Trustee of the Bankrupt Estate of Hicks & Hicks and Anor

[2018] FamCAFC 37

FAMILY COURT OF AUSTRALIA

TRUSTEE OF THE BANKRUPT ESTATE OF HICKS & HICKS AND ANOR [2018] FamCAFC 37

FAMILY LAW – APPEAL – PROPERTY – APPLICATION TO SET ASIDE CONSENT ORDERS AND MAKE OTHER ORDERS FOR PROPERTY SETTLEMENT – Where the primary judge bifurcated the proceedings and only heard and determined the application to set aside the consent orders – Where the second respondent conceded that there was a miscarriage of justice – Where in the exercise of her discretion the primary judge dismissed the application – Where there was a lack of findings by the primary judge central to important, substantial and controversial issues relating to the integrity of the court’s orders and process – Where the primary judge erred in the exercise of her discretion – Where the Notice of Contention filed by the second respondent does not provide an alternative basis for the primary judge dismissing the application – Appeal allowed – The order of the primary judge set aside – The proceedings be partially remitted 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).

FAMILY LAW – COSTS – Where there should be no order for costs and the primary rule under s 117 of the Family Law Act 1975 (Cth) should apply – Where costs certificates pursuant to the Federal Proceedings (Costs) Act 1981 should issue for the appellant and the for second respondent – Costs certificates issued for the appeal and for the partial rehearing.

Bankruptcy Act 1966 (Cth) s 58(1) and (3)
Family Law Act 1975 (Cth) ss 37A(1)(g), 79, 79A, 97(3) and 117

Federal Proceedings (Costs) Act1981 (Cth) ss 6, 8 and 9

B Pty Ltd & K (2008) FLC 93-380
Biltoft and Biltoft (1995) FLC 92-614
Burke v LFOT Pty Ltd (2002) 209 CLR 282
Coulton v Holcombe (1986) 162 CLR 1
Fox v Percy (2003) 214 CLR 118
Gitane & Velacruz (2008) FLC 93-371
Harris v Caladine (1991) 172 CLR 84
Kokl and Kokl (1981) FLC 91-078
Kopel & Ferro (2016) FLC 93-741
Lancer & Lancer [2008] FamCAFC 112
Liu and Liu (1984) FLC 91-572
Metwally v University of Wollongong (1985) 60 ALR 68
Morrison and Morrison (1995) FLC 92-573
Oastler and Oastler (1993) FLC 92-390
O’Brien v Komesaroff (1982) 150 CLR 310
Official Trustee in Bankruptcy v Donovan and Donovan and Stevens (1996) FLC 92-703
Patching and Patching (1995) FLC 92-585
Pelerman v Pelerman (2000) FLC 93-037
Pendleton & Pendleton (2017) 56 Fam LR 459
Prowse and Prowse (1995) FLC 92-557
Prince and Prince (1984) FLC 91-501
Puddy & Grossvard (2010) FLC 93-432
Rohde and Rohde (1984) FLC 91-592
Ruscoe and Walker (2002) FLC 93-093
Stanford v Stanford (2012) 247 CLR 108
Suttor v Gundowda Pty Ltd (1950) 81 CLR 418
Trustee for the Bankrupt Estate of N Lasic & Lasic (2009) FLC 93-402
Vetter v Lake Macquarie City Council (2001) 202 CLR 439
Walker v Ruscoe S115/2001 [2002] HCA Trans 101
Warren v Coombes (1979) 142 CLR 531
Water Board v Moustakas (1988) 180 CLR 491

APPELLANT: Mr Thomas as Trustee in Bankruptcy of the Estate of Mr Hicks

FIRST RESPONDENT: Mr Hicks

SECOND RESPONDENT: Ms Hicks

FILE NUMBER: SYC 2372 of 2013

APPEAL NUMBER: EA 97 of 2016

DATE DELIVERED: 26 February 2018

PLACE DELIVERED: Adelaide

PLACE HEARD: Sydney

JUDGMENT OF: Strickland, Murphy & Austin JJ

HEARING DATE: 3 May 2017

LOWER COURT JURISDICTION: Family Court of Australia

LOWER COURT JUDGMENT DATE: 10 June 2016

LOWER COURT MNC: [2016] FamCA 462

REPRESENTATION

COUNSEL FOR THE APPELLANT: Mr Alexander

SOLICITOR FOR THE APPELLANT: Marsdens Law Group

COUNSEL FOR THE FIRST RESPONDENT: Not applicable

SOLICITOR FOR THE FIRST

RESPONDENT:

Not applicable

COUNSEL FOR THE SECOND

RESPONDENT:

Mr Wilson SC

SOLICITOR FOR THE SECOND

RESPONDENT:

Russell C Byrnes Solicitor

Orders

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).

4. The Court grants to the trustee a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the trustee in respect to the costs incurred by the trustee in relation to the appeal.

5. The Court grants to the wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the wife in respect to the costs incurred by her in relation to the appeal.

6. The court grants to the trustee and to the wife a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the court, it would be appropriate for the Attorney-General to authorise a payment under that Act to each of them in respect of the costs incurred by them in relation to the partial rehearing of the proceedings.

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).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY

Appeal Number: EA 97 of 2016
File Number: SYC 2372 of 2013

Mr Thomas as Trustee in Bankruptcy of the Estate of Mr Hicks

Appellant

And

Mr Hicks

First Respondent

And

Ms Hicks

Second Respondent

REASONS FOR JUDGMENT

Introduction

Strickland J

1. By way of Amended Notice of Appeal filed on 8 November 2016, Mr Thomas as Trustee in Bankruptcy of the Estate of Mr Hicks (“the trustee”) appeals against the order made by Stevenson J on 10 June 2016 dismissing the trustee’s Initiating Application filed on 3 May 2013.

2. Final property orders were made by consent between Mr Hicks (“the husband”) and Ms Hicks (“the wife”) on 1 September 2011.

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

4. The trustee sought the following orders in the Initiating Application:

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

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

5. The primary judge bifurcated the proceedings, and heard and determined the application to set aside the consent orders.

6. The appeal is opposed by the wife. She also included in her written summary of argument a Notice of Contention, providing a possible alternative basis for her Honour’s order. I will address that Notice in due course.

7. The husband has not participated in the appeal proceedings.

Background

1. The following facts are taken substantially from the primary judge’s reasons for judgment delivered on 10 June 2016.

2. The husband and wife were aged 72 years and 60 years respectively at the time of trial.

3. The parties married in 1978 and in the Application for Consent Orders claimed to have separated on 9 September 2009. This date was disputed by the trustee at trial.

4. The parties were divorced on 2 September 2011.

5. There are three children of the marriage, all of whom are now adults.

6. At the date of marriage, the husband owned a unit at Suburb G and the wife had approximately $15,000 in savings. Both parties were employed by the same employer.

7. The parties acquired a property at E Street, Suburb F (“the Suburb F property”) in 1981 for $157,000, of which $147,000 was borrowed. This property became the parties’ family home and was still occupied by the wife at trial.

8. From 1986 the husband engaged in a number of business ventures with varying degrees of success.

9. Prior to the purchase of the Suburb F property, the wife had borrowed funds and loaned $45,000 to a friend. The borrower was subsequently unable to repay the loan and, in satisfaction of the debt, transferred to the wife a brothel business at Suburb J (“the Suburb J business”).

10. The wife continued her employment but also attended administrative duties at the Suburb J business. The wife continued this arrangement until the birth of the parties’ first child in 1988, at which time she took leave from her employment but only took a short break from her work at the Suburb J business.

11. The wife resumed full-time employment in September 1991 and continued until she accepted a voluntary redundancy in November 1993. During this period she was continuing to manage the Suburb J business.

12. The wife received a net lump sum payment of approximately $98,000 upon her resignation. All of the loans were then discharged by her by a payment of $82,946.

13. Upon her resignation, the wife also received a rolled over superannuation payment of $143,731.

14. In April 1994 the parties purchased a property at B Street, C Town (“the C Town property”) for $380,000, of which $93,740 came from the wife’s rolled over superannuation payment and approximately $250,000 was borrowed.

15. The wife had also withdrawn $34,000 from her superannuation fund and at trial the balance of her superannuation account was approximately $5,550.

16. In 2000 the husband’s mother died and bequeathed to him her home at Suburb N. This property was sold for $775,000 in December 2002. In 2003, the husband applied part of the sale proceeds to the purchase of a property at O Street, Suburb P for $325,000 (“the Suburb P property”).

17. Using the Suburb P property as security, the husband borrowed $75,000 from a firm of solicitors and applied this money to the purchase of real estate in Country Q. Prior to this, the husband had used $80,000 of his inheritance to purchase vacant land in Country Q.

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

19. In 2006 the husband borrowed $210,000 from Macquarie Bank and repaid the loan secured on the Suburb P property. The balance of the amount borrowed was used by the husband on various projects in Country Q.

20. In May 2007 the parties established a $450,000 line of credit with the Commonwealth Bank of Australia, which was secured on the title to the C Town property. A sum of $199,227 was put toward an existing debt to the National Australia Bank.

21. Between 2005 and 2007 the husband purchased properties in Country Q. From this point, he began spending increasing periods of time there. Late in 2008 the wife discovered that the husband was cohabitating with a woman in Country Q.

22. In November 2007 the parties 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 line of credit to meet mortgage payments for projects in Country Q.

23. In 2008 the husband entered into a commercial deal with Mr S and Mr T. The arrangement intended to secure an investment by Mr S of $560,000 in an enterprise known as U Pty Ltd.

24. 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 U Pty Ltd. Mr S would take mortgages over a property owned by Mr T in Country Q and another owned by the husband in Country Q.

25. The document prepared by Mr S contained provision for repayment of the sum of $560,000 by 1 June 2009. This was later amended to 1 June 2010.

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

27. 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. Following a defended hearing, judgment was entered against the husband for the amount of $605,567 on 8 September 2011.

28. On 24 August 2011 the parties filed an Application for Consent Orders for property settlement in the Family Court of Australia. Neither party disclosed in the application any liability to Mr S, and nor did they identify him as a person who may be entitled to become a party to the case, something the application required.

29. On 1 September 2011 the following orders were made:

    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.

    …

30. The Application for Consent Orders stated that the husband and the wife would receive 48.76 per cent and 51.24 per cent respectively of their net property, and that essentially the wife took the Australian real estate assets and the husband took the Country Q property.

31. In October 2011 the Commonwealth Bank of Australia 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.

32. The wife made various payments to the husband which she claimed to be in satisfaction of the orders made on 1 September 2011, totalling $55,018.75.

