Rebecca Chan and Anor v Robert Acres and Anor

Supreme Court of NSW|2013-10-17|Before: Kunc J

Summary 1The issue in these proceedings is whether a family law property settlement made between the defendants ("Mr and Mrs Acres") should be set aside as a fraud on creditors under s 37A of the Conveyancing Act 1919 (NSW) (the "CA") or set aside or varied under s 79A of the Family Law Act 1975 (Cth) (the "FLA"). 2Mr and Mrs Acres commenced living together in a de facto relationship in 1987. In 1988 Mr Acres was retrenched from his employment and has not worked full time since then. Mr and Mrs Acres married in 1989. Mrs Acres, a successful businesswoman, was the principal breadwinner throughout their marriage. 3In November 2007 Mr and Mrs Acres bought a house in Wahroonga (the "Wahroonga Property") with the intention of renovating it. Mr Acres became the owner-builder for the purposes of the Home Building Act 1989 (NSW) (the "HBA"). Having completed the renovations, the Wahroonga Property was sold to the plaintiffs in May 2010. Within a month the plaintiffs began complaining to Mr Acres about alleged defects in the Wahroonga Property. Those complaints culminated on 14 February 2012 when the plaintiffs filed a statement of claim in the District Court of New South Wales claiming $323,254.82 plus interest and costs against Mr Acres and Alpha Building Services Pty Ltd ("Alpha"), the company which they had retained to carry out their pre-purchase inspection of the Wahroonga Property (the "District Court proceedings"). 4As it happened, several weeks earlier on 2 January 2012 Mr & Mrs Acres separated. They continued to live separately at their home at Killara (the "Killara Property"), which they decided to sell. 5On 18 September 2012 the Family Court made consent orders for the sale of the Killara Property (of which Mr Acres was a joint tenant) and for Mr Acres to receive 23% of the net proceeds. The Killara Property did not attract the interest for which Mr and Mrs Acres had hoped and it remained unsold by the end of 2012. It nevertheless continued to be listed with an agent. 6By March 2013 Mr Acres needed money to pay the legal bills he was incurring in defending the District Court proceedings and for general living expenses. He asked Mrs Acres to buy him out of his share of the Killara Property. 7On 5 May 2013 the Family Court made further consent orders (the "consent orders" varying those which had been made in September 2012. By those orders Mrs Acres was required to pay Mr Acres $250,470, in return for which he transferred to her all of his interest as joint tenant in the Killara Property. That is what occurred. The Family Court's orders on both occasions were made without the knowledge or consent of the plaintiffs. 8The plaintiffs submit that Mr Acres transferred his interest in the Killara Property with the intent to defraud creditors, including future creditors such as themselves if they succeeded in the District Court proceedings. They seek to have the transfer avoided under s 37A of the CA. Alternatively, they submit that they are persons affected by the consent orders and that there has been a miscarriage of justice because Mr and Mrs Acres did not disclose the District Court proceedings to the Family Court. In those circumstances they seek an order under s 79A of the FCA setting aside or varying those orders, including a declaration that Mrs Acres holds the Killara Property on trust for herself and Mr Acres in equal shares. 9Both of the plaintiffs' claims fail. They have not proved that Mr Acres alienated his interest in the Killara Property with an intent to defraud creditors. Furthermore, the Court is not satisfied that the making of the consent orders caused a miscarriage of justice requiring them to be set aside or varied.

