husband and the Wife.
2.4That the balance of the net assets of the Husband and the Wife, after payment of the amounts set out in Order 2.1, be divided equally between the Second Respondent and the Applicant as Trustee of the Estate of the Husband.
2.5That, if the Wife fails to comply with Order 2.1 or is unable or unwilling to give effect to Order 2.4 without selling the matrimonial home, the following provisions will apply:
(a)Within 14 days of non-compliance with Order 2.1 or within 14 days of receipt of the report of the valuer (whichever is last to occur), the Wife and the Applicant take all steps and sign such documents as are required to:
(i)Appoint an agent to act on the sale, which agent will be chosen by the Applicant Trustee after seeking the opinion of the Wife;
(ii)Appoint a lawyer or conveyancer to prepare a contract and take such steps as are appropriate to effect the sale of the property, which person will be chosen by the Applicant Trustee after seeking the opinion of the Wife;
(iii)Direct the agent to advertise the property at a price the agent recommends which must not be more than 5% less than the valuation but must not exceed the valuation by more than 10%;
(iv)Accept any reasonable offer;
(v)Execute any Contract for Sale, Transfer and any further documents required to transfer the matrimonial home, with such execution to occur within 24 hours of being asked to do so;
(vi)Direct the lawyer or conveyancer to direct the proceeds of sale as follows:
•In discharge of any mortgage secured against the property;
•In payment of the costs of sale including but not limited to agent commission, legal fees and disbursements and advertising expenses;
•In payment of the amounts set out in Order 2.1 (if not previously paid by the Wife); and
•In payment to the balance to the Applicant Trustee.
(b)Within 14 days of receiving payment under Order 2.5(a)(vi), the amount of any such payment must be added to the net assets of the Husband and the Wife with the Wife to be paid such amount of the proceeds of the sale of the matrimonial home as will leave her with 50% of the value of the net assets.
(c)If any party fails to execute a deed or instrument under this Order and the Court considers it necessary to do so, an officer of the Court is appointed to execute the deed or instrument and to do all acts and things necessary to give validity and operation to the deed or instrument under Section 106A Family Law Act 1975.
The wife sought orders in terms of a Minute included in her Case Outline document as follows:
1.In accordance with the Response to Initiating Application filed 22 August 2013, the Wife seeks an order that the Application be dismissed and that the Applicant pay her costs on a solicitor/client basis as agreed or assessed.
2.Discharge the injunction made on 18 April 2018 restraining the wife from selling, encumbering or leasing the Suburb F property.
At the conclusion of the trial I was told that the parties agreed to an order for the sale of the Suburb F property. As far as I know, such an order was never formally sought or granted.
Documents Read
The parties relied on the following documents:
Single expert valuer:
·affidavit of Mr AA filed 12 September 2018.
Documents relied on by the trustee:
·Volumes 1 - 9 of the Appeal Books except for items 1, 2, 3 and the Certificate of Correctness;
·affidavit of Mr Thomas filed 7 June 2018;
·affidavit of Mr CC filed 2 August 2018; and
·affidavit of Mr Thomas sworn 6 August 2018.
Documents relied on by the wife:
·Response to Initiating Application filed 22 August 2013;
·Financial Statement filed 22 August 2013;
·affidavit of the wife filed 22 August 2013;
·affidavit of the wife sworn 14 October 2015;
·affidavit in reply of the wife sworn 11 February 2016;
·affidavit of the wife sworn 2 July 2018;
·Financial Statement filed 2 July 2018; and
·Volumes 1 - 9 of the Appeal Books.
The Proceedings
On 3 May 2013 the trustee filed an Initiating Application seeking that pursuant to s 79A(1)(a) of the Act property settlement orders made by consent on 1 September 2011 be set aside. The matter came before Stevenson J in early 2016 and on 10 June 2016 an order was made dismissing the Initiating Application.
That decision was the subject of an appeal and on 26 February 2018 the Full Court ordered that:
(1) The appeal be allowed.
(2) The order made on 10 June 2016 be set aside.
(3)The proceedings be partially remitted to the Family Court of Australia for rehearing by a judge other than the primary judge, with such rehearing to proceed on the basis that there has been a miscarriage of justice pursuant to s 79A(1)(a) of the Family Law Act 1975 (Cth).
…
The proceedings before Stevenson J were bifurcated proceedings under s 79A. That is to say that the parties did not seek orders, present evidence or make submissions on the basis of which her Honour could have made different orders under s 79, had the earlier orders been set aside. In the reasons for judgment of the Full Court each of the judges referred to earlier decisions which counsel against bifurcating the hearing of proceedings under s 79A. Murphy J, who joined Strickland J in upholding the appeal (Austin J dissenting), briefly addressed the rehearing at the conclusion of his remarks in the following terms:
207.I would order that the proceedings be remitted to be heard by a judge other than Stevenson J.
208.As her Honour’s order will be set aside, it will be a matter for the parties and for the judge rehearing the matter as to whether the remitted hearing should embrace a bifurcated process. I would respectfully suggest that very careful consideration be given to that question in light of what has fallen from this Court in this judgment and what was said by earlier Full Courts, for example in Oastler, Patching, and Lancer, all of which have been referred to above.
209.It will be clear that, whether because the wife should be bound by a concession, or because a conclusion of miscarriage of justice is inevitable on the evidence before the court, any remitted proceedings should be confined to issues other than miscarriage of justice.
(Footnotes omitted)
His Honour went later in his reasons, under the heading “Additional Observations” to argue against bifurcating this type of proceedings. His Honour said:
215.In this case, and in many other cases, it appears to have been argued and accepted that the factual questions and the s 79A discretion can be bifurcated from the s 79 discretions to be exercised if the orders are varied or set aside. In very many, if not all, cases, it is difficult to see how the two separate exercises of discretion will not, nevertheless, involve at least overlapping factual circumstances. That is, factual issues relevant to whether the orders should be set aside or varied will very often, if not always, be relevant to the question of what orders if any should be made. It will, I would have thought, be a highly unusual case where the factual determination of miscarriage of justice and the discretionary determination of whether the order should be set aside or varied can be successfully bifurcated from the discretionary issue of what order if any should be made if the orders are set aside or varied.
