TRUSTEE OF THE BANKRUPT ESTATE OF HICKS & HICKS

[2016] FamCA 462

FAMILY COURT OF AUSTRALIA

TRUSTEE OF THE BANKRUPT ESTATE OF HICKS & HICKS [2016] FamCA 462

FAMILY LAW – PROPERTY – Application by the Trustee of the Bankrupt Estate of the husband under section 79A(1)(a) to set aside final consent orders – Where there was non-disclosure by the husband of his assets and liabilities in the Application for Consent Orders– Where notice was not provided of the Application for Consent Orders to a third party engaged in litigation with the husband – Where the Court finds that there has been a miscarriage of justice – Whether the Court should exercise its discretion to set aside the consent orders – Where the wife is not liable for the debts incurred by the husband – Where there is uncertainty as to overseas assets and liabilities of the husband – Where a reconsideration of the proceedings under section 79 would be unlikely to result in an order more favourable to the Trustee – Where the Court declines to exercise its discretion in favour of the Trustee – Application dismissed.

Family Law Act 1975 (Cth) s 79A

Patching & Patching (1995) FLC 92-585
Official Trustee in Bankruptcy v Donovan and Stevens (1996) FLC 92-703
Prince & Prince (1984) FLC 91-501

APPLICANT: Mr Thomas as Trustee of the Bankrupt Estate of Mr Hicks

RESPONDENT: Ms Hicks

FILE NUMBER: SYC 2372 of 2013

DATE DELIVERED: 10 June 2016

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Stevenson J

HEARING DATE: 29 February and 1 March 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Alexander

SOLICITOR FOR THE APPLICANT: Marsdens Law Group

COUNSEL FOR THE RESPONDENT: Mr Wilson SC

SOLICITOR FOR THE RESPONDENT: Russell C Byrnes Solicitor

Orders

1. The Initiating Application of Mr Thomas filed on 3 May 2013 is dismissed.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Trustee of the Bankrupt Estate of Hicks & Hicks has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 2372  of 2013

Mr Thomas as Trustee of the Bankrupt Estate of Mr Hicks

Applicant

And

Ms Hicks

Respondent

REASONS FOR JUDGMENT

The proceedings

1. The parties to these proceedings are the applicant, Mr Thomas, who is the Trustee in Bankruptcy of the husband (Mr Hicks) and the respondent wife (Ms Hicks).  By an Initiating Application filed on 3 May 2013 Mr Thomas (“the Trustee”) sought the following orders:

   1.That pursuant to section 79A(1)(a) Family Law Act 1975 the orders made by consent on 1 September 2011 be set aside.

   2.That the Court make another order under section 79 in substitution for the orders so set aside.

2. By a Response filed on 22 August 2013 the wife sought a dismissal of the application and an order that the Trustee pay her costs on a solicitor/client basis.  By an Application in a Case filed on 18 February 2016 the wife sought the following orders:

   1.That the property known as B Street, C Town NSW being the whole of the land in Folio Identifier … (“C Town”) be sold.

   2.That the Applicant wife have the conduct of such sale and that the property be listed with D Real Estate for sale by way of private treaty at $800,000.

   3.If the property does not sell within 2 months from the date of listing then the price be reduced to an amount agreed by the Applicant and First Respondent and failing agreement as advised by such agent.

   4.That the proceeds of such sale after the payment of the agents fees relating to the sale and the legal costs relating to such sale be paid as to the sum of $80,000 to Russell C Byrnes, solicitor on account of the legal costs of the Applicant and the balance be paid to the Macquarie Bank in reduction of the loan account … with that bank and currently secured over the property known as E Street, Suburb F.  After the payment of such loan the balance if any be held in the trust account of Marsdens Solicitors on behalf of both parties pending further order of this Court.

   5.That the Second Respondent vacate C Town upon receiving 28 days written notice from the Applicant.

   6.Such further Order as this Honourable Court deems appropriate.

3. The Trustee did not oppose a sale of the C Town property but objected to payment of a sum of $80,000 to the wife’s solicitor.  The Trustee proposed that the net sale proceeds be applied to reduce the existing mortgages, subject to a restraint on the wife then drawing down on these accounts.

Background

1. The husband and the wife are aged 72 and 60 respectively.  They married in 1978 and claimed that they separated on 9 September 2009.  This purported date was disputed by the Trustee, who alleged that they separated at some later, but unspecified, time.  They were divorced on 2 September 2011.  The husband and wife have three children who were born in 1988, 1990 and 1993.

2. At the date of the marriage the husband owned a home unit at Suburb G, the fate of which was not revealed by the evidence.  At that date the wife had approximately $15,000 in savings.  They were both working for the same employer.

3. In 1979 the parties borrowed funds and purchased a property at H Street, Suburb I for an unknown amount.  They sold this property for $135,000 in 1981 and discharged the mortgage by a payment of about $120,000.

4. In 1981 the husband and wife purchased a property at E Street, Suburb F for $157,000, utilising borrowings of $147,000.  This property was their family home and is currently occupied by the wife.

5. In November 1971 the wife began work.  She continued with this employment until November 1993, with various periods of maternity leave.  The husband worked as a salesman until 1986, from which point he engaged in business ventures with varying degrees of success.