The facts 10Mr and Mrs Acres met in 1984. At the time Mrs Acres was married. Mr Acres holds a Mechanical Engineering Diploma and was working in air conditioning and computer companies. Mrs Acres holds a Business Degree and owned a number of businesses. 11In 1987 Mrs Acres separated from her then husband. Under the property settlement she received approximately $450,000 from the sales of a jointly held business and their former matrimonial home. Shortly after, Mr and Mrs Acres began living together. 12In June 1988 Mr Acres was made redundant. He has not worked in full time employment since then. 13Mr and Mrs Acres married in June 1989. Throughout their marriage Mrs Acres was the sole income provider for their family. Mr Acres made no financial contributions in relation to the various properties which he and Mrs Acres owned during the course of their marriage. 14Mrs Acres initially owned a catering business known as Royce Rolls. In 1990 she sold this business for approximately $30,000. 15In May 1990 Mr and Mrs Acres' son Robert was born. Mrs Acres was the primary carer of Robert although Mr Acres assisted with collecting him from childcare and later from school. Mrs Acres was also the primary carer of the children from her first marriage. 16Mrs Acres' eldest daughter died in January 1994. Subsequently, Mrs Acres sold her fruit market business and catering business and received approximately $60,000 for both businesses. 17In 1996 Mr and Mrs Acres, along with Robert and Mrs Acres' daughter from her first marriage moved to the United Kingdom. They bought a house in the Midlands (the "Midlands Property") for £105,000 using the proceeds of sale from the fruit market business and the catering business and a loan from Barclays Bank. Mrs Acres renovated the Midlands Property with little or no assistance from Mr Acres. 18In 1997 Mrs Acres started a plastic assembly business. She bought a commercial building for approximately £100,00 in which to operate the business known as "Jara Assembly". 19In 2002 Mr and Mrs Acres sold the Midlands Property for £420,000. Mrs Acres also sold the commercial premises of Jara Assembly and the business itself for £250,000. Mr and Mrs Acres and Robert returned to Australia that year. 20In 2003 Mrs Acres opened a lingerie store on Oxford Street, Paddington, known as "Miss Amour". Mrs Acres developed the basement of the store into a beauty and hairdressing salon. In November 2007 Mrs Acres sold this business for $135,000. 21In April 2003 Mr and Mrs Acres purchased a property in East Killara (the "East Killara Property") for a purchase price of $1,875,000. They lived there with Robert until June 2010. The purchase price was paid for using the proceeds of sale from the Midlands Property, Jara Assembly and its premises. Mr and Mrs Acres also took out a mortgage from Westpac Bank for approximately $400,000. This was later refinanced through the National Australia Bank. 22In 2007 Mr and Mrs Acres purchased the Wahroonga Property for $875,000 with the intention of renovating it for Robert to live in. The Wahroonga Property's purchase was funded by the sale of Mrs Acres' lingerie business, a mortgage from ANZ in the sum of approximately $600,000 and an increase in the National Australia Bank mortgage secured over the East Killara Property. The Wahroonga Property was a 3 bedroom cottage with an enclosure that had been built on the back. 23In April 2008 Mr and Mrs Acres sought and were issued with the development consent for alterations and additions to be made to the Wahroonga Property. Mr Acres also obtained an owner-builder's licence and Mrs Acres assisted in finding qualified tradesmen to assist with the works. 24In November 2008 Mr and Mrs Acres purchased the Killara Property for $1.25 million. To fund the purchase price, Mr and Mrs Acres increased the mortgage from the National Australia Bank to $1.9 million and the mortgage with Westpac to approximately $760,000. The Westpac mortgage was secured over the Killara Property and the National Australia Bank mortgage was secured over the East Killara property. 25In January 2009 Mrs Acres' mother died. Her father died later that year and she received an inheritance of $320,000. 26The construction works at the Wahroonga Property were completed during 2009. However, in August of that year strong winds caused a large gum tree to fall onto the roof of the Wahroonga Property. Mr and Mrs Acres lodged a claim with the NRMA in relation to damage caused by the tree to the property. CC Pines Pty Limited on a document entitled "Scope of Works" listed the damage caused to the Wahroonga Property by the fallen tree. They were to repair this damage. Mrs Acres signed the document. 27In early 2010 CC Pines Pty Limited completed the repairs to the Wahroonga Property. Mr and Mrs Acres and Robert then began living there. While living there Mrs Acres did not observe any problems with the alterations, additions and repairs made to the property. 28In early 2010 the plaintiffs became interested in purchasing the Wahroonga Property. Alpha issued a building inspection report to the plaintiffs on 16 March 2010. On 30 March 2010 the plaintiffs and Mr and Mrs Acres exchanged contracts for the sale of the Wahroonga Property for $1,295,000. 29The sale of the Wahroonga Property to the plaintiffs was completed in May 2010. Following the discharge of the mortgage to ANZ and the legal costs and disbursements, the net proceeds of sale from the Wahroonga Property were approximately $400,000. 30Mr and Mrs Acres and Robert moved to the Killara Property because the East Killara Property was rented. Robert later moved to the United Kingdom. Mrs Acres was paying off the mortgage over that property using the money she had received from her father's estate. 31On 4 June 2010 Mrs Acres spoke to one of the plaintiffs, who said words to the effect that "there's water entering the house from the roof and water is coming into the study, into the kitchen and our bedroom". Mrs Acres responded with words to the effect "I'm not sure why that is, but you should ring the NRMA as they fixed the roof after a tree fell on it and arrange a time for them to come out and look at it since they fixed the roof". 