As is set out above, in the remitted proceedings the trustee seeks orders for property settlement in substitution for the orders made by consent on 1 September 2011. A consideration of the current position under s 79 is necessary for determining whether the existing orders should be set aside. Although the trustee’s primary application is opposed by the wife there was no argument made on her behalf against the rehearing being a complete exercise of power under s 79A. These are not threshold, preliminary or bifurcated proceedings.
The Hearing
The husband was named as a party in the proceedings before Stevenson J but he did not appear at the hearing before her Honour. The husband was named as a party to the subsequent appeal but did not take part in those proceedings[1]. The husband was named as a party to the proceedings before me and orders were sought against him. The husband took no part in these proceedings.
[1] Trustee of the Bankrupt Estate of Hicks & Hicks and Anor [2018] FamCAFC 37 at [7].
On 18 April 2018 there was no appearance by or on behalf of the husband when orders were made, including trial directions, as follows:
1.The proceedings are fixed for hearing in relation to property settlement for three days commencing 15 August 2018.
2.Any affidavit on which the wife seeks to rely, any updated Financial Statement and any evidence on which the trustee seeks to rely be filed and served within 28 days from today’s date or such later time as the parties agree in writing. The affidavit evidence is to be one consolidated affidavit from each deponent only.
3.Orders and notations are made in terms of paragraphs 4, 5 and 6 contained in the Application in a Case filed 4 April 2018, as set out hereunder:
4.That the Second Respondent be restrained by injunction from selling, leasing, encumbering, further encumbering or otherwise dealing with the property described in Folio Identifier … and known as Lot 2 in DP … and Lot 1 in DP … and as E Street, Suburb F in the State of New South Wales (“the Suburb F property”).
5.That the First Respondent be restrained by injunction from selling, leasing, encumbering, further encumbering or otherwise dealing with the Suburb F property.
6.NOTED THAT any drawdown on a redraw facility secured against the Suburb F property is a further encumbrance on the Suburb F property and is subject to the restraint set out in Orders 4 & 5 above.
4.Service on the husband of that Application, the supporting affidavit and these orders is dispensed with on condition that within 14 days in relation to those documents service is effected on the husband at his last known email address and in relation to future documents that they are served on him at that same address.
5.Otherwise the requirement of the Rules is dispensed with that would prevent the Application in a Case being determined today.
6.Leave is granted to the parties to restore the proceedings to the list on giving seven days’ notice to the Court and to each other and without limiting it to that issue particularly to the wife to seek relief from the injunctions today.
7.A case outline document be provided to the chambers of Justice Loughnan by the legal representatives for the parties by the close of business on 6 August 2018 setting out the orders sought by each party, setting out the documents to be relied on and setting out the arguments to be made under Part VIII of the Family Law Act 1975 (Cth).
8.The wife and the trustees settle an agreed balance sheet by 10.00 am on the first morning of the trial.
9.The parties restore the proceedings to the list forthwith in the event that either party is aware of any reason why the hearing could not start on 15 August 2018 or conclude on 17 August 2018.
Given that the husband had not taken part in the earlier proceedings, those directions anticipated that the husband would maintain that approach and that proved to be correct. When the hearing commenced before me on 15 August 2018 the applicant and the wife were each present and represented by counsel. There was no appearance by or on behalf of the husband on that day or on any of the subsequent days of the hearing. I was not taken to specific evidence of compliance with the order dispensing with service but during final submissions learned counsel for the applicant trustee said that the husband was given notice of the hearing and invited to come (to court)[2].
[2] At about 4.13pm on 13 September 2018
Of course, the trustee stands in the place of the husband but as is referred to above, he was invited to take part. I am satisfied that the husband had notice of these proceedings and elected not to take part in them. To the extent necessary, I am satisfied that it is appropriate to make orders on an undefended basis against the husband.
Counsel for the trustee and the wife agreed that the hearing could be contained within two days. That was not achieved and on 16 August 2018 the hearing was adjourned and the following orders were made:
1.The proceedings are adjourned part-heard to 14 September 2018 for the remainder of any oral evidence and oral submissions.
2.The parties do all things and sign all documents and allow all access to E Street, Suburb F NSW at a time convenient to the wife for an agreed valuer to provide evidence as a single expert to value the property and in the first instance the cost of that valuation be met by the applicant.
On 14 September 2018 the hearing concluded and judgment was reserved. Following an oral application on behalf of the wife, leave was however, granted to the parties to make an approach in chambers for an order in terms agreed between the parties for the sale of the Suburb F property and for some part of the net proceeds to be held to await the outcome of these proceedings. There was no approach for such orders.
There has been a substantial delay in the delivery of judgment in these proceedings and I apologise to the parties for that delay.
Short History
The wife was born in 1955 and is now 64 years of age. The husband was born in 1944 and is now 75 years of age. The husband and wife were married in 1978 and were divorced in 2011. There is a dispute in these proceedings about the separation of the husband and wife. There are three adult children of their marriage.
The husband and Mr T had plans for a business to be established in Country Q. In late 2007 there were discussions in Country Q between the husband, Mr T and Mr S about Mr S providing capital and investing in a project known as U Pty Ltd. On or around 11 January 2008 an agreement was executed between them pursuant to which Mr S agreed to advance $560,000 to U Pty Ltd. On 14 October 2010 Mr S commenced proceedings in the Supreme Court of New South Wales against Mr T and the husband in relation to the repayment of invested moneys. On 1 September 2011 property settlement orders were made by this Court at Parramatta in terms agreed between the husband and wife. On 8 September 2011 judgment was given against the husband by the Supreme Court in the sum of $605,567.12, plus costs. On 10 April 2012 the husband was made bankrupt on his own petition. The applicant, Mr Thomas, was appointed trustee of his bankrupt estate.