33. In April 2014 the wife permitted the husband to take up residence in the C Town property, on the basis that he paid a rent of $155 per week. According to the wife the husband later allowed his Country Q de facto partner to move into the property without the wife’s knowledge or consent. At trial, the wife conceded that the sum of $155 per week was below market rental for the property.

The Primary judge’s Reasons for Judgment

1. Her Honour, having been satisfied that s 79A(5) of the Family Law Act 1975 (Cth) (“the Act”) provided the trustee with standing to institute the proceedings, summarised the trustee’s case as follows:

   49.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.

2. In respect of the first matter raised by the trustee, her Honour noted that counsel for the wife drew her attention to the Full Court decision in Official Trustee in Bankruptcy v Donovan and Donovan and Stevens (1996) FLC 92-703 where it was held that:

   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 …

3. Her Honour also noted the submission of counsel for the wife to the effect 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” (at [53]).

4. Her Honour returned to this concession by counsel for the wife later in her reasons and regarded it as “proper and warranted on the basis of all of the evidence”. Having reached that conclusion, her Honour said that it was unnecessary for her to determine whether the other matters relied upon by the trustee, individually or collectively, were sufficient to constitute a miscarriage of justice (at [80] – [82]).

5. Her Honour then turned to consider whether she ought to exercise her discretion to set aside or vary the orders of 1 September 2011 and said as follows:

   83.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.

   84.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)).

   85.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.

   86.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.”

   87.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.

   88.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%, rather than 51.37% of the net pool and that the husband would be ordered to be solely responsible for the debt to Mr S.

   89.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.

   90.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.

   91.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.

   92.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.

   93.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.

   94.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.

The Appeal

1. This appeal highlights the difficulties in bifurcating the s 79A and the s 79 proceedings, rather than determining both issues together as is generally the preferred option according to the authorities (e.g. see Patching and Patching (1995) FLC 92-585).

2. The particular difficulty which arose in this case is in the exercise of the discretion under s 79A of the Act. It is beyond doubt that in exercising that discretion the court is entitled to take into account the likely outcome of the s 79 proceedings, if the orders are set aside (Official Trustee in Bankruptcy v Donovan and Donovan and Stevens (1996) FLC 92-703, at 83,423). The question in any case though is the extent to which that can be done given that the s 79A and the s 79 proceedings are separate proceedings, and the discretions to be exercised are different. The ability to address the likely outcome can also be dependent on what evidence is before the court, but that in itself can be problematic, particularly in a case such as this where there is a trustee who was not a party to the orders sought to be set aside, and a party (the husband) who has not given evidence in the s 79A proceedings, but may well do so in the s 79 proceedings. In other words, it would not necessarily be open to her Honour in these circumstances to proceed on the basis of the evidence of the one party (the wife) who was a party to both proceedings, even if unchallenged. The trustee, and the husband for that matter, would be entitled to say that the evidence relevant to a s 79 determination is a matter for the separate s 79 proceedings.

3. It is apparent that this is a significant issue in this appeal. Plainly, her Honour’s primary reason for dismissing the application of the trustee, was her finding that in effect there was no utility in setting the consent orders aside, because “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”, and that in that event “the Trustee would find himself in no more favourable position” (at [87]).

4. Alternatively, given the evidence of the wife, her Honour found “force” (at [89]) in the submission that “the exercise of discretion ‘would lead to the inevitable conclusion that the only order available would be one more favourable to the wife’” (at [88]).

5. The question raised on appeal is whether in making these findings her Honour was in error in taking into account irrelevant considerations, or assumed facts essential to the exercise of her discretion, but not reasonably open to her.

6. As discussed with counsel for the trustee during the hearing of the appeal, it is also necessary to reframe the grounds of appeal. That is because many of the grounds by themselves can lead nowhere (e.g. Grounds 1, 2, 4, 14, and 15).

7. It is apparent that a primary ground of appeal is that her Honour failed to determine the trustee’s case, namely that the wife was complicit in the miscarriage of justice and engaged in “conscious wrongdoing”, and those grounds of appeal would seem to represent particulars of that ground, rather than grounds of appeal in their own right.

8. I pause to note that this issue was only raised by the trustee before her Honour in the context of whether there was a miscarriage of justice, and not in the context of the exercise of the discretion. The question then becomes whether the trustee can raise the argument on appeal that the primary judge erred in failing to make findings about this issue when exercising her discretion. Murphy J addresses this at [162] – [175], and I agree with his Honour’s conclusion that the trustee is not precluded from raising this argument.

9. With this background I turn to the grounds of appeal as pleaded.

Grounds 1 & 2

1. Her Honour erred in failing to make a finding in relation to the date of the alleged separation of the parties.

1. Her Honour erred in that she misconstrued the relevance of the evidence of the Husband’s use of the [Suburb F] address on incoming passenger cards.

1. As can be seen, once her Honour found that there was a miscarriage of justice by reason of the failure to notify the creditor of the husband, Mr S, of the Application for Consent Orders, her Honour addressed whether she should exercise her discretion to set aside the consent orders.

2. The question posed by the trustee for consideration by her Honour, albeit in his case as to the presence of a miscarriage of justice, was whether the wife was complicit in presenting an application to the court which sought orders that did not represent a just and equitable division of the net assets of the parties.

3. The trustee’s case was that the date of separation was relevant to a determination of that issue, yet her Honour failed to make a finding as to the date.

4. The wife’s evidence was that the separation occurred on 9 September 2009, yet the trustee claimed it was much later, and certainly after the presentation of the application and the making of the consent orders.

5. It was in 2008 that the husband entered into a commercial deal with Mr S, and although repayment of the sum of $560,000 was due to be made by the husband by 1 June 2010, judgment was ultimately entered against the husband in the sum of $605,567 on 8 September 2011.

6. Her Honour found (at [83]), that the debt was not incurred in the course of pursuing a matrimonial objective, and (at [85]) the wife had “no involvement in the transactions which created [the debt]”. As a result her Honour did not consider that the wife should be required to bear any responsibility for the debt.

7. However, it is difficult to see how her Honour could make those findings and arrive at that conclusion without making a finding as to when the parties separated. For example, the evidence that they did not separate until sometime later than the wife alleges, goes to the involvement of the wife in the affairs of the husband, and the part that she played in the application for consent orders. Her Honour recorded this evidence at [59] as follows:

   59.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.

8. Her Honour considered this evidence at length, but, without making a finding, her Honour then noted the concession made on behalf of the wife that there was a miscarriage of justice for the purposes of s 79A of the Act, and said this at [82]:

   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.

9. The point that is being made in this ground though, is that her Honour did not revisit the issue of the date of separation in exercising her discretion, yet it was clearly necessary for her Honour to do so in the exercise of her discretion.

10. As submitted by the trustee in his written summary of argument filed on 16 November 2016:

    8.3If the parties were not separated until a much later date than that set out in the consent orders, two considerations flow:

    (a)The finding of her Honour that the Wife had no involvement in the transactions which created the Husband’s debt (AB Vol 1 Page 50.6) would be subject to doubt; and

    (b)The entering into Consent Orders is more likely to have been an attempt to defeat the claim of a creditor, and for that reason a basis on which the Wife might be expected to contribute to the repayment of the debt to Mr S (cf AB Vol 1 Page 50.8)

11. The issue raised in Ground 2 also forms part of the proposition that separation did not occur until after the date contended for by the wife. That is the relevance of the evidence referred to, and I agree that her Honour misconstrued that, looking only at the obvious circumstance that it was not the wife who thereby made the representation as to where the husband was living.

12. In these circumstances I find merit in these grounds of appeal, but as explained above, by themselves they lead nowhere, but as particulars of the claim of conscious wrongdoing on the part of the wife, they are highly relevant.

Ground 3

Her Honour erred in failing to find that the Wife deliberately elected not to disclose to the Court (in the Application for Consent Orders) information concerning [Mr S].

1. This ground is essentially the primary complaint of the trustee.

2. Her Honour found (at [57]) that “it is more probable than not that the husband deliberately elected not to disclose information concerning Mr S in the Application for Consent Orders”. However, no finding was made as to this in relation to the wife.

3. I agree with the submission of the trustee that a similar finding as to the wife’s intention was “irresistible”.

4. The wife’s evidence was that she was aware of a loan being taken out as a result of learning of the Statement of Claim filed in the Supreme Court of New South Wales and dated 14 October 2010. Further, she knew when she signed the application that the question of the debt was to be resolved within three weeks by the Supreme Court.

5. The wife counters this by submitting that given the miscarriage of justice was founded on an admitted lack of disclosure by the husband, a similar finding in relation to the wife “could not have advanced the [trustee’s] case”. However, with respect, that misses the point. Once the miscarriage of justice had been conceded, the question then became how would her Honour exercise her discretion. Here, that entailed her Honour considering whether the wife was complicit in the miscarriage of justice, and in particular, as raised in this ground, whether the wife (like the husband) “deliberately elected” not to disclose the debt to the court. The question of whether the trustee’s case would be advanced was a separate question to be addressed in the exercise of her Honour’s discretion.

6. I find merit in this ground of appeal.

Ground 4

Her Honour erred in determining that the liability owed by the Husband to [Mr S] did not crystallise until 8 September 2011.

1. Her Honour found at [57] that the debt “crystallised into an actual debt only by way of the orders of the Supreme Court made on 8 September 2011”.

2. However, the trustee submits that the debt crystallised at the latest in 2010. He relies on the judgment of the Supreme Court wherein the Chief Justice found that the husband “agreed to be personally responsible for repayment of the $560,000 advanced by [Mr S] in January 2008 by no later than 1 June 2010” (Judgment of Bergin CJ, delivered 8 September 2011, at page 11 of the affidavit of Mr S sworn 22 January 2016), and submits that the judgment was declaratory. That conclusion is also reflected in the addition of interest to the debt.

3. The point of this ground is that Mr S was a creditor of the husband when the application was made, and the wife must have known of that. Thus, it was another particular of the ultimate complaint, namely the wife’s “conscious wrongdoing”.

4. I also find merit in this ground of appeal but it is subject to the same rider as applies to Grounds 1 and 2.

Ground 5

Her Honour erred in that, having found that the failure to give notice to [Mr S] (and other creditors), constituted a miscarriage of justice, she failed to provide natural justice to [Mr S] (and other creditors).

1. This is a curious ground.

2. The application before her Honour was for orders pursuant to s 79A of the Act, and it was not (yet) a hearing pursuant to s 79 of the Act. Indeed, her Honour had bifurcated the proceedings.