6. Prior to the purchase of the Suburb F property the wife borrowed funds and made a loan of $45,000 to a friend.  This person was unable to make repayment and, in satisfaction of the debt, he transferred to the wife a business at Suburb J known as Company 1 (“the Suburb J business”).

7. The wife continued to work but also attended administrative duties at the Suburb J business.  She worked in this business at night and on weekends until the birth of her first child in 1988.

8. In April 1982 the wife borrowed $20,000 from the Credit Union by way of a third mortgage on the Suburb F property.  She made repayments in respect of all three mortgages from her salary.

9. In approximately 1985 the husband and two partners acquired a business known as Company 2 at Suburb I.  He gave up full-time employment in 1986 and worked in the business for three to four nights per week.  The husband relinquished his interest in Company 2 to his partners in 1987/88, after the wife threatened a separation due to his alleged drinking and gambling.  The husband and wife received no money for his interest in the business and thus made a loss on this investment.

10. Approximately one month before the birth of her first child in 1988, the wife took leave from her employment.  She continued to work at the Suburb J business, taking a break of only a few weeks before and after the birth.

11. In September 1987 the wife borrowed an unspecified sum.  The purpose of these borrowings was to effect renovations to the Suburb F property.

12. The wife resumed her employment in September 1991 and worked full-time until she accepted voluntary redundancy in November 1993.  She continued to manage the Suburb J business during that period.

13. On her resignation the wife received a net lump sum payment of approximately $98,000.  She discharged all of her loans by a payment of $82,946.  The total amount of the loans was $109,320 but the wife received a discount of $26,374.

14. On her resignation the wife also received a rolled over superannuation payment of $143,731.  She applied $93,740 to the purchase of a property at B Street, C Town and also withdrew a sum of about $34,000 from the superannuation fund.  The wife’s superannuation account currently has a balance of approximately $5,550.

15. The husband and wife purchased the C Town property for $380,000 in April 1994.  In addition to the money withdrawn from the wife’s superannuation account, they funded the purchase by way of bank borrowings of approximately $250,000.

16. In 1995 the husband and wife acquired an interest in a business known as Company 3, in partnership with another couple.  The four purchasers borrowed a total of $617,000 from the National Australia Bank.  This loan was secured on the titles to the Suburb F property and the home of the other couple.  The wife continued to work in the Suburb J business and the husband attended at Company 3 on occasions.

17. In 1999/2000 a partnership dispute arose between the husband and wife and their co-owners of Company 3.  This dispute was settled by a superannuation payment to the wife of $90,914 and a further sum of $181,828 to her and the husband.  The sum of $181,828 was deposited into a National Australia Bank account conducted jointly by the husband and wife (“the joint account”).  This settlement resulted in a gross capital gain of $363,655 for the wife, upon which she paid tax.  These funds were applied to the discharge of the mortgage secured on the Suburb F property and in reduction of the C Town loan.

18. In 2000 the husband’s mother died and bequeathed to him her home at Suburb N.  He sold this property for $775,000 in December 2002.  In December 2003 he applied part of the sale proceeds to the purchase of a property O Street, Suburb P for $325,000.

19. On the security of the Suburb P property, the husband borrowed $75,000 from a firm of solicitors and applied this money to the purchase of real estate in Country Q.  Previously he had paid $80,000 from his inheritance for the purchase of vacant land in Country Q.

20. In July 2003 the husband and wife paid a sum of $190,000 to his step-brother and sister in exchange for their future interest in the estate of his father.  On the death of the husband’s father in July 2010, he inherited a residential property at Suburb I.  The husband sold this property for a net sum of $714,850 in March 2011 and deposited this money into the joint account.

21. From July 2003 the husband withdrew money from the joint account and spent these funds in Country Q, despite the wife’s objection.  According to the wife, by 2004/2005 he had depleted most of his inheritance from his mother.

22. In 2006 the husband borrowed $210,000 from Macquarie Bank and repaid the loan of $75,000 secured on the Suburb P property.  He spent the balance of approximately $135,000 on various projects in Country Q.

23. In November 2009 the husband sold the Suburb P property, at a loss, for $290,000.  He had spent some $25,000 on development plans for a project which never came to fruition.  From the sale proceeds a sum of $213,686 was applied to discharge the Macquarie Bank loan and $43,530 was deposited into the joint account.

24. In September 2006 the husband purchased a business known as Company 4 at Suburb I, over the objection of the wife.  This purchase was funded by a loan of $150,000 from the National Australia Bank, which was secured on the title to the C Town property.  Between September 2006 and March 2007 the husband and wife borrowed an additional sum of $114,000, which was used as working capital for this business.

25. By March 2007 the husband and wife had invested a total of $260,000 in the Company 4 business.  On the wife’s insistence, this business was sold in September 2007 for $350,000.  The husband and wife received only a total sum of $193,323 because the purchaser defaulted on full payment.

26. In May 2007 the husband and wife established a $450,000 line of credit with the Commonwealth Bank, which was secured on the title to the C Town property.  A sum of $199,227 was used to pay out an existing debt to the National Australia Bank.