On 3 May 2013 the trustee commenced these proceedings under s 79A, seeking to set aside the consent orders and to secure the payment of certain debts that were proved in the husband’s bankruptcy, including the debt to Mr S.
Background Facts
On 15 November 1971 the wife commenced employment with a financial institution.
In 1978 the husband and wife were married. At the time of the marriage the husband owned a property in Suburb G which had been the subject of a property settlement with his first wife. The wife had savings of $15,000.
In 1979 the husband and wife purchased a property at H Street, Suburb I (“the Suburb I property”).
In about 1980 or 1981 the wife loaned the sum of approximately $45,000 to a friend. The borrower fell into financial difficulties and by way of settlement of the outstanding loan, transferred his business, known as “Company 1”, to the wife. The wife worked in this business at night as a manager/receptionist while continuing to work at the financial institution during the day.
In 1981 the husband and wife sold the Suburb I property for $135,000 and repaid the mortgage of $120,000. The wife and husband then purchased E Street, Suburb F (“the Suburb F property”) for $157,000 and borrowed $147,000 from the financial institution and another finance company.
In 1982 the wife obtained a third mortgage of $20,000 on the Suburb F property.
In 1985 the husband took over a business in Suburb I, known as “Company 2” in partnership with two others.
In September 1987 the wife borrowed more money from the financial institution to do renovations to the Suburb F property.
In 1988 the husband ceased paid employment. At around the same time the wife commenced leave for the birth of the first child of the marriage. That child was born in 1988. The wife resumed work at Company 1 from about two weeks after the birth.
In 1990 the wife gave birth to the second child of the marriage. At this time the wife was still on leave from the financial institution but continued to work at Company 1.
On 11 September 1991 the wife resumed her employment at the financial institution on a part-time basis and continued to work full-time at Company 1.
In 1993, the third child of the marriage was born.
On 17 November 1993 the wife ceased her employment with the financial institution. She received an after tax redundancy figure of about $98,000 and discharged loans in the sum of $82,946.67, including one from the financial institution. The wife was entitled to superannuation of $143,731 which she rolled over into Super Fund 1.
In April 1994 the husband and wife purchased a property at B Street, C Town (“the C Town property”) for the sum of $380,000. About $250,000 was borrowed from a bank to complete this purchase.
In 1995 the husband and wife bought a retail business known as “Company 3” in partnership with another couple under a company structure. The husband and wife borrowed the sum of $617,058 from the same bank to fund the purchase. The husband commenced working in this business.
In 1999 or 2000 the Company 3 partnership broke down when the husband and wife discovered that their business partners were taking money from the business. Under a settlement in December 2000 the wife received $90,914.25 in the form of superannuation which was paid into Super Fund 2 and $181,828.50 was paid into the joint account of the husband and wife with the bank. It is the wife’s evidence that out of the transaction the wife made a capital gain of $363,655, on which she paid tax. On those facts it is difficult to understand how there was a capital gain, but there it is.
In mid 2000 the husband’s mother died and left him a property at Suburb N (“the Suburb N property”).
In 2000 the wife employed a full-time manager at Company 1 and ceased her part-time work there.
The wife says that from January 2002 until December 2012 the husband travelled to Country Q on 49 occasions.
In December 2002 the Suburb N property was sold for $775,000 and approximately $750,000 was banked into a bank account in the name of the husband.
On 23 July 2003 the husband and wife paid the sum of $190,000 out of their joint account to the husband’s step brother and sister on account of the future shares of the step brother and sister in the estate of the husband’s father.
On 31 July 2003 the husband and wife paid the sum of $150,000 out of their joint account to DD Group by way of an investment in a property development in EE Town with FF Pty Ltd. They received that money back on 27 October 2006.
In July 2003 the husband began withdrawing money from the joint account for business ventures in Country Q. It is the evidence of the wife that those withdrawals were made despite her objections.
In 2003 the husband purchased land in Country Q for approximately $80,000. In December 2003 the husband purchased a property at O Street, Suburb P for approximately $325,000 which was wholly funded by him from the money received from his mother’s estate. He used that property as security for a loan of $75,000 from solicitors, GG Lawyers.
In 2005 a further property was purchased in Country Q by the husband, being Property 1.
In 2005 the wife commenced caring for the husband’s father whose mobility was poor and who had lost most of his sight to macular degeneration. With the help of the wife, his doctor and daily visits from nurses, the husband’s father lived in his own home until late 2009.
In 2006 the husband borrowed the sum of $210,000 from Macquarie Bank on the Suburb P property which was used to pay back the loan to GG Lawyers. The balance of approximately $135,000 was used by the husband in Country Q.
In September 2006 the husband bought a business known as “R Pty Ltd” at Suburb I. The purchase price of the business was $146,500 and $5,317 was paid for legal fees and stamp duty. At this stage the loan on the C Town property stood at $42,033.40. The husband and wife borrowed the sum of $150,000 from the National Australia Bank (“NAB”) for the purchase of R Pty Ltd, using the C Town property as security. Up until 16 March 2007 further amounts totalling $114,000 were paid towards securing and running the business.
In 2007 a further property was purchased in Country Q by the husband, being Property 2[3].
[3] The Country Q properties are described differently in various documents used in the proceedings.
On 21 May 2007 a line of credit was approved by the Commonwealth Bank of Australia (“CBA”) for $450,000 using the C Town property as security and $199,227.77 was drawn down to pay out the existing loan with the NAB.
In September 2007 the husband and wife sold R Pty Ltd for $350,000. However, they only received $193,323 before the purchaser defaulted on the balance of the purchase price.