3. The wife argues as follows:

   a)With the s 79A application, the trustee was in reality conducting the proceedings on behalf of Mr S, given that he was the only creditor to prove in the husband’s bankruptcy.

   b)Moreover, Mr S was clearly aware of the proceedings, yet he never sought to intervene in the same. Thus he cannot have been denied natural justice by her Honour.

   c)Finally, the complaint here “ignores the provisions of s58(3) of the Bankruptcy Act 1966 (Cth)”. That subsection provides as follows:

   Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:

   (a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

   (b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.

   d)Thus, Mr S was not entitled to seek an order that his debt be paid from the gross assets in priority to any adjustment of those interests between the parties.

4. However, the point of this ground would appear to be that her Honour erred in finding in the s 79A proceedings that the wife was not responsible for the debt, without hearing from Mr S. Certainly, Mr S was entitled to be heard in relation to that issue, but that issue was not one for the s 79A proceedings; it would be a relevant issue though in the s 79 proceedings. Thus it cannot be said that her Honour failed to provide natural justice to Mr S (and other creditors) in the s 79A proceedings.

5. In these circumstances I can find no merit in this ground.

Ground 6

Her Honour erred in determining that the debt owed to [Mr S] was not incurred in the pursuit of a matrimonial objective.

1. It is unclear what her Honour meant by finding that the debt was not incurred in “the pursuit of a matrimonial objective”. I assume that it is meant to signify that given the circumstances of its creation, it was solely for the benefit of the husband, and thus he is solely responsible for it, as opposed to it being a debt intended to be for the benefit of both parties, and thus they are both responsible for it.

2. Her Honour made this finding at [83]. It was a submission made on behalf of the wife, and her Honour simply said that she regarded it “as correct, on the basis of all of the evidence”.

3. However, I am persuaded that the evidence demonstrates otherwise, and that her Honour’s finding, if it can be described as such, was not reasonably open.

4. The debt was incurred during the marriage on any view of the date of separation. Between 2005 and 2007, the husband purchased properties in Country Q. In November 2007 the husband and the wife took out an $800,000 line of credit with Macquarie Bank on the security of the Suburb F property. This was used by the husband to fund projects in Country Q and to meet mortgage repayments.

5. The transactions which resulted in Mr S loaning $560,000 to a company of the husband occurred in January 2008.

6. It is readily apparent that the husband’s Country Q projects were intended to benefit the marriage relationship. The wife gave evidence of numerous payments that she received from Country Q in 2009, 2010 and finally in 2012, and she acknowledged that this money came through the husband. The payments were made into a joint account of the parties.

7. This ground plainly has merit.

Ground 7

Her Honour erred in finding that the Wife should bear no part of the debt to [Mr S].

1. This was in effect the ultimate conclusion by her Honour, and as can be seen, I considered whether her Honour erred in arriving at this conclusion when addressing Grounds 1 and 2 above (see [59] and [60]).

2. Her Honour arrived at this conclusion on the back of findings (at [83]) that the debt was not incurred in the course of pursuing a matrimonial objective, and (at [85]) that the wife had no involvement in the transactions which created the debt. As expressed above, in the context of Grounds 1 and 2, I found it difficult to see how her Honour could make those findings and arrive at that conclusion, without making a finding as to when the parties separated.

3. However, that aside, this is not a finding which had any place in this case, in the exercise of the discretion under s 79A; plainly, it is a matter for the s 79 proceedings, and they were not before her Honour.

4. Thus, for both of these reasons I find merit in this ground of appeal.

Ground 8

In the alternative to Ground 7, if her Honour was correct in determining that the Wife should bear no part of the debt to [Mr S], she erred in concluding, on that basis, that she should not exercise a discretion in favour of the Trustee.

1. This is not a ground that can be maintained.

2. As amplified in the trustee’s summary of argument, it proceeds on the assumption that the discretion should be exercised in the trustee’s favour because in the s 79 proceedings the trustee could achieve a more favourable result than the consent orders. However, just as her Honour was not in a position to find definitively that the wife would be afforded a more favourable result if the orders were set aside, her Honour could not find definitively that the trustee would achieve a better result.

Ground 9

In supporting her determination by reference to the Full Court decision of Prince v Prince (1984) FLC 91-501 her Honour erred in that:

9.2.    Her Honour failed to support the principles set out in the judgment of Evatt CJ to the effect that “The Family Court would (not) lightly disregard the financial liabilities incurred by a party – it would be reluctant to do so unless they had been incurred in deliberate or reckless disregard of the interest a spouse may be entitled to claim under s79”;

9.3.    The issue for her Honour was not whether the Wife had “involvement in the transactions which created … the Husband’s debt to [Mr S]” but whether the debt ought properly to be regarded as a debt to be included in the pool of assets and liabilities; and

9.4.    There was no or insufficient evidence to show that the Husband had acted in deliberate or reckless disregard of the interest a spouse may be entitled to claim under s79.

1. This ground again highlights a major issue in this case. In other words, having found a miscarriage of justice and moved to consider the exercise of discretion, how far can the primary judge go in considering whether there would be a different result pursuant to s 79 if the orders are set aside.

2. Plainly, in a case such as this, where the proceedings are bifurcated, and all her Honour had before her was the s 79A application, her Honour is not able to make definitive findings as to what the result would be pursuant to s 79. Indeed, in this case, it was not open to her Honour at this stage to apply the principles emanating from Prince and Prince (1984) FLC 91-501. The issue of how the debt should be regarded, and who should be responsible for it, were matters for determination in the s 79 proceedings.

3. Thus, it cannot be said that her Honour has erred in the manner claimed, and this ground has no merit.

Grounds 10 & 11

1. Her Honour erred in making any finding in relation to the expenditure by the Husband of substantial sums of money in [Country Q] in circumstances where the Wife has been asked to provide records of transfers of funds and has failed to do so.

1. In assessing the contribution of the parties, to the extent to which Her Honour did so, her Honour erred in failing to balance the contribution of the Wife with the initial contribution of the Husband and with bequests made to him by his parents, and in failing to have regard to the assessment of contribution made by the Husband and the Wife.

1. These grounds misconceive her Honour’s task. To repeat, the application before her Honour was the s 79A application, and in that context, issues such as the respective contributions of the parties, insofar as they do not bear upon whether there has been a miscarriage of justice, are strictly irrelevant to her Honour’s determination of the application.

2. With respect, her Honour should not have given any weight to the wife’s submissions as to contributions, and to the extent that she did she has erred. However, that is not the complaint that is raised in this ground of appeal.

Ground 12

Her Honour erred in that she failed to make findings, or to give reasons as to the findings she made, in relation to:

12.1.  The date on which the Husband and Wife separated;

12.2.  The Wife’s “consciousness of wrongdoing”;

12.3.  The relevance of the division of assets under the Consent Orders in diminishing the capacity of creditors to recover debts; and

12.4.  The relevance of findings on those issues in dismissing the application of the Trustee.

1. I have already dealt with the complaint in Ground 12.1, and I need not say anything more.

2. Similarly, I have addressed the complaint in Ground 12.2 when considering Ground 3.

3. Her Honour, of course, was only recording in [49] (see [41] above) the claim of the trustee that the wife engaged in “conscious wrongdoing” (not “consciousness of wrongdoing” as appears in the ground itself) but her Honour still failed to make any findings in relation to that claim. Impliedly, in finding that the wife should bear no part of the debt, her Honour has dealt with the trustee’s claim, but I am not persuaded that that is the case, and indeed, because of its significance, it behove her Honour to specifically address it, and she did not. The purpose of the wife (and the husband) in entering into the consent orders at the time they did, was a primary issue in the case.

4. I confirm that there is merit in Grounds 1 and 3, and thus there is merit in Grounds 12.1 and 12.2.

5. As to Ground 12.3 I agree with the submission of the wife that this complaint is “disingenuous”. There is ample reference in her Honour’s reasons to the effect on creditors of the division of assets under the consent orders.

6. Finally, Ground 12.4 is merely a summary of the complaints in Ground 12 and does not require any specific comment.

Ground 13

Her Honour erred in determining that, having found that there was a miscarriage of justice by reason of lack of notice to creditors, that it was not necessary to determine whether other matters on which the Trustee relied were sufficient, individually or collectively, to constitute a miscarriage of justice.

1. I do not consider that this ground has any merit. Her Honour only needed to find a miscarriage of justice by reason of one circumstance, and that is what she did. There is no requirement to find a miscarriage of justice on a multitude of bases.

2. However, where her Honour did err is in saying (at [82]), that some of the other matters relied on by the trustee as establishing a miscarriage of justice “could be relevant to the exercise of the discretion”, and not in fact going on to make findings in relation to those other matters that were relevant, including, for example, the date of separation of the parties. Of course, that is not the complaint in this ground of appeal, but it is the subject of other grounds, including Ground 1, and I need say nothing more about this issue.

Ground 14

Her Honour erred in failing to make adverse credit findings in relation to the Wife in circumstances where:

14.1.  The Wife either ignored the liability of the Husband to [Mr S] or was wilfully blind to it;

14.2.  The Wife gave contradictory evidence in relation to the use of telephones and/or taking over the business;

14.3.  The Wife gave contradictory evidence in relation to the signing of the lease;

14.4.  The Wife gave contradictory evidence in relation to a telephone call she made to [Mr S];

14.5.  The Wife gave evidence contradicted by the process server;

14.6.  The Wife gave contradictory evidence as to the operation of the sub-lease;

14.7.  The Wife gave contradictory evidence in relation to the date of separation; and

14.8.  The Wife gave contradictory evidence as to where [Mr Hicks] lived after September.

1. As can be seen, this ground complains that her Honour failed to make adverse credit findings in relation to the wife, but it is unclear what the consequence of that error is in the context of this appeal if it is established.

2. Is it to demonstrate that the wife’s evidence should not be accepted in relation to relevant issues such as the date of separation, or her knowledge of the debt, or her intention in failing to disclose the debt, or her intention in entering into the consent orders?

3. In his written summary of argument, the trustee elaborates on the alleged inconsistent evidence of the wife that he says would lead to an adverse credit finding, but he only pitches that at the date of separation, and at none of the other possible issues.

4. Assuming then that this complaint is directed primarily to the issue of the date of separation, it is apparent from the inconsistencies referred to, that if her Honour had thought it necessary to determine the date of separation, inevitably it would not be as the wife alleged. However, her Honour failed to determine the date of separation and that was the subject of Ground 1, a ground in respect of which I consider there is merit. Thus, there is no utility in this ground of appeal.

Ground 15

In claiming that the Trustee contended that the parties were not separated when the consent orders were made, Her Honour erred in that she misconstrued the contentions of the Trustee with regard to the date of separation.