27. Between 2005 and 2007 the husband purchased further properties in Country Q.  From this point, he began to spend increasing periods of time in Country Q.  Late in 2008 the wife discovered that the husband was cohabiting with a woman in Country Q.

28. In November 2007 the husband and wife took out an $800,000 line of credit with Macquarie Bank on the security of the Suburb F property.  The husband used funds from this source to meet mortgage payments and for projects in Country Q.  The wife met her living expenses from payments on account of the sale of Company 4 and income from the Suburb J business.

29. In 2008 the husband entered into a commercial deal with Mr S and Mr T.  It seems that this arrangement was intended to secure an investment by Mr S of $560,000 in an enterprise known as U Pty Ltd.  Mr S drafted a document dated 11 January 2008 which provided, in essence, that he would invest $560,000 and receive 10 per cent of the shareholding in the U Pty Ltd.  Mr S would take mortgages over a property owned by Mr T in Country Q, of which the husband was the proprietor.

30. The document prepared by Mr S contained provision for repayment of the sum of $560,000 by 1 June 2009.  There was a later amendment which provided for repayment by 1 June 2010.

31. Pursuant to this arrangement Mr S wrote two cheques, each of which was made payable to Mr T and his brother.  Both of these cheques were banked into a joint account of the T brothers.

32. A dispute as to repayment arose and Mr S filed a Statement of Claim in the Supreme Court of New South Wales on 14 October 2010.  The husband filed a Defence on 24 December 2010.  After a defended hearing, judgment was entered against the husband in an amount of $605,567 on 8 September 2011.

33. In August 2011 the husband entered into a mortgage in relation to one of the Country Q properties with Mr V.  The principal sum was $100,000.

34. On 24 August 2011 the husband and wife filed an Application for Consent Orders for settlement of property in the Family Court of Australia.  The following orders were made on 1 September 2011:

    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 … in … and Lot … in ….

    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 … and mortgage to Commonwealth Bank of Australia secured on the title to [B Street, C Town] being Mortgage Number … 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 ...

    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.

1. The husband and wife set out their assets and liabilities as follows in the Application for Consent Orders:

PROPERTY
APPLICANT	RESPONDENT
Real estate	Address	Address
	E Street SUBURB F  State NSW	E Street SUBURB F  State NSW
	Your  per cent share 50 per cent	Your  per cent share 50 per cent
	Value of your share            E $650,000	Value of your share            E $650,000
Address	Address
B Street C TOWN  State NSW	B Street C TOWN  State NSW
Your  per cent share 50 per cent	Your  per cent share 50 per cent
Value of your share            E $400,000	Value of your share            E $400,000
Address	Address
Property 1, Country Q freehold  State	State
Your  per cent share 100	Your  per cent share
Value of your share            E $350,000	Value of your share

Address	Address
Property 2, Country Q freehold  State	State
Your  per cent share   $255,000	Your  per cent share
Value of your share	Value of your share
Address	Address
Property 3, Country Q leasehold  State	State
Your  per cent share 100	Your  per cent share
Value of your share            E $450,000	Value of your share
Motor Vehicles	Make Motor vehicle 1	Make Motor vehicle 2
	Model …	Model …
Value of your share            E $2,000	Value of your share            E $5,000
Make	Make Motor vehicle 3
Model	Model …
Value of your share	Value of your share            E $5,000
Furniture, furnishings and effects	Value of your share            $75,000	Value of your share            $100,000
Funds in banks, building societies, credit unions or other financial institutions	Name of Institution Commonwealth Bank	Name of Institution St George Bank
	Your share  $15,000	Your share  $155,000
	Account Number …	Account Number …
Name of Institution Commsec Account	Name of Institution
Your share  $115,000	Your share
Account Number	Account Number
Name of Institution Country Q Bank 1	Name of Institution
Your share  $9,650	Your share
Account Number	Account Number
Name of Institution Country Q Bank 2	Name of Institution
Your share  $28,000	Your share
Account Number	Account Number
Name of Institution Country Q Bank 2	Name of Institution
Your share  $35,000	Your share
Account Number	Account Number
Name of Institution Country Q Bank 2	Name of Institution
Your share  $52,000	Your share
Account Number	Account Number
Interest in any business (give your best estimate of the gross market value)	Name of business W Pty Ltd	Name of business W Pty Ltd
	Your  per cent share 50	Your  per cent share 50
	Value of your share            E $52,500	Value of your share            E $52,500
Investments including shares in public companies	Name and type of investment	Name and type of investment
	Number shares held/Your  per cent share	Number shares held/Your  per cent share
Value  NIL	Value  NIL
Life insurance policies	Company	Company
Policy No.	Policy No.
Surrender value of your share            NIL	Surrender value of your share        NIL
Interest in any other property, including in any leased property	Give details	Give details
	Value of your share  NIL	Value of your share                 NIL
TOTAL VALUE OF PROPERTY OWNED BY YOU	$2,489,150	$1,367,500
LIABILITIES
APPLICANT	RESPONDENT
Amount owing on home mortgage	Name of lender Macquarie Bank	Name of lender Macquarie Bank
	Address of property E Street SUBURB F   State NSW	Address of property E Street SUBURB F   State NSW
	Your share of amount owing    $225,000	Your share of amount owing    $225,000
Amount owing on any other mortgage	Name of lender Commonwealth Bank	Name of lender Commonwealth Bank
	Address of property B Street C TOWN  State NSW	Address of property B Street C TOWN  State NSW
	Your share of amount owing    $225,000	Your share of amount owing    $225,000