On 2 November 2007 a $800,000 line of credit was set up with Macquarie Bank using the Suburb F property as security. This money was mainly utilised to fund the husband’s projects in Country Q and pay mortgage commitments.
On or around 11 January 2008 an agreement was executed between the husband, Mr T and Mr S in relation to a project known as U Pty Ltd.
The agreement relevantly contained the following terms:
“U Corporation Understanding 11th Jan 2008
This understanding is made between:
Mr T of[….],
Mr Hicks of […]
Mr S of […]
Mr S will invest $560,000 into U Corporation
On the basis that:
-after this investment he will earn 10% of the share capital of U Corporation
-he will have legal security(1st mortgage) over to Villas being:
1.COUNTRY Q Property 1
2.COUNTRY Q Property 2
Currently #1 is owned by Mr T and #2 by Mr Hicks
These properties are unencumbered and believed to be worth in excess of $450,000 US
Legal security will be arranged by Mr T and Mr Hicks
If for any reason Mr S has not received returns of at least $560,000 by 1st June 2009 the properties will be sold and Mr S repaid his $560,000. Once Mr S receives $560,000 he will release the security.
The investment will be by way of secured loan to the company of $550,000 and the shares will be issued for $10,000.
Mr T will notify VV Group & WW Group of the issue of new shares and confirm with both that they have no issues with the issue of new shares. And confirm to Ms S that they are (sic) have been informed and have no objections.
Mr S will be invited to invest in all new Country Q investment opportunities at least as 10% investor.
Any seed money is subsequently raised that go to paying Mr T, Mr Hicks and Mr S in equal amounts.
It is anticipated that if another $3 million is raised then Mr T, Mr Hicks and Mr S will get $500,000 each and the company will retain $1,500,000 for working capital.
The Supreme Court of New South Wales Judge, later found[4] that a meeting was arranged for 11 January 2008 to sign the agreement but the husband was not able to attend. Mr S met with Mr T and his brother Mr TT on that date and Mr S telephoned the husband and asked him if he had a copy of the agreement. The husband said that he did have a copy of the agreement and Mr S said to him:
I am calling to make sure you are fully aware that the money I am handing over today is a loan which you and Mr T are guaranteeing, and using your properties in Country Q as security for. Are you happy for Mr T to accept the money on your behalf?
[4] On 8 September 2011.
The husband said: “Yes, I am okay with all of that”. The Supreme Court Judge noted[5] that that evidence was unchallenged.
[5] Page 224 of the Appeal Books.
Mr S paid $560,000. He drew two cheques, one for $260,000 and one for $300,000, each in the names of both Mr T and his brother, Mr TT. Those cheques were deposited into two accounts in the names of the T brothers.
The wife says that in early 2008 she became aware that one of the Country Q partners had organised another investor apart from the husband.
The Supreme Court Judge found[6] that in February 2008 the husband asked Mr S if the date for the repayment of the $560,000 could be delayed and by agreement the date was changed from 1 June 2009 to 1 June 2010. It is submitted on behalf of the applicant that that finding puts the lie to the wife’s case that the husband believed that $560,000 had never been paid. Justice Bergin also found [7] that the agreement entered into on 11 January 2011 was a binding commercial agreement.
[6] Page 225 of the Appeal Books.
[7] Page 230 of the Appeal Books.
The wife says that in late 2008 she became aware that the husband was living with a woman in Country Q.
The Supreme Court Judge found that a dispute arose between Mr T and the husband in about August or September 2009 and they parted company in respect of their business dealings. As far as I can tell, that is the only evidence vaguely related to the fate of the Country Q, U project.
On about 9 December 2009 Mr T contacted Mr S and advised him that the husband had started the process of transferring the villa at Property 1 from the name of Mr T to that of the husband. The husband had instructed a local lawyer in Country Q to organise the sale of the villa. He emailed Mr T in December 2009. Mr S wrote to the husband and to Mr T on 9 December 2009 in the following terms:
“Mr Hicks/Mr T
this is to confirm that you are not to sell or transfer either Country Q properties
Country Q Property 1 or Country Q Property 2 without my written authorisation. Otherwise you will be in breach of the document you both signed- attached. I am happy to consider selling the properties if I agree with the price and the proceeds are paid directly to me. Alternately we can agree to use the proceeds to extend the lease on the other property you control but in this case we would need to execute a new agreement to confirm who is responsible and liable to ensure this happens.”
On 10 December 2009 the husband wrote to Mr S in the following terms :
“Thank you for your advices & for clarifying your position. There will be no breach.
As an alternate plan will be put in place to secure the lease as mentioned by you …. There will, therefore be no need to enter into any new agreements. I will advise Mr UU of the outcome of his request for the execution of a POA.
Again thank you for your candour.
The Supreme Court Judge found[8] that no moneys were repaid to Mr S and that no formal first mortgage was registered in his favour despite the terms of the agreement of 11 January 2009.
[8] Page 227 of the Appeal Books.
In 2009 papers were served by the Sheriff on behalf of the local Council for unpaid rates on the property at Suburb P. At around the same time the husband was sued by LL Company, Canberra for other debts related to the Country Q businesses. A settlement was reached in the sum of $45,000 plus $20,000 in legal fees.
The wife says that she and the husband separated on 9 September 2009. The trustee contests this and argues that the marriage continued after that date.
The wife says that following separation she continued to reside at the former matrimonial home in Suburb F and the husband resided either in Country Q or when he was in Australia, with a female friend on the HH Region.
In November 2009 the Suburb P property was sold for a loss, at $290,000. The loan to Macquarie Bank was repaid in the sum of $213,686.26 and the sum of $43,529.85 was paid into the joint account of the husband and wife with NAB.
From late 2009 the husband’s father had periods of time in hospital and in about early 2010 he was diagnosed with cancer. It is the wife’s evidence that the husband’s father offered to change his will in favour of her when he discovered that the husband was living with another woman in Country Q, but the wife says that she talked him out of doing so. In mid-2010 the husband’s father passed away.