1. This is also a ground which is intimately related to Ground 1. The alleged misunderstanding by the primary judge highlights the error that her Honour made in not making a finding as to the date of separation.

Notice of Contention

1. It is apparent that the basis of this Notice of Contention is that Mr S was a secured creditor. It is argued, correctly, that if that is the case then he has discrete remedies available to him, which do not include attempting to recover his debt by proving as an unsecured creditor in the husband’s bankruptcy, unless he has sought to first enforce his rights as a secured creditor.

2. It is said that there is no evidence of that, and thus for that reason alone it was open to her Honour to refuse to set aside the consent orders.

3. However, the evidence does not establish that Mr S is a secured creditor for bankruptcy purposes. Certainly, in [85] her Honour said this:

   … 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 …

   But this is not a finding that the debt was secured. Further, and perhaps fatal to this argument, in the Supreme Court proceedings Bergin CJ found that there was no security provided to Mr S by way of first mortgage as mentioned in the agreement (Judgment of Bergin CJ, delivered 8 September 2011, at page 8 of the affidavit of Mr S sworn 22 January 2016).

4. No objection was taken, as it could have been, to this finding being evidence before her Honour, and thus it is not open to now suggest that the debt was secured.

5. In these circumstances the Notice of Contention does not provide an alternative basis for her Honour rejecting the trustee’s claim.

Conclusion

1. Having found merit in Grounds 1, 2, 3, 4, 6, 7, 12.1, 12.2 and 15, that leads to the conclusion that her Honour erred in the exercise of her discretion, and the appeal should be allowed.

2. The question then becomes whether this Court is able to re-exercise the discretion, or whether the matter should be remitted for rehearing.

3. Both parties submit that in the event the appeal is allowed, there is sufficient evidence before this Court to re-exercise the discretion. In other words, neither party seeks to present further evidence in relation to the exercise of the discretion.

4. However, as should be apparent, the basis for the success of most, if not all of the grounds of appeal where I have found merit, is a lack of necessary findings by the primary judge. That renders it impossible for this Court to re-exercise the discretion, and the proceedings will need to be remitted to be heard by a judge other than the primary judge.

5. It is not the whole of the proceedings though that I propose be remitted. Given the concession that there was a miscarriage of justice, the rehearing should proceed on that basis, namely that there was a miscarriage of justice pursuant to s 79A(1)(a) of the Act.

6. It is open for this Court to place limits on a rehearing given the precise terms of s 94(2) of the Act (Ruscoe & Walker (2002) FLC 93-093 at [19]; Walker v Ruscoe S115/2001 [2002] HCA Trans 101 per McHugh J).

Costs

1. At the conclusion of the hearing of the appeal we sought submissions from the parties as to the question of costs depending on the outcome of the appeal.

2. In the event that the appeal was successful, and the wife’s behaviour was found to be “wrong”, the trustee sought an order for costs. However, if no costs order is made, the trustee sought a costs certificate pursuant to the provisions of the Federal Proceedings (Costs) Act 1981 (Cth).

3. For her part the wife opposed the application for an order for costs, but joined in making an application for a costs certificate.

4. The primary rule under s 117 of the Act is that the parties should bear their own costs, but a costs order can be made if there are circumstances that justify the same.

5. Here, although the wife has been substantially unsuccessful in the appeal (s 117(2A)(e)), in the exercise of my discretion I consider that the primary rule should apply, and there should be no costs order.

6. I am disposed though to order costs certificates for the trustee and the wife for the appeal and for the partial rehearing. The appeal is being allowed on a question of law, and there is no order for costs.

MURPHY J

1. I have now had the advantage of reading in draft form each of the reasons of Strickland J and Austin J. 

2. I agree with Strickland J that the appeal should be allowed but my reasons for that conclusion differ somewhat from those of his Honour. 

The Appeal In Context

(a)      Background

1. The background facts and circumstances have been set out by each of their Honours and need not be repeated. 

2. In the proceedings before the primary judge, the Trustee in Bankruptcy’s case was that the husband and wife conspired in applying for the orders for settlement of property which were made by consent.  The trustee’s case was almost entirely circumstantial; he sought to prove a number of matters which, when taken together, were said to provide an inescapable conclusion of the asserted collusion. 

3. The contended effect of the orders, and the asserted conspiracy, was to vest property in the wife so as to avoid its application in payment of the then soon‑to-be-bankrupt husband’s debts.  The consent orders were made on 1 September 2011.  A week later, on 8 September, a judgment of the Supreme Court of New South Wales ordered the husband to pay over $600,000 to Mr S after a trial in that court.  On 10 April 2012 the husband became a bankrupt. 

4. Mr S had indemnified the trustee in the proceedings below.  The trustee’s standing to bring the proceedings below and to prosecute this appeal is not in doubt. 

(b)      The Application for Consent Orders Process and Miscarriage of Justice

1. Despite a large amount of evidence and the entirety of the trustee’s case before the primary judge being directed to the issue of miscarriage of justice, that finding was effectively irresistible and, as will be seen, was (with respect properly as her Honour found) effectively conceded by senior counsel appearing for the wife. 

2. The process employed by the husband and wife in order to obtain the impugned consent orders is an important contextual element for the manner in which the trustee presented his case below. 

3. The husband and wife filed an Application for Consent Orders seeking that orders for settlement of property between them be made by consent.  The Application for Consent Orders process invokes the power of a Registrar to make orders by consent.[1]  By its nature, the process does not require the parties to appear in court; rather the decision as to whether the orders for settlement of property should be made is made by a Registrar, and in the normal course of events, is made solely on the basis of information provided by the parties jointly in the Application for Consent Orders. 

   [1]Family Law Act 1975 (Cth) s 37A(1)(g).

4. The process, and the application, require the parties to provide all such information as is required so as to permit the Registrar to conclude that a) orders for settlement of property should be made at all and b) if so, that the proposed orders are “appropriate” by reason of being “just and equitable”.[2] The making of a s 79 order by a Registrar via that process is not “automatic”,[3] albeit that the nature and breadth of the Registrar’s inquiry takes account of the parties’ consent and any advice they have received.[4] 

   [2]Family Law Act 1975 (Cth) s 79; Harris v Caladine (1991) 172 CLR 84 at 96 (Mason CJ and Deane J), at 103 – 104 (Brennan J) (‘Harris’); Stanford v Stanford (2012) 247 CLR 108.

   [3]Harris at 104 (Brennan J).

   [4]See Harris at 103 (Brennan J), at 96 (Mason CJ and Deane J).

5. Unsurprisingly the principles just discussed find reflection in the Application for Consent Orders requiring both parties to swear or affirm to the factual statements made within it.  Secondly, and equally unsurprising, the Application for Consent Orders requires both parties to swear or affirm that they have disclosed to that other party – and crucially to the court – all such information as is relevant to the making of the orders as proposed.[5] 

   [5]See eg, Application for Consent Orders, paragraphs 6 and 10 of Parts J and L.

6. Axiomatically, in order for a Registrar to conclude that the orders are “appropriate” and “just and equitable” within the terms of s 79, the sworn statements made by the parties must include an accurate statement as to the legal and equitable interests in property of the parties or either of them; their financial resources; and their joint and several liabilities.

7. The consent orders process solemnised ultimately by a consent order miscarries if that does not occur.  Justice miscarries accordingly.

8. It was not in issue before the primary judge that:

   ·The Application for Consent Orders sworn to by the husband and wife was inaccurate in (at least) one material respect;

   ·The picture of the liabilities of the parties or either of them represented by the Application for Consent Orders and the consequent net value of the property of the parties or either of them was materially different to that which it would be if Mr S’s claimed debt was taken into account;

   ·A Statement of Claim had been filed by Mr S in the Supreme Court of New South Wales seeking repayment of the debt by the husband some 12 months before the consent orders were made;

   ·The wife was aware of the claim by Mr S and the filed Statement of Claim;

   ·Mr S’s claim (and, if established, the debt to him) was crucial to the court determining if the proposed consent orders were “appropriate” and were “just and equitable”;

   ·Debts owing by the parties or either of them, and whether one or both parties should bear responsibility for all or part of those debts, was a matter directly affecting each of those determinations and, thus, whether the consent orders should be made;

   ·Mr S’s interests were potentially affected by the orders and he was entitled to be heard in respect of them;

   ·Mr S was not given notice of the proposed orders; and

   ·Thus, the husband and wife sought orders from the court, and the court did in fact make orders, without reference to Mr S’s interest in the proceedings and, specifically, his Supreme Court claim.

9. The principles and undisputed facts just referred to rendered effectively irresistible a finding of “miscarriage of justice” by reason of “any other circumstance”.[6]  As her Honour recorded at [80], counsel for the wife, Mr Wilson SC, effectively conceded that to be the case in the proceedings below.  He was, with respect, correct to do so. 

   [6]Family Law Act 1975 (Cth) s 79A(1)(a).

10. The inevitable finding of miscarriage of justice emerges independently of any finding of wrongdoing – for example, by reason of intentional “suppression of evidence”[7] – on the part of either the husband or the wife. If the consent order is made on the basis of sworn information that is materially false, the evaluative process conducted by the Registrar has miscarried; the Registrar cannot have decided that the orders are appropriate based on them being just and equitable if materially false information has informed the inquiry.[8]  

    [7]Family Law Act 1975 (Cth) s 79A(1)(a).

    [8]See eg, Pelerman v Pelerman (2000) FLC 93-037.

11. A consequence is that it was, in fact, unnecessary for the trustee to contend for any findings, and unnecessary for her Honour to make any findings, about asserted wrongdoing on the part of either the husband or the wife in seeking to establish miscarriage of justice within the meaning of the section.

12. Indeed, the trustee may have sought to make out a case for the exercise of the s 79A discretion by reference to those very same undisputed facts – for example as an alternative if a case of wrongdoing and complicity was not made out.

13. Central to the issues on this appeal is the fact that in the proceedings before the primary judge the trustee not only failed to agitate explicitly a case that the asserted wrongdoing and conspiracy was relevant to the exercise of the s 79A discretion, he failed to agitate any explicit case before the primary judge in respect of the exercise of that discretion. 

14. Establishing a “miscarriage of justice” does not of itself lead to s 79A relief. It must be established, in addition, that the court should, in light of the miscarriage of justice, exercise the discretion to set aside or vary the impugned order.[9] If the discretion leads to variation or setting aside of the order, the discretions inherent in s 79 must then be exercised in the making of a varied or new order.