Amounts owing on any credit/charge cards	Type of card	Type of card
	Your share of amount owing        NIL	Your share of amount owing         NIL
Amounts owing on any other loans	Give details	Give details
	Name of lender/s	Name of lender/s
	Your share of amount owing        NIL	Your share of amount owing         NIL
Hire purchase / lease	Give details	Give details
	Name of lender/s	Name of lender/s
	Description of property	Description of property
	Your share of amount owing        NIL	Your share of amount owing         NIL
Income tax liabilities	Current financial year              NIL	Current financial year               NIL
	Amount unpaid from previous financial years             NIL	Amount unpaid from previous financial years             NIL
Any other liabilities	Give details	Give details
	Your share of amount owing        NIL	Your share of amount owing         NIL
YOUR TOTAL LIABILITIES	$450,000	$450,000

YOUR TOTAL NET WORTH (NOT INCLUDING SUPERANNUATION)
APPLICANT		RESPONDENT
To calculate your total net worth, subtract the amounts at Item 57 from the amounts at Item 49.
Insert the total from Item 49		A  $2,489,150		C  $1,367,500
Insert the total from Item 57		B  $450,000		D  $450,000
YOUR TOTAL NET WORTH (NOT INCLUDING SUPERANNUATION)		$2,039,150		$917,500
		Has either party acquired or disposed of any property since the date of separation?	No      GO TO ITEM 60  Yes      GIVE DETAILS		No      GO TO ITEM 60  Yes      GIVE DETAILS

1. The Application for Consent Orders stated that the husband and wife would receive 48.76 per cent and 51.24 per cent respectively of their net property.  According to the wife, the orders essentially provided that she would take the Australian real estate assets and the husband would retain the Country Q property.  The husband engaged a solicitor but the wife had no legal representation at the time of and leading up to the making of the consent orders.

2. In October 2011 the Commonwealth Bank mortgage secured on the C Town property had a payout figure of $449,534.  According to the wife, the husband had spent approximately $250,000 from these funds in Country Q.  The wife took out a redraw facility of $345,000 with Macquarie Bank and paid $107,060 from her St George Bank account to secure a transfer of the C Town property into her name.

3. The wife made various payments to the husband which she claimed to be in satisfaction of the orders of 1 September 2011.  She listed these payments as follows:

PAYMENTS MADE TO AND ON BEHALF OF MR HICKS
9/8/11	Legal fees to Tonkin Drysdale	$880.00
15/8/11	Cash to [Mr Hicks]	$2,000.00
26/8/11	Cash to [Mr Hicks]	$500.00
1/9/11	Cash to [Mr Hicks]	$3,000.00
7/9/11	Legal Fees to Julian Trebeck, Barrister	$14,450.34
9/9/11	Legal fees to Julian Trebeck, Barrister	$8,388.41
9/9/11	Cash to [Mr Hicks]	$500.00
15/9/11	Cash to [Mr Hicks]	$3,500.00
11/10/11	Cash to [Mr Hicks]	$2,000.00
31/10/11	Cash to [Mr Hicks]	$300.00
4/11/11	Cash to [Mr Hicks]	$5,200.00
11/11/11	Cash to [Mr Hicks]	$4,300.00
1/12/11	Cash to [Mr Hicks]	$400.00
15/12/11	Cash to [Mr Hicks]	$1,000.00
3/1/12	Cash to [Mr Hicks]	$4,300.00
29/2/12	Cash to [Mr Hicks]	$4,300.00
$55,018.75

The wife supplied this information in an email to the Trustee dated 27 February 2013, which responded to his communication of 2 January 2013 (pp 540-541, annexures to the affidavit of Mr Thomas).

1. On 3 April 2012 the husband presented a Debtors Petition and Statement of Affairs to the Australian Financial Security Authority.  He became a bankrupt on 10 April 2012 and Mr Thomas was appointed Trustee of his estate.

2. In April 2014 the wife permitted the husband to take up residence in the C Town property, on the basis that he pays rental of $155 per week.  According to the wife he later allowed his Country Q de facto partner to move into the property without her knowledge or consent.  During her oral evidence, the wife conceded that the sum of $155 per week is below market rental for the property.

The evidence and witnesses

1. The applicant Trustee relied upon two affidavits which he swore on 6 November 2015 and 29 January 2016.  The Trustee’s affidavit of 6 November 2015 included 1,177 pages of annexures which had a thickness of some 13 centimetres. The Trustee also relied upon the affidavit of Mr S sworn 22 January 2016.

2. The respondent wife relied upon the following affidavits:

   1.        Wife’s affidavit sworn 22 August 2013;

   2.        Wife’s affidavit sworn 14 October 2015;

   3.        Wife’s affidavit in reply sworn on 11 February 2016;

   4.Wife’s affidavit sworn 11 February 2016 in support of Application in a Case; and

   5.Wife’s Financial Statement sworn on 20 August 2013.