In early October 2010 the husband and wife listed the husband’s father’s property at Suburb I for sale. On 23 March 2011 settlement took place and the net proceeds in the sum of $714,880.92 were paid into the NAB joint account.
On 14 October 2010 Mr S commenced proceedings in the Supreme Court of New South Wales against Mr T and the husband in relation to the moneys he advanced them.
On 1 August 2011 the husband entered into a loan agreement with Mr V. The result of the loan agreement was that the husband received 900,000,000 Country Q and Mr V received security over Property 2.
On 1 September 2011 orders were made by this Court at Parramatta in terms agreed between the husband and wife as follows:
BY CONSENT IT IS ORDERED
1.That within twenty-eight (28) days the husband shall give to the wife a transfer duly executed by the husband in registrable form transferring to the wife all his right, title and interest in the property situate at and known as E Street, Suburb F in the State of New South Wales being the whole of the land in Folio Auto Consol … also known as Lot 2 in DP… and Lot 1 in DP ….
2.That within twenty-eight (28) days the husband shall give to the wife a transfer duly executed by the husband in registrable form transferring to the wife all his right, title and interest in the property situate at and known as B Street, C Town in the State of New South Wales being the whole of the land in Folio Identifier ….
3.The wife hereby indemnifies the husband and shall keep the husband indemnified in respect of the mortgage to Macquarie Bank secured on the title to E Street, Suburb F being Mortgage Number …22 and mortgage to Commonwealth Bank of Australia secured on the title to B Street, C Town being Mortgage Number …44 and further in respect of both said properties the wife indemnifies and husband and shall keep the husband indemnified in relation to all outgoings including but not limited to rates, taxes and insurances.
4.That contingent on and simultaneously with Orders 1 and 2 hereof the wife shall give the husband the sum of $55,000.00 by way of Bank Cheque provided always that the said cheque is drawn from the wife’s St George Bank account number …06.
5.Provided and upon compliance by the wife with Order 4 hereof the husband shall within a further fourteen (14) days do all things and sign all documents necessary to resign as Director of W Pty Ltd and shall further do all things and sign all documents necessary to transfer his shareholding in the said corporation to the wife with any costs of or incidental to the husband’s compliance with this Order borne by the wife.
6.That unless otherwise specified in these Orders and save for the purposes of enforcing any moneys due under these or any subsequent Orders:
6.1That the Husband and Wife be solely entitled to the exclusion of the other to all property in the name of that party and/or in possession of that party as at the date of these Orders;
6.2The Husband and Wife shall forego any claim they may have to any superannuation benefits belonging to or earned by the other, except as dealt with in these Orders;
6.3Insurance policies shall remain the sole property of the beneficiary or beneficiaries named thereunder.
7.That if either party refuses or neglects to sign within fourteen (14) days of a written request to do so by the other, any document necessary to put into effect the terms of these Orders, the Registrar of the Family Court of Australia or the Local Court of New South Wales or any other Court Officer appointed by the Court in his or her stead is hereby appointed pursuant to the provisions of 106A of the Family Law Act 1975 (Cth) (as amended) to execute such documents on behalf of the defaulting party and any costs associated with having an officer of the Court act in this way shall be recoverable by the non-defaulting party against the party as a debt and on an indemnity basis.
In 2011 the husband and wife were divorced.
In September 2011 judgment was delivered in the Supreme Court proceedings between Mr S, Mr T and the husband. The reasons for judgment recorded that Mr T appeared at the trial in person; that he had previously taken no part in the proceedings and that he consented to judgment being entered against him in the sum of $605,567.12, representing the original debt of $560,000 together with interest at $45,567.12. No evidence was called in those proceedings by the husband and Mr S was not cross-examined by the husband’s counsel. The Judge found that although there was no express statement in the agreement that Mr T and the husband would personally guarantee repayment to Mr S, they clearly undertook to make that repayment and that the properties in Country Q identified in the agreement would secure the loan by way of first mortgages. It was argued on behalf of the husband that the obligation under the agreement was limited to the value of the two villas. The Judge did not find favour with that submission. Judgment was entered against the husband in the sum of $605,567.12 plus costs.
By 7 October 2011 the CBA line of credit secured on the C Town property had increased to $449,534.78. Over $250,000 of that increase had been used by the husband in Country Q. In order to transfer the C Town property into the wife’s name, as required by the consent orders, a redraw of $345,000 was made on the Macquarie Bank facility. Those funds along with $107,060.41 from the wife’s St George Bank account enabled the line of credit to be paid out.
It is the wife’s case that by 2 December 2011 she had paid $59,300 to the husband by way of compliance with her obligations under order 4 of the orders of 1 September 2011. That was $4,300 more than she was obliged to pay under the orders.
On 10 April 2012 the husband was made bankrupt on his own petition and Mr Thomas was appointed trustee of his bankrupt estate. The trustee did not conduct a public examination of the husband. He was asked about that in cross-examination and said that he felt that he had enough information (presumably, to administer the bankrupt’s estate). The trustee agreed with the proposition that he did not have access to funds with which he could administer the estate and therefore was not funded to recover any assets that might have been in Country Q. The trustee said that significant enquiries were made in Australia and Country Q but that he was not able to make any further investigations in Country Q. The trustee was satisfied that the two Country Q properties existed as he saw the relevant title deeds.
With the permission of the trustee the husband travelled to Country Q for work from 3 May 2012 to 1 August 2012. It is not clear what was the nature of that work.
From 7 September 2012 to 8 December 2012 the husband travelled to Country Q for work, again with the permission of the trustee.
The trustee withdrew consent for the husband to travel as from 10 April 2013.
On 3 May 2013 these proceedings under s 79A were commenced by the trustee, seeking to set aside the consent orders and to secure the payment of certain debts proved in the husband’s bankruptcy, including the debt to Mr S.