    [9]Oastler and Oastler (1993) FLC 92-390 (‘Oastler’); Patching and Patching (1995) FLC 92-585 (‘Patching’). In the latter decision it was said by the Full Court at 81,797 that “recent decisions of the Full Court have emphasised the independent significance of the exercise of the discretion which s 79A gives”, citing Prowse and Prowse (1995) FLC 92-557 and Morrison and Morrison (1995) FLC 92-573.

15. Those very points, and the trustee’s omission just referred to, were raised squarely by Mr Wilson SC at the commencement of his closing address before the primary judge. He submitted that the trustee did not deal with what was referred to as the “third and fourth steps” – that is the two discretions just referred to. Rather, he contended, the trustee’s submissions about wrongdoing and complicity by the wife were addressed solely to the issue of miscarriage of justice and the issue of the s 79A discretion was not addressed at all. Reference to the trustee’s Initiating Application, his written Outline of Case, and the oral submissions made on his behalf at the conclusion of the trial, establish that Mr Wilson SC’s submission is correct.

16. That raises the first of three central questions in this appeal shortly to be referred to. 

(c)      The Grounds of Appeal and the Appeal as argued

1. In my respectful view, the grounds of appeal, which can be seen set out in each of the judgments of Strickland J and Austin J, and the trustee’s written Summary of Argument, tended to obscure rather than illuminate the central assertions of error. 

1. For example, Grounds 1, 2 and 15 assert specific errors relating to two of the particulars by which the trustee sought to establish his circumstantial case of wrongdoing (directed solely to the issue of miscarriage of justice).[10]  Even if the specific assertions within the grounds are made out, they illuminate no error which would impugn her Honour’s order dismissing the trustee’s case.  In isolation, they mean little if anything. 

   [10]The date of the parties’ separation and the husband’s use of an address on immigration entry cards.

2. Ground 5 was, and is, difficult to understand.  Specifically, it was difficult to understand precisely what is contended to be the natural justice that was to be afforded to Mr S.  It is beyond doubt that he was not afforded natural justice in and about the making of the consent orders, but it is by no means clear how it is said that Mr S was not afforded natural justice in the process conducted by her Honour.  

3. Ground 4 asserts an error that is not an error at all. Contentions were made before her Honour that the S debt had not crystallised at the time of the consent orders. Her Honour found that it had. The trustee contends in Ground 4 that this is an error. In light of the uncontested facts earlier enumerated, the trustee’s contention (and her Honour’s finding) was, in my respectful view, each irrelevant to findings of miscarriage of justice or the s 79A discretion. In Biltoft and Biltoft[11] the Full Court held:

   The Family Court has always taken into account liabilities, not only liabilities which are certain or reasonably established but even those liabilities which are contingent and which have to be established…

   (Emphasis added)

   [11](1995) FLC 92-614 at 82,125.

4. The relevant issues for s 79A purposes was not whether the asserted debt had crystallised but, rather, the fact that a relevant Supreme Court claim had been made by Mr S and was awaiting determination; that he consequently had an interest in the Application for Consent Orders; that he consequently ought to have had notice of the proceedings and be heard if he chose but was not given that opportunity. As Biltoft makes clear, each and all of those considerations arise irrespective of whether the claimed debt had crystallised or not.[12] 

   [12]Judgment was in fact entered against the husband in the Supreme Court of NSW a week after the consent orders were made on 8 September 2011 in an amount, ultimately of $605,567.12 and he was additionally ordered to pay costs. 

5. Ground 13 and the trustee’s written argument asserts that, having found a miscarriage of justice by reason of “any other circumstance”, her Honour erred in not making any findings in respect of the trustee’s case of wrongdoing or collusion in concluding that there was a miscarriage of justice.  As I took Mr Alexander to ultimately concede, there is no error in her Honour doing so.  Having found miscarriage was established by reason of “any other circumstance” it was not necessary for her Honour to address the contentions of the trustee directed to any other ground; it is well established that the phrase “any other circumstance” is not to be read ejusdem generis with the various forms of wrongdoing that precede it in s 79A(1)(a).[13] 

   [13]See eg, Kokl and Kokl (1981) FLC 91-078 and the cases there cited; Rohde and Rohde (1984) FLC 91-592 at 79,768; Liu and Liu (1984) FLC 91-572 at 79,623.

6. Those and similar considerations led to exchanges between the Bench and counsel for the trustee by which it was sought to elucidate the true gravamen of the appeal and the error or errors alleged.[14]  As elucidated they can be seen as follows. 

   [14]If error is evident this Court is “authorised, and obliged, to discharge [our] appellate duties”: Fox v Percy (2003) 214 CLR 118 at [27]; Warren v Coombes (1979) 142 CLR 532 at 552.

7. First, it is contended that the trustee sought to prove a (almost wholly circumstantial) case of collusion by the wife in the husband’s wrongdoing in obtaining the consent orders[15] and that her Honour did not consider that case and make findings about it. Findings as to the circumstances underpinning that case were central to the s 79A discretion and her Honour therefore failed to make findings about, and thus consider, plainly relevant considerations.

   [15]Her Honour found at [57], that “it [was] more probable than not that the husband deliberately elected not to disclose information concerning Mr S in the Application for Consent Orders”.

8. Secondly, it emerged that the nature of any alleged failure of natural justice derives from her Honour’s finding that the wife should not be responsible for any part of the S debt.  That conclusion was a very significant matter in her Honour’s ultimate determination because, central to her Honour’s exercise of the discretion, was a finding that if the orders were set aside, the wife could only do better than what the consent orders provided. 

9. As I understood the argument as ultimately expressed, it was to the effect that any such determination required, at least, the opportunity for Mr S to be heard on that issue and to lead all such evidence as he might in relation to it. The argument continues that it is no answer to say that he could have led such evidence in the s 79A proceedings because the proceedings were bifurcated. As a consequence, it is said, the issue of which of the parties should bear what proportion of the S debt (and perhaps any other debts) was not joined in the proceedings before her Honour. Rather, the only relevant issue was the impact the opportunity for Mr S to present such a case in s 79 proceedings should have in exercising the s 79A discretion.

The Issues Engaged On The Appeal

1. By reason of the matters just discussed and reframed in what I understood to be, ultimately, the trustee’s assertions of error, the appeal falls to be determined by reference to three questions:

   a)If the trustee did not assert below that the contentions of wrongdoing and complicity of the wife were matters to be taken into account in exercising the s 79A discretion, is the trustee now entitled to so contend on appeal?

   b)If so, did her Honour in fact fail to make findings about relevant considerations and thus not take them into account in the exercise of her Honour’s discretion (and what is the impact of any such failure being induced by the manner in which the trustee ran his case)?

   c)Given that the proceedings were “bifurcated” did her Honour err by determining in the exercise of the s 79A discretion a matter relevant to a separate discretion, namely what s 79 orders should be made if the impugned consent orders were set aside?

Is The Trustee Precluded From Raising His Arguments?

1. “More than once it has been held by [that Court] that a point cannot be raised for the first time upon appeal when it could possibly have been met by calling evidence below”.[16]  It is “[o]rdinarily the pleadings” which “will be of assistance for it is one of their functions to define the issues so that each party knows the case which he is to meet”.[17] 

   [16]Water Board v Moustakas (1988) 180 CLR 491 at 497 (‘Water Board’) citing Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; Metwally v University of Wollongong (1985) 60 ALR 68 at 71; Coulton v Holcombe (1986) 162 CLR 1 at 7 – 8; O’Brien v Komesaroff (1982) 150 CLR 310 at 319.

   [17]Water Board at 497.

2. No form of pleadings is provided for in the hearing of family law claims and none were ordered in this case.  I propose to make some observations about that at the conclusion of these reasons.  For present purposes, the absence of pleadings necessitates reference being had to the documents otherwise filed by the parties and the manner in which the parties conducted their cases before the primary judge.  

The Issues joined in the Proceedings before the Primary Judge

1. In his Initiating Application the trustee sought final orders that the consent orders made on 1 September 2011 be set aside and that “the Court make another order under Section 79 in substitution for the order so set aside”. The orders sought, and the basis for them, were not otherwise particularised.

2. In the Outline of Case filed immediately prior to the commencement of trial, under the major heading “Legal Considerations”, the trustee asserted that the Application for Consent Orders “contains a number of false statements”[18] and that there were “striking dissimilarities between the Husband’s assets at the time of his Application for Consent Orders … and his Statement of Affairs”.[19]  The trustee’s outline thereafter lists seven matters under the heading “As to whether there was a miscarriage of justice”.  The trustee then addressed “consciousness of guilt” with respect to specific aspects of the consent orders. 

   [18]Outline of Case dated 25 February 2016, paragraph 21.

   [19]Outline of Case dated 25 February 2016, paragraph 22.

3. All assertions are directed to what might broadly be described as “wrongdoing” on the part of the husband and the wife’s asserted collusion in that wrongdoing. 

4. Nowhere within that document are those specific matters, or any other matter, directed to the separate question of whether, if a relevant ground and consequent miscarriage of justice is established, the court should exercise its discretion to, relevantly, set aside the consent orders.  Indeed, that separate topic is not addressed, in terms, at all. 

5. The rule precluding an appellant from relying upon matters on appeal that were not agitated in the proceedings below is not a matter of procedural “technicality” or sophistry; rather it is rooted in procedural fairness.  A party should not have to meet for the first time on appeal an issue which that party had no opportunity to meet with evidence or argument at the trial.[20] 

   [20]Water Board and the cases there cited.

6. Thus, “in deciding whether or not a point was raised at trial no narrow or technical view should be taken” and “it is necessary to look to the actual conduct of the proceedings to see whether a point was or was not taken at trial, especially where a particular is equivocal”.[21] 

   [21]Water Board at 497.

7. When referring to whether a “particular is equivocal”, the High Court is referring to the pleadings which, in one form or another, form part of ordinary civil litigation. In the context of family law litigation where no pleadings have been ordered, the “actual context” of the proceedings, which included the contents of the parties’ filed documentation and the manner in which the proceedings were actually conducted must be considered and must be considered in light of the fact that less formality and greater flexibility is accorded to the proceedings by the Act.[22] 

   [22]Family Law Act 1975 (Cth) s 97(3).

Unfairness to the Wife?

1. It is undoubtedly true that no delineation in accordance with the elements outlined in Patching was made by the trustee so as to rely upon the matters of impropriety and complicity as relevant to the exercise of the s 79A discretion. However, the wife’s affidavit evidence; her Case Outline; and the submissions made on her behalf did address, and address in detail, that central question.