   The Trustee and the wife each gave oral evidence by way of cross-examination.

The standing of the Trustee to bring the present proceedings

1. The Trustee is invested with standing to institute the present proceedings pursuant to section 79A(5) of the Family Law Act 1975 (Cth), which provides as follows:

   79A(5)  For the purposes of this section, if:

   (a)an order is made by a court under section 79 in proceedings with respect to the property of the parties to a marriage or either of them; and

   (b)either of the following subparagraphs apply to a party to the marriage:

   (i)     when the order was made, the party was a bankrupt;

   (ii)     after the order was made, the party became a bankrupt;

   the bankruptcy trustee is taken to be a person whose interests are affected by the order.

2. As noted, orders were made pursuant to section 79 on 1 September 2011 and the husband became a bankrupt on 10 April 2012.  Accordingly, the Trustee has standing to bring the present application.  There was no suggestion to the contrary in the case for the respondent wife.

The case for the Trustee

1. Counsel for the Trustee set out the basis of his claim in an Outline of Case as follows:

   The proceedings are for an order under section 79(A) Family Law Act. The basis of that claim is that the consent orders into which the respondents entered on 1 September 2011 were neither just nor equitable as a result of a miscarriage of justice under section 79A(1)(a) or by reason of default in carrying out an obligation under the consent orders under section 79(1)(c) [sic].

2. In essence, the Trustee contended that a miscarriage of justice has resulted from the following circumstances:

   ·the husband failed to disclose debts of $606,000 to Mr S and the unsecured creditors listed in his Statement of Affairs, who were allegedly owed a total of $186,832.

   ·Mr S was not provided with notice of the Application for Consent Orders.  As a person who would be adversely affected by the proposed orders, he should have been provided with such notice.

   ·the Court was unable to determine whether the orders were just and equitable in circumstances of such non-disclosure.  The Court was unable to assess the effect on any creditor’s ability to recover a debt.

   ·the parties in fact were not separated when the consent orders were made on 1 September 2011.

   ·in real terms the distribution of the parties’ net property pursuant to the consent orders was generous to the wife, as was evident from the financial position which the husband set out in his Statement of Affairs.

   ·both the husband and the wife engaged in “conscious wrongdoing”, in the case of the wife because she was aware of the debt to Mr S and of the non-separation of the parties.

3. The submission of the Trustee was that these matters justify a finding that a miscarriage of justice has occurred and that the consent orders of 1 September 2011 should be set aside pursuant to section 79A.  In that event, the Trustee proposed that trial directions should be made in relation to the substantive proceedings pursuant to section 79.  The Trustee proposed orders for the sale of the C Town property, with the net proceeds to be held by his solicitor pending further order.

The case for the respondent wife

1. Counsel for the wife rightly submitted that the determination of an application pursuant to section 79A involves a four-step process.  The Full Court described the correct procedure in Patching & Patching (1995) FLC 92-585 at 81,797 as follows:

   …namely whether there has been a suppression of evidence or “other circumstances” 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 section 79:  see, for example, McIntyre and McIntyre (1994) FLC 92-468. Recent decisions of the Full Court have emphasised the independent significance of the exercise of discretion which section 79A gives: see Prowse and Prowse (1995) FLC 92-557 and Morrison and Morrison (1995) FLC 92-573.

2. Counsel for the wife drew attention to a Full Court decision of Official Trustee in Bankruptcy v Donovan and Donovan and Stevens (1996) FLC 92-703 and stated in his Outline of Case:

   Where a party has a significant creditor or has had a significant claim made against him or her, the failure of either party to disclose this to the Court and to give notice of the Family Court proceedings to the creditor will amount to “any other circumstance” giving rise to a miscarriage of justice (see Official Trustee in Bankruptcy v Donovan and Stevens (1996)
   FLC 92-703 ...)

3. Counsel for the wife submitted, however, that it is not sufficient for the Trustee to establish that there has been a miscarriage of justice, as he bears the onus to satisfy the Court that it should exercise its discretion to set aside or vary the consent orders of 1 September 2011.  Counsel for the wife contended that all of the evidence would persuade the Court to exercise discretion in favour of the wife.  In final submissions, counsel for the wife said words to the effect:  “The wife contends that it is likely that the Court will find a miscarriage of justice because of the failure to notify [Mr S] but discretion should not be exercised to set aside the orders.”

Consideration

1. Counsel for the Trustee contended that there are “striking dissimilarities” between the husband’s financial representation as set out in the Application for Consent Orders dated 24 August 2011 and his Statement of Affairs of 3 April 2012.  The Statement of Affairs appears at pages 66-82 of the annexures to the affidavit of the Trustee sworn on 6 November 2015.

2. The discrepancies in the husband’s purported financial position as set out in these two documents include the following:

   1.In the Application for Consent Orders the husband listed as his assets the Property 1 and Property 2 properties with values of E$350,000 and $255,000 respectively.  The husband represented that he held a 100 per cent interest in “the freehold” of these two properties.  The husband also included in the Application for Consent Orders a leasehold interest in a property in Country Q with an alleged value of E$450,000.  In the Statement of Affairs, however, the husband made no mention of this leasehold interest and stated that the Property 1 “property ownership is under legal dispute”.  The husband made no mention of any liability in relation to the Property 2 property in the Application for Consent Orders, yet included a secured debt of $100,000 in the Statement of Affairs.