On 14 June 2013 orders were made whereby the husband and wife were restrained from charging, mortgaging, leasing or otherwise dealing with the C Town and Suburb F properties. However they were permitted to sell those properties provided certain conditions were met.
On or around 30 September 2013 the trustee submitted an offence referral to the Australian Financial Security Authority in respect of offences allegedly committed by the husband under the Bankruptcy Act 1966 (Cth).
On 25 November 2013 the trustee advised the Court that permission was granted to the husband to obtain legal representation in these proceedings.
On 27 October 2015 the husband pleaded guilty to the bankruptcy offences alleged against him by the trustee.
On 10 June 2016 the Initiating Application filed by the trustee on 3 May 2013 was dismissed. The trustee appealed against that decision.
In or around January 2017 the trustee was notified that the former registered owner of Property 2 commenced proceedings in Country Q seeking to reverse the 2007 transfer to the husband of Property 2. The trustee was notified in January 2018 that the former owner was successful in that claim but that the husband had subsequently lodged an appeal.
On 26 February 2018 the trustee’s appeal against the orders of 10 June 2016 was upheld by the Full Court and the s 79A proceedings were partially remitted for rehearing.
On 18 April 2018 the remitted proceedings were fixed for hearing over three days commencing 15 August 2018. It was also ordered that the husband and wife be restrained by injunction from selling, leasing, encumbering, further encumbering or otherwise dealing with the Suburb F property.
Credit
The focus of the trial was on the evidence of the wife. It is the trustee’s case that the wife was an unreliable witness. The particular matters highlighted on behalf of the trustee were:
·The wife deposed (AB 197 paragraph 7) that after separation the husband lived on the HH Region. However:
oIn oral evidence (AB1973.5) she said that he lived in Umina from “around July or August of 2011 onwards. Previous to that …. he lived here, there and everywhere, but a lot of the time he lived with Ms KK at Suburb Y”.
oThe husband’s incoming passenger cards have the Suburb F property as his address in Australia on cards dated 20 February 2010 (AB1711), 24 April 2010 (AB1727), 29 June 2010 (AB1737), 18 October 2010 (AB1693), 26 February 2011 (AB1731), and 8 December 2012 (AB1665). The husband did not change his address on passenger cards from the Suburb F property until 18 August 2011 (AB1691);
oAfter the asserted date of separation the husband’s bank statements for accounts in his sole name continued to be delivered to the Suburb F property;
oOn 31 February 2012 a process server looking to serve the husband at the Suburb F property was told “He is currently in Country Q” rather than, for example, “He no longer lives here”;
·The wife had represented that during the period 2008 to April 2012 she used a prepaid mobile and service 04******** “from time to time”. In her oral evidence she contended that she meant “from a time to a time” (AB1983).
In my view, those matters do not support a finding that the wife was an unreliable witness. The wife was not responsible for the husband’s conduct in making representations about his residence. The other matters are suggestive but do not establish that the wife lied. For example, it is not inconsistent with the wife’s evidence that she would use the expressions attributed to her. There was also criticism of the wife’s evidence about her asserted approach to paying the husband money said to be payable under the terms of the consent orders of 1 September 2011. At one point in the earlier hearing the wife said that she knew when she had paid $55,000. Before me it was her evidence that the husband kept records of the balance owing to him. The issue arises because on the wife’s evidence she paid the husband more than $55,000 and she made no attempt to explain why she did that. In this context the submission on behalf of the trustee that the mother’s evidence was a contrivance, seeking to assert that moneys that left her accounts went to the husband as part of her asserted obligation to him. It is possible that the wife paid the husband more than he was due under the property settlement orders because the orders were simply a device to defeat the husband’s creditors and were irrelevant as far as the real position of the wife and husband were concerned.
There was no successful challenge to the credit of the applicant, nor of Mr S. Of course, a very important witness was missing. The husband gave no evidence in the proceedings. It was submitted on behalf of the trustee that a Jones v Dunkel[9] inference flowed from the wife’s failure to call the husband and Ms KK. The wife was asked by learned counsel for the trustee why she did not cause the husband to give evidence and she said something to the effect: “I didn’t think that it was up to me”. She also said something during her oral evidence like “He left me out to dry”.
[9] Arising from Jones v Dunkel (1959) 101 CLR 298 is the so called rule that the unexplained failure by a party to give or call evidence may lead to an inference that the uncalled evidence or missing material would not have assisted that party’s case.
As with the wife, the trustee did not call the husband to give evidence. On the cases of each of the wife and the trustee, the husband could be a hostile witness. If true that would have prevented cross-examination of the husband by the party that called him. However, there were other options available to the trustee to obtain information from the husband. A trustee has powers under the Bankruptcy Act1966 (Cth) to obtain information, records and testimony from the bankrupt. For example, the trustee could have caused the husband to be examined and would not have been impeded by s 38 of the Evidence Act 1995 (Cth). In relation to the fact that the trustee did not hold a public examination[10], the trustee said he was satisfied that there was no utility in holding any examination. I asked the trustee’s counsel what I should take from the fact that there was no public examination and was told that there were other avenues of enquiry available to the trustee and he went down that path.
[10] Section 81 of the Bankruptcy Act1966 (Cth).
I do not draw a Jones v Dunkel inference against either of the parties. The wife holds the only Australian asset capable of addressing the debts proved in the bankruptcy and the trustee was apparently funded to pursue that asset.
The Law
The approach to proceedings under s79A
Subsection 79A(1) of the Act provides a court, in its discretion, to vary or set an order aside an order for property settlement or make another order under s 79 in substitution for the order set aside. Subsection 79A(1) relevantly provides:
(1)Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that:
(a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or
…
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.
