Failure to Disclose Debt May Jeopardise Consent Order

A recent finding of the Full Court of the Family Court of Australia serves as a timely reminder that a failure to disclose an asset or debt in a consent order may result in orders being set aside, regardless of whether that asset or debt is in the name of an individual, or the name of an ex-partner.

In the matter of Trustee of the Bankrupt Estate of Hicks & Hicks and Anor [2018] FamCAFC 37, the court was required to determine whether an appeal should be allowed on the basis that the primary judge erred in dismissing an application to set aside consent orders.

Specifically, the case involved Mr and Mrs Hicks, a husband and wife who, during their marriage, had acquired a number of properties between them. Mr Hicks also engaged in a number of business ventures, including a commercial deal to secure a $560,000 investment by Mr S in an enterprise known as U Pty Ltd.

Following their divorce, the couple filed an Application for Consent Orders for property settlement, in which neither party disclosed any liability to Mr S or identified him as a person who may be entitled to become a party to the case – something the application required.

Consequently, the Trustee of the Bankrupt Estate sought to have the final consent orders set aside.

At first instance, Mrs Hicks asserted that although there was a miscarriage of justice, the consent orders should not be set aside. The primary judge found in favour of Mrs Hicks, concluding that the debt was not incurred for a matrimonial objective and thus ruling that she had no involvement in Mr Hicks debt to Mr S. His Honour also contended that the trustee of bankruptcy would find itself in no better position if the order were set aside.

At trial, the Trustee subsequently argued that the consent orders should be set aside. In doing so, the Trustee asserted that the parties to the consent orders had sought to defeat a creditor by not disclosing that Mr S was suing Mr Hicks for $606,000 or notifying Mr S of the orders they proposed.

Thus, the court concluded that the Trial Judge had not taken into account the likely outcome of the property settlement proceedings in the event that the orders were set aside. Ultimately, the court held that the debt of $606,000 was incurred during the marriage and the projects which were linked to the loan were intended to benefit the marriage. On these grounds, the court allowed the appeal, ordering the proceeding be partially remitted for rehearing on the basis that there was a miscarriage of justice pursuant to s79A(1)(a) of the Family Law Act 1975 (Cth).

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