   2.The husband listed as his assets in the Application for Consent Orders four Country Q bank accounts with a total credit balance of approximately $124,650.  These bank accounts did not appear as assets of the husband in his Statement of Affairs.

   3.The husband listed as his assets in the Application for Consent Orders furniture to the value of $75,000, a Commonwealth Bank account with a credit balance of $15,000 and a CommSec account in the sum of $115,000.  None of these assets appear in the Statement of Affairs.

   4.There was no mention in the Application for Consent Orders of any liabilities other than two bank mortgages secured on the titles to the Suburb F and C Town properties.  In the Statement of Affairs, however, the husband included the secured debt of $100,000 to Mr V and liabilities to Mr S, the wife’s solicitor, a second solicitor and for three credit cards.

   5.In the Application for Consent Orders the husband and wife represented that, upon execution, their respective net worth would be $2,039,150 and $917,500.  Obviously the financial position which the husband presented in his Statement of Affairs was far less advantageous, after a time lapse of only some eight months.

3. In the Application for Consent Orders the husband and wife answered “No” to a question:  “19.  Is there any person who may be entitled to become a party to the case under sub-section 79(10) or sub-section 79SM(10) of the Act?”  That response was clearly incorrect on the part of the husband, who was engaged in litigation with Mr S and must have been aware of the imminent defended hearing in the Supreme Court on 8 September 2011.

4. In my view, it is more probable than not that the husband deliberately elected not to disclose information concerning Mr S in the Application for Consent Orders.  It is true that he disputed the alleged liability to Mr S, which crystallised into an actual debt only by way of the orders of the Supreme Court made on 8 September 2011.  The husband must have been well aware of that potential outcome.

5. In cross-examination the wife said that she knew of the Statement of Claim issued against the husband and was aware that a hearing was fixed in the Supreme Court in late 2011.  She said:  “I believed that [the husband] had not received money from Mr S and that the cheques went to Mr T.  I believed it had no bearing on our consent orders.”

The date of separation

1. In the submission of the Trustee “there is compelling evidence that the husband and wife did not separate until some time after 2009.”  Counsel for the Trustee relied on the following matters in support of this submission:

   1.Alleged joint use of telephone services by the husband and wife after 2009.

   2.The husband’s use of the Suburb F address on incoming passenger cards when he returned to Australia from trips to Country Q after 2009.

   3.Alleged joint use of credit cards and bank accounts after 2009.

   4.The husband lived at the Suburb F property from time to time after 2009.

   5.The payments amounting to $55,018.75 by the husband to the wife did not appear to be made pursuant to the consent orders.

   6.The husband and wife’s use of the same health insurance fund in 2010 and 2011.

   7.Alleged common business interests.

   8.Events surrounding attempted service of documents upon the husband at the Suburb F property.

2. The Trustee contended that the fact that telephone calls from number … “consistently emanate from the area of [E Street] and [Suburb F] where the family home is situated” demonstrates that the wife regularly made use of this telephone which belonged to the husband.  The Trustee suggested that this telephone service was used when the husband was in both Australia and Country Q.

3. Evidence that this telephone number was issued to the husband can be found at page 334 of the annexures to the affidavit of the Trustee of 6 November 2015.  Additionally, the Trustee tendered paragraph 16 of an affidavit of the husband sworn on 31 August 2011, in which he referred to “my mobile number …”.

4. In her affidavit of 14 October 2015 the wife deposed “the … [sic] from an unknown date until March 2012 and the start date of the pre-paid mobile is unknown to me”.  In her oral evidence, however, the wife said that this number was that of the husband in 2008.  She said also in her oral evidence that she used this number between 2008 and the alleged separation date but predominant use was by the husband.  The wife said that the telephone with this number has been “mainly” in her possession since 2012.

5. The wife maintained that the husband came to the Suburb F property after 2009 to visit the parties’ daughters and to leave his car for their use when he was in Country Q.  The wife conceded that she drove the husband to the airport on some of these occasions.

6. In her affidavit of 14 August 2013 the wife deposed that the husband stayed at the Suburb F property from time to time after 2009.  She suggested that he had no money available to him after he was prevented from leaving Australia, until he began to receive the aged pension.  The wife contended that she allowed him to stay in the home out of pity.

7. The Trustee relied on the fact that the husband completed eight incoming passenger cards between 20 November 2009 and 27 May 2011 which showed his Australian address as E Street, Suburb F.  There was no basis in the evidence for any suggestion that the wife was involved in the husband’s use of the Suburb F address on these documents.

8. The same observation can be made in relation to the fact that the 2010 and 2011 tax returns of the husband and wife showed that they used the same health insurance fund.  Further, as was submitted by counsel for the wife, she had no control over what information was contained in the husband’s tax return.