32Between June and November 2010 Mr Acres received six letters from the Plaintiffs alleging incomplete and defective work by Mr Acres as the owner-builder of the Wahroonga Property. 33In April 2011 Mr and Mrs Acres listed the East Killara Property for sale. The mortgage on the East Killara Property was over $1.9 million. At the time Mrs Acres was not working and could not afford to service the mortgage. The property was sold for approximately $2.6 million. All of the proceeds of sale were used to service the National Australia Bank mortgage secured over the East Killara Property and to pay off Mrs Acres' credit cards. 34In October 2011 Mrs Acres collected a folder from Emerson & Emerson Lawyers containing a report addressed to Mr Acres as the owner-builder of the Wahroonga Property setting out the plaintiffs' claims. 35On 2 January 2012 Mr and Mrs Acres separated. They had a conversation in which Mr Acres said that he could not afford to move out. Mrs Acres said that they would have to sell the Killara Property and then do a property settlement. From January 2012 until the date of these proceedings Mr and Mrs Acres have continued to live in the Killara Property in separate bedrooms. 36In or around February 2012 Mr Acres told Mrs Acres that his lawyer was discussing settlement proposals with the plaintiffs' lawyers about a claim relating to the Wahroonga Property. Mr Acres doubted that the claim would go anywhere. 37On 14 February 2012 the plaintiffs commenced the District Court proceedings. The Statement of Claim sued Mr Acres for alleged breaches of statutory warranties under the HBA and Alpha in contract and negligence in connection with its pre-purchase report. It was alleged, inter alia, that if Alpha had performed its duties properly and reported the alleged defects, the plaintiffs would not have bought the Wahroonga Property. The plaintiffs claimed the same damages against both defendants. 38Mr Acres informed Mrs Acres of the District Court proceedings and told her that his legal advisers believed it to be without substance and inflated as against him. 39In May 2012 Mr Acres received a Scott schedule from the plaintiffs claiming $402,012. He formed the view that much of their claim was for works not the subject of the alterations and that the remainder could not be worth more than $20,000. He expressed this belief to Mrs Acres. 40Mr Acres filed his defence in the District Court proceedings on 4 June 2012. 41In May 2012 Mrs Acres listed the Killara Property for sale with Richardson & Wrench Gordon. She said to Mr Acres words to the effect that "I feel we need to do a property settlement and have a clear break. I've been looking at the Family Court website and it tells you how to calculate a property settlement. So I've done some calculations which are these: if this property is worth $2.6 million and we deduct all my net assets, then what I had when we first started living together and my inheritances plus the money that mum and dad gave me over the years, that amounts to $920,000. Then we deduct our mortgage of $760,000 and the costs associated with selling the property. I come up with a figure for your contribution to the property equal to 23%. I think that's fair". Mr Acres then said words to the effect "I suppose that's fair. I'm also happy for you to prepare whatever documents you need and I will sign them". 42Mrs Acres began preparing the Application for Consent Orders for the property settlement which she had downloaded from the Family Court website. This included a question "is there any person who may be entitled to become a party to the case under Subsection 79(10) or subsection 90SM(10) of the Act". She looked up those provisions on the internet. In relation to the plaintiffs she formed the view that they were not creditors of Mr Acres and accepted his advice that if they did have a claim against him, it was only for a small amount. Therefore she answered that question "no". 43The consent orders which Mrs Acres prepared ordered that Mrs Acres was to pay Mr Acres $208,000 upon sale of the Killara Property. On the Family Court application she gave a value for the Killara Property of $2.6 million subject to a mortgage of $720,000. Mr and Mrs Acres signed the proposed orders on 6 July 2012 and she attended to filing them in the Family Court. 44On 5 July 2012 Mr Acres received an email from his solicitor: "The good news is that our expert is strongly of the opinion that the 'damage' suffered by Chan and Cox is vastly less than what has been claimed. On one analysis, he would place the rectification work at less than $30,000 (on a preliminary basis). On another analysis (strict compliance with the BCA) it may be more, but still significantly less than $300,000." 45On 11 July 2012 Mr Acres told Mrs Acres that the building expert had examined the Wahroonga Property and confirmed his view that the plaintiffs' claim was massively inflated. The building expert advised that it would cost less than $30,000 to fix all the matters claimed by the plaintiffs. The next day Mr Acres met with the expert and was informed that the repairs would be worth between $9,000 and $16,000 and advised Mrs Acres of this. 46On 11 July 2012 the Family Court wrote to Mr and Mrs Acres saying that the application for the consent orders had been declined for what can be summarised as technical and drafting reasons. Mrs Acres made arrangements to consult a Legal Aid solicitor as to the form of the proposed orders. 47With the benefit of legal advice Mrs Acres resubmitted the application on 17 September 2012. 48On 18 September 2012 the Family Court made the consent orders providing for the sale of the Killara Property with Mr Acres to receive 23% of the net proceeds. 