2. The Case Outline, having set out the relevant principles by reference to Patching, made it clear that as well as establishing a relevant ground “[t]he onus is on the applicant to establish that the Court as a matter of discretion should proceed to set aside the order”.[23] The particulars of the trustee’s case were addressed in detail under two separate headings, “the debt owed to [Mr S]” and “the s.79 case”.[24] 

   [23]Wife’s Case Outline dated 23 February 2016, paragraph 7.

   [24]Wife’s Case Outline dated 23 February 2016, pp 9 – 13.

3. The wife had the opportunity to present, and did in fact present, evidence directed to the particulars of the trustee’s assertions (albeit they were directed to miscarriage of justice).  In his closing submissions below Mr Wilson SC carefully addressed the trustee’s assertions that the wife was complicit in a “conspiracy to defraud” by reference to ten specific matters, ultimately contending that “they don’t add up to a compelling case that this was the husband and the wife putting their heads together”.[25] 

   [25]Transcript, 1 March 2016, pp 118 – 120.

4. Despite the re-framing of the grounds as earlier described, Mr Wilson SC comprehensively and, with respect ably, addressed the trustee’s contentions as ultimately elucidated. 

5. In my view permitting the arguments advanced on appeal does not result in any procedural unfairness to the wife.  Nor, indeed, did Mr Wilson SC specifically contend before us that it did. 

Failure To Make Findings And Consider Relevant Matters?

1. It cannot be contended that her Honour was unaware of, or failed to consider, the trustee’s case that sought to particularise the circumstances of the wife’s asserted complicity.  Those matters were set out in the reasons in both the “Background” and under the heading “The Case for the Trustee”. 

2. Under the latter heading, having set out a number of the specific assertions made by the trustee at [49], her Honour said at [50]:

   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…

   (Emphasis added)

3. The emphasised passage suggests that, despite the manner in which the trustee had outlined and argued his case, her Honour apprehended that the trustee relied upon the enumerated circumstances as informing both miscarriage of justice and the s 79A discretion. Later in the reasons, when her Honour turned to a consideration of the parties’ respective cases, the particulars of the trustee’s circumstantial case were dealt with.[26]  They were dealt with as matters pertaining to the trustee’s case of miscarriage of justice, as indeed the trustee had argued. 

   [26][54] – [79].

4. However, her Honour plainly eschewed the making of findings about them.  Her Honour did so because she concluded,[27] with respect correctly, that the wife’s concession that miscarriage of justice was established rendered findings in respect of those circumstances otiose to that issue.  Her Honour then said at [82]:

   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.

   (Emphasis added)

   [27][80].

5. Plainly enough, her Honour recognised the prospect of the trustee’s circumstantial case of wrongdoing and complicity serving two (separate) purposes: informing miscarriage of justice and informing the s 79A discretion.

6. However it was, with respect, not only “some of” the particular matters raised by the trustee that “could” be relevant to the exercise of the discretion; the trustee’s entire case was framed as the husband and wife conspiring for an improper purpose which consciously abused the court’s processes. Whatever other matters might have been contended (by either party) as relevant to the exercise of the s 79A discretion, an asserted collusive abuse of the court’s processes and the consequent integrity of the impugned consent orders had to be at the forefront of them.

7. The trustee should have, with respect, so contended. His failure to do so did not assist her Honour. Yet, her Honour was plainly aware of the relevant particulars and their potential relevance to the issue of the s 79A discretion. When the circumstances raised by the trustee were said to impugn the integrity of court orders and the process which led to them, her Honour was in my view duty bound to make findings as to the trustee’s central contentions and to consider those findings in the exercise of the s 79A discretion notwithstanding the trustee’s failure to so contend specifically. In my respectful view, her Honour did not do so.

8. First, despite acknowledging that at least some of the matters raised by the trustee “could be” relevant to the exercise of the discretion, when her Honour turned to consider separately that issue (as her Honour with respect correctly, did), no mention is made at all of any of those matters, much less does her Honour make findings about them. 

9. Her Honour found at [85] that “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”.  If that be a finding that the wife was not complicit in an abuse of the court’s process as was alleged against her (and I do not, with respect, consider that it is), I do not consider, with respect, that her Honour’s reasons are adequate to explain how that finding is derived. 

10. In my respectful view, her Honour does not at all engage with, or make findings about, the inference/s said to emerge from the totality of the circumstances said to create the inescapable inference of collusion and wrongdoing contended for. 

11. For example, her Honour makes no finding as to whether the wife was lying when swearing to the date of separation in the Application for Consent Orders. To repeat: it was not necessary to do so in respect of a miscarriage of justice (despite the trustee’s contention to the contrary) but in my view it was necessary for her Honour to do so as a crucial component in deciding whether the wife had colluded in wrongdoing with the husband. That contention was an important element of the trustee’s overall case and, thus, an important element in considering whether a finding of collusive wrongdoing should impact upon the s 79A discretion.

12. Another important circumstance relied upon by the trustee was the wife’s evidence with respect to the cash payment she was obliged to make to the husband pursuant to the terms of the consent orders – a contention dealt with by her Honour at [74] – [77].  Earlier, at [41], her Honour referred to the wife’s evidence by which she contended that her obligation under the consent orders was discharged by 16 separate payments made between 9 August 2011 and 29 February 2012. 

13. The consent orders provided for the transfer of two properties within 28 days and that “contingent on and simultaneously with” those transfers:

    …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...

14. In fact, in respect of that obligation:

    ·On the wife’s own case, the payment did not occur within 28 days;

    ·The payment was not a single payment;

    ·It was not paid by bank cheque;

    ·The amounts allegedly paid by the wife did not involve a single payment of $55,000 but sixteen separate payments;

    ·Her Honour found that three of the payments said by the wife to comply with the orders, totalling $3,380 pre-dated the consent orders (at [75]);

    ·Her Honour further found that “[o]ne payment of $3,000 was allegedly made on 1 September 2011, which is the day of the making of the consent orders” and that “[p]ayments 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” (at [75]); and

    ·Further, her Honour found at [76]:

    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.

1. The trustee separately contended the primary judge misconstrued the relevance of some evidence related to the factual dispute over the spouses’ correct date of separation (Ground 2) but, since no finding was actually made about the timing of their separation by the primary judge, any misconception allegedly held by her Honour about some aspect of the evidence was immaterial. Grounds 1 and 2 should therefore fail.

The S debt (Grounds 3-9)

1. These grounds of appeal describe, in various ways, the trustee’s dissatisfaction with the primary judge’s findings about the S debt. In summary, his complaints are that the primary judge failed to find the wife deliberately omitted to disclose information about Mr S to the Court before the consent orders were made (Ground 3), erred by finding the debt did not crystallise until after the consent orders were made (Ground 4), failed to afford S natural justice (Ground 5), and erred by concluding the S debt should be borne exclusively by the husband, thereby allowing the wife to escape any liability for it (Grounds 6, 7, 9), or alternatively, erred by not setting the consent orders aside (Ground 8).

2. Mr S loaned money to a corporation controlled by the husband in January 2008, which loan was repayable in June 2010. When the money was not repaid, in October 2010, Mr S sued the husband personally in the Supreme Court of NSW. The husband defended the suit but, after a trial, judgment was entered in favour of Mr S on 8 September 2011. The property settlement orders were made between the spouses only one week before, on 1 September 2011. The contemporaneity of those events understandably piqued the trustee’s suspicion but did not, of itself, demonstrate any mischief on the wife’s part. She said, and the primary judge accepted (at [72]), the process of arranging their application for the consent orders started many months before.

3. The primary judge found the husband’s suppression of information about the S suit at the time the application for consent orders was made was probably deliberate (at [57]), but that did not necessarily reflect adversely upon the wife. Despite asserting in the appeal that the primary judge erred by failing to also find the wife “deliberately” suppressed information about the S suit when the spouses made their application for consent orders to the Court, the trustee did not ask for any such finding to be made at trial. On the contrary, the trustee eventually informed the primary judge it was unnecessary to make any finding about whether information pertaining to the pending S suit was suppressed as part of a “conspiracy to defraud” or “conscious wrongdoing”, in which event the wife’s intention was irrelevant. Consequently, his criticism of the primary judge for refraining from making the finding about the wife he told her Honour she need not make was a novel but unmeritorious appeal point.

4. The Court was undoubtedly ignorant of Mr S’s pending suit against the husband when the consent orders were made on the spouses’ application in 2011, and further, the wife conceded Mr S should have been notified of their joint application so he could then have applied to intervene in the proceedings to contest the proposed orders, had he wanted. Those omissions manifested the miscarriage of justice required to fulfil the first element prescribed by s 79A(1)(a) but, given the wife conceded the miscarriage of justice, the question whether her failure to appraise the Court of the pending S suit was deliberate, reckless, or unintentional was entirely otiose. There was a miscarriage of justice regardless. Ground 3 should therefore fail.

5. The trustee contended the primary judge was in error to find the S debt did not crystallise until 8 September 2011, but her Honour was correct to so find (at [57]). The debt was disputed in the Supreme Court, though the reasons why are now irrelevant because the husband’s defence failed at trial. The debt was therefore proven, but his liability for the debt did not crystallise until judgment was entered against him. Before then, the husband’s liability to Mr S was merely a contested allegation, but it ceased to be so upon the pronouncement of judgment. The judgment validated the liability and rendered it enforceable.

6. The wife gave evidence of her belief the husband would successfully defend the S suit, but the honesty of her belief was immaterial to the antecedent question of whether there had been a miscarriage of justice. Even though Mr S did not hold an enforceable judgment against the husband at the time the consent orders were made between the spouses, the wife conceded Mr S should have been informed of their application for the consent orders. In addition, the Court should have been informed of Mr S’s pending suit against the husband, so the Court’s judgment about the justice and equity of the proposed orders under s 79 of the Act was fully informed. Those omissions pointed inexorably to the finding about the miscarriage of justice. Ground 4 should fail.

7. Given the primary judge’s finding of the miscarriage of justice, so as to satisfy the first analytical step to engage s 79A(1)(a) of the Act, the trustee contended the primary judge erred by then “failing to provide natural justice to [Mr S] (and other creditors)”. The trustee was correct to observe that Mr S was entitled to be heard by the Court, had he so desired, when the consent orders were made in September 2011 – the omission of which (at least in part) caused the miscarriage of justice – but the manner in which the trustee articulated Mr S’s alleged deprivation of natural justice at trial in 2016 remained quite unclear. The trustee submitted Mr S was “entitled to seek an order that his debt be paid from the gross assets in priority to any adjustment of those interests between the parties”. Indeed, Mr S was entitled to seek an order to that effect, but at what point: in 2011 or 2016?