9. The Trustee contended that the husband and wife each used an ANZ credit card in his name between 24 March 2011 and 19 January 2012.  It was submitted that there were many transactions in the E Street and Suburb X areas but none on the Central Coast, which is where the husband supposedly lived at that time.  The wife conceded that she used this card to make a payment to a plastic surgeon in October 2011, for the benefit of the parties’ daughter.

10. In his affidavit of 6 November 2015 the Trustee deposed that the husband’s ANZ and CBA credit cards were used in “the immediate vicinity” of the Suburb F property between 21 March 2011 and 25 January 2012.  As noted, the wife deposed that the husband came to the former matrimonial home to see their daughters and to leave his car for their use after the alleged separation date.  As also noted, the wife said that the husband stayed in the premises from time to time after 2009.

11. The Trustee maintained that the husband and wife continued to operate at least two joint bank accounts in 2011.  On the evidence of the Trustee, the joint NAB account of the husband and wife was closed on 21 July 2011.

12. The Trustee contended that the husband’s CBA credit card was paid out in full each month prior to September 2011 and that, thereafter, there were increasing debit balances.  The Trustee maintained that these increasing debit balances “suggest a concrete plan to enter bankruptcy”, given that the husband allegedly “had cash in Country Q and from the wife.”

13. Counsel for the wife submitted that she and the husband made joint use of these credit cards and bank accounts because there was no “final financial wash up at that stage”.  That submission would appear to be correct and it is notable that the Trustee adduced little or no evidence of ongoing joint use of credit cards or bank accounts after the date of the consent orders.

14. The wife said that she and the husband “formed an intention to enter into consent orders” in mid-2011.  She said that they “started drafting in early 2011” and that “one reason we waited was the distribution of his father’s estate”.  As noted above, the husband’s father died in 2010.

15. The Trustee placed weight on the wife’s apparently conflicting evidence as to whether the husband lived on the Central Coast or at Y Town at various times.  I do not consider that this evidence assists the case for the Trustee.  The wife said that she made a mistake in her earlier evidence, which she sought to correct in her current affidavit.

1. The Trustee questioned whether payments which the wife made to the husband, were in fact pursuant to the requirement in the consent orders that he receive $55,000 within 28 days.  These payments are listed above in paragraph 40 of these reasons.

2. Obviously payments made on 9 August 2011, 15 August 2011 and 26 August 2011, which amounted to $3,380, pre-dated the consent orders.  One payment of $3,000 was allegedly made on 1 September 2011, which is the day of the making of the consent orders.  Payments totalling $22,838 on 7 September 2011 and 9 September 2011 were made to a barrister who appeared for the husband at the hearing in the Supreme Court.

3. In her oral evidence the wife said that some payments which she described as “cash to [Mr Hicks]” in her list would have been “for bills” but any amounts greater than $1,000 were paid to the husband.  It seems strange that amounts for alleged “bills”, without exception, were in round figures and multiples of $100.

4. The Trustee submitted that withdrawals on 12 October 2009 of $9,000 entitled “Cash--- to [Country Q]” and 10 December 2009 of $6,500 entitled Cash to [Coutry Q] - - -” from the joint account constituted evidence that the husband and wife had “common business interests”.  Similarly, the Trustee sought to attach weight to the fact that in 2010 the husband’s writing appeared on bank statements in the name of an entity known as W Pty Ltd.  This company is the holder of a lease of the premises occupied by the Suburb J business and is controlled by the wife.  The husband holds no interest in this entity.  The 2010 statements of W Pty Ltd were in evidence (pp 1060-1078 of the annexures to the affidavit of Mr Thomas) and, in fact, contained very little handwriting.

5. On 31 January 2012 a process server, Mr Z, attended the Suburb F property.  He deposed that the wife said “I am his wife” when he asked the whereabouts of the husband.  The wife denied that she said these words and maintained that she stated “I was his wife”.

6. Counsel for the Trustee submitted that the husband referred to the respondent as “my wife” in an affidavit which he swore on 31 August 2011.  Only paragraph 16 of that affidavit was in fact in evidence and contains no such reference.

7. As noted above, counsel for the wife said in his final submissions words to the effect:

   It is likely that the Court will find a miscarriage of justice because of the failure to notify [Mr S] but discretion should not be exercised to set aside the orders.

   I regard the concession of a miscarriage of justice, for the purposes of section 79A, by counsel for the wife as proper and warranted on the basis of all of the evidence.

8. I consider that Mr S was entitled to notice of the Application for Consent Orders, as he was clearly a person who may have “become a party to the case under subsection 79(10) ...” The husband was a party to the commercial arrangements with Mr S and he was aware of the hearing listed in the Supreme Court on 7 and 8 September 2011.

9. Having reached that conclusion, it is strictly unnecessary that I determine whether the other matters upon which the Trustee relied are sufficient, individually or collectively, to constitute a miscarriage of justice.  Some of these matters, however, could be relevant to the exercise of the discretion whether to set aside or vary the orders of 1 September 2011.

The exercise of discretion

1. Counsel for the wife placed reliance upon the circumstances in which the husband incurred the debt to Mr S.  It was submitted that she had little knowledge of the husband’s commercial activities in Country Q and no involvement in these ventures.  On behalf of the wife, it was submitted that:

   On no basis can it be said that the debt owed to [Mr S] was incurred in the course of pursuing a matrimonial objective.