Pursuant to order 3 made by the Full Court on 26 February 2018, in this instance the rehearing proceeds on the basis that there has been a miscarriage of justice pursuant to s 79A(1)(a) of the Act.
There is no dispute about the trustee having standing in the proceedings as a person whose interests are affected by the order which is sought to be set aside, as provided for in s 79A(5) of the Act.
In Patching & Patching (1995) FLC 92-585 the Full Court held that the determination of an application under s 79A involves a four step process:
…namely whether there had been a suppression of evidence or “other circumstance'' as alleged by the husband, whether that amounted to a ``miscarriage of justice'', whether the Court, in its discretion, should “vary the order or set the order aside'' and whether it should make another order under s. 79: see, for example, McIntyre and McIntyre . Recent decisions of the Full Court have emphasized the independent significance of the exercise of the discretion which s. 79A gives: see Prowse and Prowse and Morrison and Morrison .
In this matter the Full Court accepted the findings made at first instance that there had been a suppression of evidence and that a miscarriage of justice has occurred. It is therefore necessary to consider only the third and fourth steps referred to above:
(a)whether the Court, in its discretion, should vary the order made on 1 September 2011 or set the order aside; and
(b)if so, whether the Court should make another order under s 79 of the Act.
At the outset I should say that without evidence from the husband, the task of identifying a just and equitable distribution of property is virtually impossible.
Should the Court vary the order or set the order aside?
In Barker & Barker (2007) 36 Fam LR 650the Full Court said at [123]:
As previously discussed, in order for a claim under s 79A(1) to succeed, the Court must be satisfied that a miscarriage of justice has resulted. It is not sufficient to merely establish the existence of one or more of the stated grounds, such as suppression of evidence. In Livesey v Jenkins (supra), Brandon LJ had this to say about the nexus between non-disclosure and setting an order aside (at 445-6):
I would end with an emphatic word of warning. It is not every failure of frank and full disclosure which would justify a court in setting aside an order of the kind concerned in this appeal. On the contrary, it will only be in cases when the absence of full and frank disclosure has led to the court making, either in contested proceedings or by consent, an order which is substantially different from the order which it would have made if such disclosure had taken place that a case for setting aside can possibly be made good. Parties who apply to set aside orders on the ground of failure to disclose some relatively minor matter or matters, the disclosure of which would not have made any substantial difference to the order which the court would have made or approved, are likely to find their applications being summarily dismissed, with costs against them, or, if they are legally aided, against the legal aid fund.
We agree with this statement.
In In the Marriage of Morrison (1994) 18 Fam LR 519 (“Morrison”), after quoting the above passage of Brandon LJ from Livesey v Jenkins the Full Court said:
43. Rather than use His Lordship's test of "the order which it would have made", we would suggest that the test is more properly expressed as "the order which it might have made".
In the proceedings before me the wife submits that there should be an adequate explanation for the trustee’s delay in bringing the s 79A application. The wife places reliance on references in Morrison on that issue. I do not think that this is the strongest part of the wife’s case. As opposed to proceedings for leave to bring proceedings out of time[11], there is no time limit for applications under s 79A. In any event, in Morrison there had been a delay of seven years. Here the delay was 13 months (from bankruptcy until the filing of the trustee’s application) and no specific prejudice therefrom has been identified.
[11] Such as proceedings for leave pursuant to s 44(3) of the Family Law Act 1975 (Cth).
In Prowse and Prowse (1995) FLC 92–557 at 81,566 the Full Court discussed what should happen after a miscarriage of justice had been established in s 79A proceedings and said:
…. The better view, in our opinion, is that an applicant for an order under s 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 discretion is to so order.
Therefore the onus falls on the trustee.
It follows from the judgments of the plurality (Strickland & Murphy JJ) in the appeal in these proceedings that the Court’s task is to engage with the contentions of the trustee and, where practicable, to make findings about those matters. The matters raised by the trustee are:
·the extent if any of the wife’s involvement in misleading the Court when the agreement of the husband and wife was presented for the making of orders by consent in 2011;
·the date of separation;
·the level of the wife’s involvement in the business transaction that created the debt to Mr S;
·the establishment of a balance sheet for the purposes of s 79 and in particular the treatment of the Mr S debt;
·the proportions in which the husband and wife made their contributions;
·any adjustments that should be made pursuant to paragraphs s 79(4)(d), (e), (f) and (g); and
·the ultimate property settlement and a comparison with the outcome under the 2011 orders.
I will address those matters.
The extent, if any, of the wife’s involvement in misleading the Court
Short of a concession, it is not possible to be certain about the level of the wife’s involvement in misleading the Court. It is a matter of assessing the surrounding circumstances and making a finding on the balance of probability.
As I have said, the evidentiary onus falls on the trustee. Although the standard of proof is the civil standard, without limiting the matters taken into account, some matters including the gravity of the alleged conduct, must be taken into account in making the finding.[12]
[12] See s 140 of the Evidence Act 1995 (Cth).
As was identified in the oral submissions made on behalf of the wife, in the course of his judgment in the Appeal, Murphy J expressed a view about the import of a finding of collusive wrongdoing by the wife. His Honour said:
“DID HER HONOUR ERR IN CONSIDERING IRRELEVANT MATTERS?
194.Strickland J has earlier set out [83] – [94] of her Honour’s reasons where her Honour took into account a number of matters in refusing to set aside the impugned consent orders.
195.I would make two observations about those factors. First, I find it difficult if not impossible to see how those factors taken together could, even if correct, justify not setting aside the orders unless specific findings were made that there had been no collusive wrongdoing on the part of the husband and wife in obtaining the orders. It would in my view be, to say the least, a highly exceptional case for a conscious abuse of the court’s process – in effect a fraud on the court – to not result in orders being set aside, at least in the absence of truly exceptional countervailing discretionary considerations.
196.The second observation relates to what I perceive to be the trustee’s argument based on procedural fairness.
