Trustee of the Bankrupt Estate of Hicks & Hicks and Anor [2018] FamCAFC 37 was an appeal against a decision declining to set aside final property orders made by consent under section 79 of the Family Law Act 1975 (Cth) (the Act). The trustee succeeded at appeal in obtaining a rehearing, at which orders were ultimately made to set aside the final property order.

The case is of interest as the orders were made at the rehearing in the trustee’s favour despite the non-bankrupt wife not being found responsible for the debt the bankrupt was seeking to avoid, and the difficulties faced by the trustee despite the highly suspicious circumstances in which the final property orders were consented to.

 

Background

On 1 September 2011, final property orders were made, by consent, under section 79 of the Act as to the respective property interests of Mr and Mrs Hicks (‘Hicks’ being a pseudonym) the day before their divorce on 2 September 2011 (the Consent Orders).

On 8 September 2011 judgment was entered in the Supreme Court of New South Wales for Mr Hicks to pay one of his creditors $600,000 (the $600k Debt).

On 3 April 2012, Mr Hicks filed a debtor’s petition with the trustee being appointed on 10 April 2012. Mr Hicks failed to disclose the $600k Debt to the Court when the Consent Orders were made or to the trustee in his Statement of Affairs.

 

Judgment below

At first instance 10 June 2016 in Trustee of the Bankrupt Estate of Hicks & Hicks [2016] FamCA 462 Mr Hicks’ trustee in bankruptcy’s application under section 79A of the Act to set aside the Consent Order was dismissed by Justice Stevenson.

In declining to exercise her discretion to set the Consent Order aside, Stevenson J accepted Mrs Hicks’ claim not to have been involved in Mr Hicks’ overseas investment which was relevant to the $600k debt. Her Honour also took into account Mrs Hicks’ superior home making skills and financial contribution to the household finances, and Mr Hicks’ overseas absences in determining that if the Consent Orders were set aside and a different order were made, it should be no less favourable to Mrs Hicks.

 

Appeal

On 26 February 2018, inTrustee of the Bankrupt Estate of Hicks & Hicks and Anor [2018] FamCAFC 37 Strickland and Murphy JJ (Austin J dissenting) allowed the appeal by Mr Hicks’ trustee in Bankruptcy, requiring a rehearing by a different judge.

Strickland J found that Stevenson J had overlooked the importance of the date of separation, Mrs Hicks’ knowledge of the $600k Debt and the failure to disclose it to the Court when exercising her discretion not to set aside the Consent Orders. His honour found that Stevenson J’s finding that Mrs Hicks’ was not involved in Mr Hicks’ overseas investment was not reasonably open as Mr Hicks had made a number of payments to the couple’s joint account while overseas.

Strickland J also found (at 98) that Mrs Hicks’ contributions to the relationship were irrelevant to the application under section 79A of the Act as to whether there had been a miscarriage of justice.

While Murphy J agreed with Strickland J, he was critical of the Trustee’s reliance upon circumstantial evidence (at 133) and failure to more fully particularise his case (at 220) as potentially having necessitated an otherwise avoidable appeal. Austin J (in dissent at 267) was also critical of the trustee’s failure to produce statements to contradict Mrs Hicks’ evidence regarding Mr Hicks’ expenditure.

Where the majority of successful grounds for appeal were based on the primary judge’s failure to make necessary findings, the matter was remitted to a different judge for rehearing on the basis of the conceded miscarriage of justice pursuant to section 79A of the Act (at 122).

 

Rehearing

At rehearing on 27 September 2019, in Trustee of the Bankrupt Estate of Hicks & Hicks and Anor [2019] FamCA 695, both parties were able to rely on further affidavits and the appeal books. Loughnan J proceeded most relevantly to order Mrs Hicks to pay the trustee $638,217, corresponding roughly with the $600k Debt. This was despite his Honour finding Mrs Hicks not to be responsible for the $600k Debt, holding rather that:

‘it is not possible to identify a just and equitable settlement of property between the husband and the wife but in my view a conservative exercise of discretion would allow to the husband sufficient property settlement to discharge the bankruptcy debts’

It has often been the case that insolvency practitioners have found it difficult to recover assets for the benefit of creditors in the face of settlements of proceedings in the Family Court. This recent authority however suggests that such attempts can be worth making.