8. At trial in 2016, the judge found Mr S’s inability to participate in the s 79 debate before the consent orders were actually made in 2011 was intrinsic to the miscarriage of justice but, having made that finding, there could still be no contest in 2016 about the nature of any substitute property settlement orders between the spouses unless and until the primary judge subsequently found, in the exercise of her discretion, that the 2011 consent orders should be set aside.

9. The trustee contended opaquely in his written submissions:

   In not exercising her discretion to set aside the Consent Orders, and permit the Trustee to exercise that natural justice, her Honour compounded the miscarriage of justice which occurred in the failure to inform third party creditors of the application made in 2011 [sic].

10. Inferentially, the trustee’s submission amounted to no more than that the primary judge’s exercise of discretion under s 79A(1) to not set the consent orders aside resulted in the deprivation of Mr S’s entitlement to be heard on the question of the determination of fresh property settlement orders between the spouses. Assuming that was the point being made, it is without merit.

11. The husband was bankrupted in April 2012. When the sequestration order was made, his property vested in the trustee (s 58(1) of the Bankruptcy Act 1966 (Cth)). The trustee commenced the proceedings seeking relief in May 2013. He undoubtedly had standing to do so (s 79A(5) of the Act). However, since S’s debt was proven in the husband’s bankruptcy, he had no independent standing to commence the proceedings.

12. The object of the trustee’s application was to upset the spouses’ consent orders and to persuade the primary judge of the need to make fresh property settlement orders, in the hope of obtaining more property to satisfy the husband’s creditors than was available under the consent orders. The trustee was therefore representing the interests of the husband’s creditors in the proceedings and, to that end, the trustee called Mr S as a witness at the trial. Indeed, the trustee conceded in cross-examination that Mr S was funding his legal costs to prosecute the application before the primary judge. Mr S was therefore heard by the primary judge as a witness, but he could not have been heard by the primary judge as a party because he had no standing. His interests were represented by the trustee. In his representative capacity, the trustee adduced all evidence at trial he considered relevant to the disposition of the application under s 79A(1) of the Act. Neither the trustee nor Mr S was denied natural justice.

13. At least in part, the trustee’s flawed complaint about the denial of natural justice can be traced to his tactical procedural decision about how the trial should be conducted. His application before the Court was twofold: relief under s 79A(1)(a) of the Act and, consequentially, unspecified remedial relief under s 79 of the Act. Although the transcript reveals the issue was not expressly broached by the parties or the primary judge at the commencement of the trial, it is clear from the primary judge’s reasons that the trustee decided to conduct the trial by addressing only the first limb of his application; not the whole of it.

14. In her reasons, the primary judge remarked (at [50]), that if the consent orders should be set aside pursuant to s 79A of the Act then, in that event:

    …the Trustee proposed that trial directions should be made in relation to the substantive proceedings pursuant to section 79.

15. The primary judge correctly extracted that proposal from the trustee’s Case Outline, produced by him prior to trial and repeated in final submissions. There was no misunderstanding, since the trustee made a final submission to the effect that the proper time to address any question of costs would be:

    …in the section 79 proceedings rather than in these [proceedings].

16. Clearly, the trustee embarked upon the trial expecting the primary judge to make a separate threshold determination about whether the consent orders would be set aside and, if so, to then consider at some later time in a different hearing what other property settlement orders might be made in substitution for the discharged consent orders. Evidently, there would be no need for any supplementary hearing if the primary judge declined, in the exercise of discretion, to set aside the consent orders, which is what transpired.

17. The application of s 79A(1) entails a sequential stepped process. It is unwise, but not necessarily an error, to segregate the process into two isolated parts by first considering whether any miscarriage of justice is established and, if so, assuming the orders must be set aside, then later moving on in a separate inquiry to consider what orders should then be made. The discharge or variation of property settlement orders does not automatically result from the establishment of a miscarriage of justice (see Gitane & Velacruz (2008) FLC 93-371 at 464; Official Trustee in Bankruptcy v Donovan and Donovan and Stevens (1996) FLC 92-703 at 83,424; Patching and Patching (1995) FLC 92-585 at 81,796 – 81,799; Morrison and Morrison (1995) FLC 92-573 at 81,673; Prowse & Prowse (1995) FLC 92-557 at 81,565; Oastler and Oastler (1993) FLC 92-390 at 80,006). Features of the evidence that would influence the discretion exercised under s 79(4) of the Act, if substitute property settlement orders were to be made, may also motivate exercise of the discretion under s 79A(1) as to whether the existing property settlement orders should be set aside, varied or preserved. In fact, that will often be the case, in which event it is generally desirable to hear the entirety of the application at once. The avoidance of two hearings is also desirable to eradicate the possibility of contradictory findings resulting from different evidence elicited at the two hearings (see Gitane v Velacruz at 464; Patching and Patching at 81,798).

18. Significantly, the manner in which the trustee decided to conduct his case was neither induced by, nor agreed with, the wife or primary judge. The wife actually proposed the trustee’s s 79A application should be determined in its entirety. She submitted to the primary judge that the trustee failed to deal in his earlier submissions with all aspects of the s 79A(1) discretion, and in particular, failed to deal with her specific contentions about how the S debt might be quarantined as the husband’s exclusive debt and how she might receive more than her existing 51 per cent share of the property under the consent orders if, in the exercise of discretion, they were set aside and fresh property settlement orders made. But, even when expressly put on notice of the shortcomings in his submissions, the trustee did not attempt to rectify them in reply. Instead, he simply re-emphasised his submission about the miscarriage of justice, which the wife had conceded throughout.

19. The significance of the procedural course taken by the trustee at trial invited speculation in the appeal about whether he may, thereby, have been effectively precluded from adducing all available evidence which might have borne upon the primary judge’s exercise of discretion under s 79A(1) to retain or set aside the consent orders. But, even if the trustee had more evidence to offer in relation to the exercise of that discretion, the choice not to adduce it was voluntary and the choice not to address it in submissions in reply, when alerted to the lacuna, was voluntary. The trustee chose to bifurcate his application and persisted with that decision even when invited not to by the wife. Given the primary judge’s decision not to set the existing orders aside, he cannot be heard to complain now.

20. This situation was quite different to and may be distinguished from another recent case decided by the Full Court (see Pendleton & Pendleton (2017) 56 Fam LR 459 at [22] – [41]). In that case, consent orders were set aside, but substitute orders were then made without hearing further evidence from the parties when they had expected to embark upon a second hearing to contest the substitute orders. Understandably, those circumstances did create procedural unfairness. However, the trustee’s complaint about the denial of procedural unfairness in this case, as contended by Ground 5, is unfounded and should fail.

21. Although couched in various different ways, the trustee submitted the primary judge was in error to conclude the S debt should be borne exclusively by the husband. The primary judge concluded he should do so, but that was only one consideration which influenced the exercise of discretion to either set aside or retain the consent orders (at [83]), following upon the finding of the miscarriage of justice (at [80]). The significance of the finding about the husband’s responsibility for the S debt was that her Honour concluded, if the consent orders were set aside, then his share of the matrimonial property would not likely be materially greater once discretion under s 79 of the Act was re-exercised, which militated against the existing consent orders being set aside, irrespective of the miscarriage of justice (at [86] – [87]). However, other considerations motivated the primary judge’s exercise of discretion to retain the consent orders (at [90] – [94]).

22. The primary judge’s conclusion about the husband’s probable exclusive liability for the S debt was open on the evidence. The debt related to commercial dealings between the husband, his corporation, Mr S, and other third parties in Country Q that did not involve the wife. The trustee’s written submissions conceded “the transactions formed part of the business dealings of the Husband”. The wife was not privy to the Supreme Court litigation over the debt and so Mr S obtained judgment against only the husband. On the other hand, the loan was advanced during the spouses’ marriage and the husband’s commercial activities were designed to advance the spouses’ mutual financial interests.

23. The flaw in the trustee’s submissions was his implicit contention the primary judge was obliged to find the husband’s liability to Mr S should have been characterised as a “matrimonial debt”, for which the wife attracted joint liability, the effect of which would be to ensure full repayment of the S debt from the spouses’ joint and several property interests prior to any division of the residual net assets between them. The primary judge was not obliged to so find and was not in error to reach the conclusion the trustee finds objectionable. Another primary judge might have reached the different conclusion for which the trustee advocated, but her Honour was not mandated by the evidence or the law to do so.

24. In any exercise of discretion under s 79 of the Act, the primary judge is required to make orders that are just and equitable. Sometimes, justice and equity requires one spouse to bear exclusive liability for a debt incurred during the spouses’ relationship (see Puddy & Grossvard (2010) FLC 93-432 at [62], [101] – [111]; Trustee for the Bankrupt Estate of N Lasic v Lasic (2009) FLC 93-402 at [197] – [200]; Biltoft and Biltoft (1995) FLC 92-614 at 82,128 – 82-129; Prince and Prince (1984) FLC 91-501 at 79,076). In this case, in exercising discretion under s 79A(1) of the Act to determine whether or not to set aside the consent orders and replace them with fresh orders made under s 79, the primary judge concluded the husband would most likely bear exclusive liability for the S debt if the consent orders were set aside and fresh property settlement orders had to be considered. That conclusion was one reason why the primary judge concluded the existing consent orders should not be set aside. Since such a finding was open, there was no discretionary error and Grounds 6, 7 and 9 should therefore fail.

25. The trustee alternatively argued that, if there was no error in finding the husband should bear exclusive liability for the S debt, the primary judge erred in concluding “on that basis” not to exercise discretion to set aside the consent orders. The submission was misconceived for two reasons. First, the primary judge’s exercise of discretion to refrain from setting aside the consent orders was not based solely upon her conclusion the husband should bear exclusive liability for the S debt. Second, the trustee failed to submit, let alone demonstrate, that the reasons collectively given by the primary judge for the exercise of discretion in that way were erroneous. Ground 8 should therefore also fail.

Contributions (Grounds 10-11)

1. These two grounds of appeal were directed to findings allegedly made by the primary judge in relation to the spouses’ respective “contributions” in so far as they would be relevant to the exercise of discretion when making orders between them under s 79 of the Act.

2. Before discussing these grounds of appeal, it is instructive to understand the context in which the evidence was adduced at trial. The trustee initiated the proceedings to set aside the consent orders under s 79A(1) of the Act, which proceedings were defended by only the wife. The husband did not participate. The trustee adduced evidence from both himself and Mr S. Only the wife gave evidence in her case. Neither party attempted to compel the husband to give evidence. Accordingly, the history of the spouses’ relationship and their contributions was premised upon the wife’s evidence, much of which was entirely uncontroversial. Understandably, the trustee was in no position to contradict much of what she had to say.