197.As it seems to me, her Honour’s conclusion (at [86]) that “the only additional or different order to be made [if the orders were set aside] would be a provision that the wife bear no part of the debt to Mr S” is a conclusion about a separate discretion, namely what order, if any, should be made if the orders are set aside.
198.It should be accepted, of course, that in many cases issues relevant to the exercise of the s 79A discretion and the latter discretion will overlap. However, here, the proceedings were bifurcated and the latter issue was not joined in the proceedings.
199.I consider that the parties needed to be afforded the opportunity to put forward all such evidence and submissions as they might in respect of the separate issue of what orders, if any, should be made if, as a result of the bifurcated proceedings, the impugned orders were set aside. A central issue in those proceedings would undoubtedly be whether one or both parties should bear responsibility for the debt and, if both, in what proportion.
200.The same is in my view true of the conclusion reached at [88] of her Honour’s reasons to the effect that s 79 proceedings would only see the wife doing worse than what is provided for in the consent orders. In these bifurcated proceedings, that was a decision that should await a determination of the s 79 issues which were not joined before her Honour.
201.In my respectful opinion her Honour has erred in considering each of those matters.”
More than $1,000,000 was applied to those projects and to servicing the related debts. It is the unchallenged evidence of the wife that she objected to at least some of those investments.
The husband made 35 trips to Country Q between 2002 and 2009 and in doing so, left the wife to manage the parties’ household and business affairs in Australia.
It is submitted for the wife that she made 60 percent of the contributions made, compared to 40 percent by the husband. For the trustee the outcome proposed is one of equality, after the discharge of the Mr S debt. I take it then that the submission on behalf of the trustee is for a finding of equality of contributions with no adjustments.
It is not possible on the known facts and the artificial balance sheet to strike a reliable balance for the contributions of the married parties. Suffice it to say that it is possible that the contributions of the wife were greater than those of the husband and I so find.
Where there has been a failure of proper disclosure, the Court is allowed some latitude in identifying an outcome under s 79. That is the situation here.
Any adjustments that should be made pursuant to paragraphs s 79(4)(d), (e), (f) and (g)
The only evidence about the current circumstances of the married parties relates to the wife. She is 64 years of age and is in poor health. In the affidavit sworn 11 February 2016 the wife referred to having depression, drinking a lot of alcohol and being very unwell in around September 2009. In the beginning of 2012 she saw a general medical practitioner and found that she had high blood pressure and severe depression. She does not have paid employment. The wife lives with the daughter of the marriage, Ms RR Hicks, who shares the household expenses. The wife has had to borrow funds to make ends meet. The wife does not have paid employment and intends to apply for the aged pension when she qualifies for it. As at July 2018 the wife had applied to Centrelink for a Newstart Allowance but had not commenced to receive the allowance.
The husband is about 12 years older than the wife but there is no evidence of his circumstances. On those facts, although the contribution based finding would leave her with a greater share of the assets, there should be an adjustment in favour of the wife.
That said, the original orders meant that it was made impracticable for the husband’s creditors to be paid. In my view whatever the adjustment, it should not prevent those creditors being paid.
The ultimate property settlement and a comparison with the outcome under the 2011 orders.
Due to the absence of evidence from the husband the identification of a property settlement based on the current circumstances is necessarily vague. Two things can be said about the original division of property in favour of the husband. First, in practical terms the husband’s share was substantially lower that would have been justified by the assessment of contributions as adjustments required by s 79(4). Second, the property settlement did not allow the discharge of the debts proved in the husband’s bankruptcy.
Should the consent orders be set aside?
In my view the consent orders should be set aside. Albeit an order in terms agreed to by the husband, the settlement significantly understated his entitlement to property. As a result the husband avoided his responsibilities.
If the consent orders are set aside, should the court make another order under s 79 of the Act.
Once the consent orders are set aside it is necessary to make another order. It cannot be said that the way in which the assets are currently held meets the requirement of s 79(2).
The trustee seeks that the debts proved in the bankruptcy be paid out, that the costs of the trustee be paid and that the balance of the matrimonial assets be divided equally between the trustee (presumably for the husband) and the wife.
As is indicated earlier in these reasons, in my view the wife should not be liable for the debt to Mr S. Nor for that matter should she be liable for the other debts proved in the husband’s bankruptcy. No link has been established between the marriage and any of the debts proved in his bankruptcy.
Nevertheless, in my view the debts should be paid. Without information about the husband’s circumstances it is not possible to identify a just and equitable settlement of property between the husband and the wife but in my view a conservative exercise of discretion would allow to the husband sufficient property settlement to discharge the bankruptcy debts.
I will order that the husband’s debts be paid and that the husband and the wife retain what they own and responsibility for what they respectively owe. Although it has been consistently anticipated that the Suburb F property will have to be sold, I will make a bare order for payment with an order for sale if the payment is not made. Rather than 28 days, I will give the wife three months to make the payment. The trustee has proposed a regime of orders aimed at achieving the best reasonably attainable price for the Suburb F property. In my view that will not be necessary. There will be no one more motivated to maximise the value of the property than the wife and those matters can be left to her discretion. The only issue will be the need to realise the property in a timely way.
The trustee included a claim for costs in the orders sought. I will leave the issue of costs to be raised and argued once the parties have had an opportunity to consider the outcome of the substantive proceedings.
Conclusion
There was a miscarriage of justice in the making of the orders of 1 September 2011. Taking into account the husband’s debts, the orders should be set aside and new orders made that provide for a payment to the trustee in an amount of $638,217. Otherwise the assets and liabilities will remain with the party who owns or is responsible for them. On the basis of the evidence before the Court, that is an outcome that meets the requirements of ss 79A and 79.
Leave will be granted to the parties to bring the matter back in respect of costs or the wording of the orders within 28 days.
I certify that the preceding one hundred and eighty (180) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 27 September 2019
Associate:
Date: 27 September 2019
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