   I regard that submission as correct, on the basis of all of the evidence.

2. Counsel for the wife drew attention to a Full Court decision of Prince & Prince (1984) FLC 91-501, in which consideration was given to the appropriate treatment of liabilities in section 79 proceedings. Evatt CJ said:

   The assessment of debts and liabilities is not necessarily arrived at by a strictly mathematical or accounting approach in all cases.  While some liabilities are charges upon the property which can be accurately assessed at a certain date, others are at large or have not been precisely determined, e.g., tax liabilities … In some cases there are sufficient uncertainties as to the alleged liability to lead the Court to disregard it entirely or partly
   (e.g. a loan from a parent of the party not likely to be enforced… Af Petersens (supra); Quirk (1983) (unreported).  In other cases, the Court may take the view that because of the circumstances surrounding the incurring of the liability it ought in justice and equity to be wholly or partly disregarded in determining the appropriate order to make under sec.79 as between the parties to the marriage.  Such a result could be reached where a spouse had incurred a liability in deliberate or reckless disregard of the other party’s potential entitlement under sec.79 (Kimber and Kimber (1981) FLC 91-085; Kowaliw and Kowaliw (1981) FLC 91-092; Antmann and Antmann (1980) FLC 90-908; Af Petersens (supra)).  Complex issues can arise in regard to liabilities to third parties…

   Of course, the Court cannot ignore the fact that there is or may be a liability; the effect is simply that it does not consider that the other spouse should be called upon to in effect “contribute” to the liability by having that spouse’s fair share in the parties’ property reduced by virtue of its existence.  The effect may be that the party who has incurred the liability will be left to meet it out of whatever funds remain to that party after satisfying the property order made under sec.79 (Af Petersens (supra)).

3. I accept the submission on behalf of the wife to the effect that she had no involvement in the transactions which created the creation of the husband’s debt to Mr S.  Further, the document which Mr S prepared provided for the monies advanced by him to be secured on the title to a Country Q property of which the husband was the owner and not the Australian properties.  In this circumstance, I am of the view that the wife should not be required to bear any responsibility for this debt.

4. The submission on behalf of the wife was that “if the Court were to accept that she should not be required to contribute to the repayment of the debt to Mr S the exercise of discretion would result in no order being made pursuant to section 79A.  This is for the reason that a reconsideration of the proceedings pursuant to section 79 would not result in a new order more favourable to the husband or the Trustee.”

5. I accept the submission on behalf of the wife to the effect that, in these circumstances, the only additional or different order to be made would be a provision that the wife bear no part of the debt to Mr S.  With such an outcome, the Trustee would find himself in no more favourable position.

6. An alternative submission on behalf of the wife was to the effect that the exercise of discretion “would lead to the inevitable conclusion that the only order available would be one more favourable to the wife”.  Specifically, this submission was that the wife would be found to be entitled to 60 per cent, rather than 51.37 per cent of the net pool and that the husband would be ordered to be solely responsible for the debt to Mr S.

7. This submission was based on the wife’s income-generating activities throughout most of the parties’ cohabitation; her vastly superior homemaker and parenting contribution and her injection of a sum of $130,281 to the purchase price of the C Town property from her superannuation.  Counsel for the wife contrasted these contributions on her part to the husband’s absences from the family and his expenditure of substantial sums in Country Q.  There would seem to be some force in these submissions.

8. A further matter upon which counsel for the wife relied as counter-indicative to the exercise of discretion in favour of the Trustee was his delay in commencing proceedings pursuant to section 79A.  Mr Thomas was appointed trustee on 10 April 2012 but commenced proceedings some twelve months later on

   
   

   3 May 2013.  During that period the wife serviced a mortgage secured on the title to the Suburb F property.  Her unchallenged evidence was that she has paid approximately $5,000 per month in respect of this liability.  The wife deposed that the payout figure of this mortgage stood at $794,931 as at 16 February 2016.

9. An additional submission which was put by counsel for the wife against the exercise of discretion in favour of the Trustee was that “the matrix of the assets has changed so much.”  In fact the situation in relation to the Country Q assets is far from clear, despite the enquiries carried out by the Trustee.  The extent of the Trustee’s knowledge of the Country Q assets and liabilities was set out in his affidavit of 6 November 2015.

10. Significantly, the Trustee deposed that the ownership of the Property 1 property was still a matter of dispute and in fact that it may have been sold in 2015.  In his oral evidence the Trustee indicated that he has been unable to obtain any information concerning bank accounts which the husband may hold in Country Q.

11. In these circumstances, I foresee real difficulties in a court attempting to make just and equitable orders pursuant to section 79A.  Almost inevitably, there will be certainty as to the Australian assets and liabilities.  By contrast there will be uncertainty, confusion or simply lack of information concerning the assets and liabilities in Country Q.

12. For all of these reasons, I decline to exercise discretion in favour of the Trustee.  I will dismiss the Initiating Application filed on 3 May 2013.  That being so, it is unnecessary that I determine the wife’s Application in a Case for orders for the sale of the C Town property.

I certify that the preceding ninety-four (94) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 10 June 2016.

Associate: 

Date:  10 June 2016