3. The trustee contended the primary judge erred by making findings about the husband’s expenditure of funds in Country Q during the spouses’ marriage (Ground 10). Her Honour set out, by way of background (at [21] – [25], [40]), the wife’s evidence about the husband’s expenditure of funds in Country Q but, even if those stated facts are deemed to be factual findings rather than merely the recitation of discursive history, nothing turned on them. The consent orders ensured the husband received about 49 per cent of the spouses’ net property so, regardless of his past expenditure in Country Q, the spouses agreed their contributions and other considerations under s 79(4) of the Act warranted their broadly equivalent entitlements to the available property and superannuation when the consent orders were made between them in 2011. The trustee did not take issue with that proposition at trial and only did so in the appeal (Ground 11).

1. At trial, the factual controversy centred upon the wife’s alleged complicity in a scheme to defeat the husband’s creditors and, consequently, whether she should also bear some liability for the debts proven in the husband’s bankruptcy, and in particular, the S debt. The quantum of money spent by the husband during the marriage in Country Q to acquire, conserve, or improve property was conceivably relevant to that argument, but the primary judge’s acceptance of the wife’s evidence about the husband’s expenditure, notwithstanding the trustee’s complaint about her alleged failure to produce bank statements to verify his movement of such cash offshore, was not shown to be erroneous.

2. The primary judge was at liberty to accept the wife’s evidence, notwithstanding the trustee’s doubts about her veracity. If the trustee was sceptical about the wife’s evidence, he did not procure the bank statements to contradict her, either directly from the husband (of whom he was the trustee, with the array of power available under the Bankruptcy Act) or by subpoena to the banking institutions where the funds were held. The trustee’s criticism of the wife for her failure to produce the historical documents could be no stronger than the criticism that can be made of him for failing to procure them. The bank statements were as easily accessible to him as they were to the wife. All evidence must be weighed according to the power of one side to have produced and the power of the other to have contradicted (see Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at 454; Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 330). The trustee had as much power as the wife in that regard. Ground 10 should fail.

3. In exercising the s 79A(1) discretion, the primary judge was persuaded not to set aside the existing consent orders, the reasons given for which were: the husband would likely bear sole responsibility for the S debt and the trustee would therefore be no better off with fresh property settlement orders made between the spouses (at [85] – [87]); if fresh property settlement orders were made, the wife might receive more, but probably no less, than the 51 per cent share she received under the consent orders (at [88] – [89]); the trustee delayed institution of the proceedings for about a year after the husband’s bankruptcy (at [90]); and the significant change in the spouses’ circumstances in the years elapsed since the consent orders were made (at [91] – [93]). The trustee’s complaint that the primary judge erred in her assessment of the spouses’ respective contributions (Ground 11) bore upon only the second of those four reasons collectively given by the primary judge for not setting aside the consent orders.

4. The trustee asserted the primary judge’s conclusion, that there was “some force” in the wife’s submission that she might receive a greater share of the spouses’ property if the consent orders were set aside and fresh property settlement orders were then made in substitution (at [89]), was wrong because her Honour failed to properly balance the wife’s contributions with the husband’s “initial contribution” and the bequests later made to him by his parents. The trustee inferred on appeal, but did not actually say, the proper analysis of the spouses’ property entitlements would not result in the wife’s receipt of up to 60 per cent of the property, as the wife contended and the primary judge accepted.

5. The fatal impediment to the trustee’s submission was that he did not argue the point at trial. While the wife was asked in cross-examination to concede the quantum of money the husband received from his deceased father’s estate, which she did, no aspect of her cross-examination lay the foundation for any submission that her proportional entitlement to the spouses’ net property was less than she contended and, as already observed, no submission to that effect was ever made by the trustee. He did not engage with the argument advanced by the wife that she may do better, but certainly no worse, if the consent orders were set aside and fresh property settlement orders made. Given the trustee’s failure to address that particular issue at trial, both in evidence and during submissions, he cannot raise it now. Having regard to the evidence adduced by the wife and the submissions made by her, the primary judge’s conclusion about the spouses’ probable respective entitlements under any fresh property settlement orders was open and not demonstrably unsound. Ground 11 should fail.

Absence of findings and/or reasons (Grounds 12-15)

1. Grounds 12 to 15 inclusive were a collection of grievances about the primary judge’s alleged failure to make findings, or alternatively, failure to give reasons for the findings that were made.

2. Some of the complaints pertain to issues already discussed and rejected under other grounds of appeal and need no further discussion. Those complaints relate to the timing of the spouses’ separation (Grounds 12.1 and 15) and the wife’s alleged “conscious wrongdoing” (Ground 12.2).

3. The complaints not yet addressed relate to the detriment caused to the husband’s creditors by retention of the consent orders (Grounds 12.3 and 12.4), the primary judge’s failure to consider all aspects of the evidence once the wife conceded that the manner in which the consent orders were made resulted in a miscarriage of justice (Ground 13), and the failure of the primary judge to make adverse credit findings against the wife (Ground 14).

4. As to Grounds 12.3 and 12.4, the trustee submitted:

   54.Although her Honour indicated that the overall result might favour the Wife even more strongly than the Consent Orders if an adjustment of property interests were made under Section 79…, her Honour makes no finding in relation to the effect on the creditors of the Husband of the manner in which the interests of the parties were divided. Her Honour provides no reasons as to the weight she gave to those considerations in exercising her discretion under Section 79A, having found there was a miscarriage of justice.

   55.The failure of her Honour to give reasons and to make findings in relation to those matters amounted to an error of law.

5. The wife’s short submissions in reply were apt, providing in part:

   …the whole case was about that effect [upon the husband’s creditors of retention of the consent orders], and the primary judge’s reasons are replete with references to that effect…

6. The only point to the trustee’s application was to set aside the spouses’ consent orders, with a view to replacing them with fresh orders under which a greater share of the spouses’ assets were allocated to the husband, thereby making more property available to satisfy his creditors. That reality plainly did not escape the primary judge’s notice. It was the context in which the primary judge assessed the wife’s claim that, if the consent orders were set aside, she would do no worse and perhaps even better. The consequences of the decision to not set aside the consent orders were obvious. Left undisturbed, the orders provided for the husband to receive about 49 per cent of the spouses’ property and he bore exclusive liability for the S debt. The husband’s share of the spouses’ property under the existing consent orders vested in the trustee when the sequestration order was made in April 2012 and such property was available for the trustee’s use to satisfy the husband’s creditors, as was the husband’s after-acquired property and any income liable to sequestration under the Bankruptcy Act. If all of that property and income was insufficient for the trustee to satisfy all the proven debts, then the remainder of the debts would be unsatisfied and the husband’s discharge from bankruptcy would still eventuate. It could not be genuinely contended the parties and the primary judge were unaware of those consequences when the exercise of discretion as to whether the consent orders should or should not be set aside was debated. Grounds 12.3 and 12.4 should be rejected.

7. Ground 13 amounted to a complaint that the primary judge fell into error by finding there was a miscarriage of justice in reliance upon only the wife’s concession of it, without proceeding to then determine whether the miscarriage of justice was also proven by one or more of the other factual grounds upon which the trustee relied. The complaint was misconceived, as were the submissions made in support of it. To sustain the application for relief, the trustee bore the burden of proving that, for one or more of the recognised reasons under s 79A(1)(a) of the Act, a miscarriage of justice occurred. The wife alleviated that burden by admitting the miscarriage of justice, so the trustee no longer had to prove that element of his case. The wife’s concession of the miscarriage of justice was confined to the failure, by either spouse, to give S advance notice about their application for the consent orders, as the primary judge recorded (at [80] – [81]), but the fact the trustee contended there were additional reasons why the primary judge would find the miscarriage of justice established was not to the point. Once the miscarriage was established, it did not matter whether it was proven comprehensively or barely.

8. Whether the miscarriage of justice was slight, modest or egregious might make a difference at the next step in the process, but that was not overlooked. Having accepted the miscarriage of justice was established, the primary judge was then obliged to move on and consider whether, in the exercise of discretion, the consent orders should be varied or set aside and, if set aside, whether substitute orders under s 79 of the Act should then be made between the spouses. The primary judge correctly acknowledged that other features of the evidence emphasised by the trustee were relevant to the supplementary exercise of discretion (at [82]) and then went on to give adequate reasons for the exercise of her discretion to not set aside the consent orders (at [83] – [94]). Importantly, the trustee chose not to engage with that separate argument. It was clear from both his Case Outline and his final submissions at trial that he focussed entirely upon the preliminary question of establishment of a miscarriage of justice. Ground 13 should fail.

9. Ground 14 averred the primary judge erred by failing to make “adverse credit findings” against the wife in the face of a series of asserted factual discrepancies which, it was submitted, demonstrated instances of her lack of veracity. The trustee blandly submitted the primary judge “ought to have made credit findings adverse to the Wife”, but he omitted to explain why. There is no utility in attacking the credit of parties or witnesses at trial unless there is a point to be served. In this case there was no point because the wife conceded the trustee could prove the miscarriage of justice, so the only live issue was whether the consent orders should have been set aside. The reasons given by the primary judge for deciding not to set aside the consent orders did not hinge upon acceptance of the wife as a credible witness. Rather, they related principally to questions of law and uncontentious facts about the husband’s responsibility for the S debt, the spouses’ likely entitlements under any fresh property settlement orders, the trustee’s delay instituting the proceedings, and the spouses’ changed circumstances over the intervening years since the consent orders were made. By his own choice, the trustee did not confront those arguments in final submissions. He ran his case to prove the miscarriage of justice, which the wife conceded all along. While the trustee might have been fixated upon the wife’s veracity, the primary judge quite properly was not. Ground 14 should fail.

Conclusions and costs

1. In my view, the appeal should be dismissed.

2. I also consider the trustee should pay the wife’s costs of the appeal on a party/party basis in the sum agreed or assessed. The ordinary rule under s 117(1) of the Act should not apply. The appeal was conducted for the benefit of a third party and was (in my view) wholly unsuccessful. While the trustee was fulfilling a statutory function for the benefit of creditors, the prosecution of his application at trial was funded by Mr S. Whether the same funding arrangement applied to the appeal remains unknown. However, the wife submitted, without contradiction, that Mr S was the only creditor to prove in the husband’s bankruptcy. Without implying any impropriety by the trustee, he conducted these proceedings for Mr S’s benefit at Mr S’s cost. The trustee should bear the wife’s costs of the appeal and any indemnity as between the trustee and Mr S is a matter for them.

I certify that the preceding two hundred and eighty-two (282) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Murphy & Austin JJ) delivered on 26 February 2018.

Associate: 

Date:  26 February 2018