49The Killara Property was listed for auction on 13 December 2012 with Century 21 but was withdrawn for lack of interest. It had been advertised as being valued in the mid $2,000,000 range but had only elicited one verbal offer of $2,200,000, which Mrs Acres was not prepared to consider. 50In January 2013 Mr Acres' expert provided a written report estimating the cost of the repairs required to meet the plaintiffs' claim to be $9,895. 51In the course of preparing for a mediation, the plaintiffs became aware in February 2013 that the Killara Property was listed for sale. On 27 February 2013 their solicitor wrote to Mr Acres' lawyers proposing undertakings or consent orders to the effect that if there was a sale, $323,254.82 (the then amount of the plaintiffs' claim) be set aside and held in a trust account pending determination of the District Court proceedings. The letter gave 1 March 2013 as the deadline for a response and threatened a motion for a freezing order under UCPR 25.11. 52On 4 March 2013 the solicitor for Mrs Acres became aware of the orders that had been made by the Family Court a few months earlier. 53After agreement could not be reached, on 5 March 2013 the plaintiffs filed a motion in the District Court proceedings against Mr and Mrs Acres for relief including: 1. Pursuant to r 25.11 (1) UCPR, and upon the plaintiffs, Warren Cox and Rebecca Chan, by their counsel, giving to the Court the usual undertaking as to damages, the Court orders that the first defendant/first respondent and second respondent (Jan Acres) by themselves, their servants and agents, shall lodge with the Court the net proceeds of sale of any of the real property known as 1 Kalang Avenue Killara in the state of New South Wales, after payment of mortgagees and secured creditors, outstanding council and water rates, and reasonable legal and agency costs of the sale, pending determination of these proceedings and/or further order of this Court. Any amount otherwise payable to the second respondent Jan Acres as a result of orders made in the Family Court of Australia shall be included in the net proceeds of sale to be paid into this Court, including in circumstances where that amount has been secured by way of a mortgage over the property. 2. The first defendant/first respondent and second respondent (Jan Acres), or their legal representatives, in respect of the sale of any of the real property referred to in (1) above, shall within seven (7) days after completion of such sale: · Pay the net proceeds of sale (as defined above) into Court; and · Forward to the plaintiffs legal representative copies of: i. The court's receipt in respect of the monies so paid; and ii. The Settlement statement. 54The plaintiffs also issued notices to produce to Mr and Mrs Acres seeking copies of the Family Court's orders. Mrs Acres' solicitor told the plaintiffs' lawyer that they were in the wrong court and that relief should be sought in the Family Court. In a letter dated 8 March 2013 the plaintiffs' solicitor wrote to Mr and Mrs Acres' respective lawyers: It is our clients' intentions to resolve these issues without the need for further applications to the Family Court of Australia, hence the seeking of your clients' voluntary disclosure of information/documents. In the events that your clients do not consent to release the documents requested in the Notices, then we anticipate receiving instructions to commence s 79A proceedings in the Family Court of Australia, with the first order to be sought being access to the Courts file. 55The motion was heard and determined by Judge Olsson on 13 March 2013. The plaintiffs were unsuccessful. In relation to Mrs Acres it was dismissed by consent with an order that her costs be paid in the sum of $9,000. In relation to Mr Acres the relief sought in the motion was not pressed. Instead orders were sought "that subject to the plaintiffs giving the usual undertaking as to damages, the defendants give the plaintiffs notice of any sale [of the Killara Property] including sale price, likely mortgage payout, likely amount payable to the second defendant and a copy of the sale contract within (sic) four weeks notice as to settlement" (p2 of her Honour's reasons). 56In the course of address, counsel for the plaintiffs made the following submissions (T23:40-24:8; T25:48-26:12): So your Honour in summary, what I would say is that the plaintiffs' case is more than arguable considering the evidence that has been served supporting the allegations having been made, and there does not appear to be a dispute that the claim is brought in a regular manner against an owner/builder who has obligations under the Home Building Act equivalent to a licensed builder. The debate as is often the case in these sort of matters is really in relation to the extent of defects and their scope. Now, your Honour, we would concede that the amount sought in the latest Scott schedule being $320,000 odd is an amount that is in relation to both the claim against Mr Acres and the pre purchase inspector and there is yet to be a strict division between those two defendants as to who would be responsible for what exactly, depending of course on how the Court looked at whether or not for example the owner/builder were responsible for defects that you might describe as latent, for example, versus those that are patent; that may be ones that depending on the view that the pre purchase inspector took of them, and whether or not they were reported on for example, might fall within his scope of liability. Nonetheless, the claim against the - well, either party is substantial and arguable and that's all I can say in relation to that aspect of the application. ... Your Honour, on that basis, we took the view that if the sort of estimates that Mrs Acres had provided in relation to the level of debt over the property, debt that her husband had to her and the value of the property, that even with a 77/23% split of the net sale proceeds, the utility of our client pursuing orders in either the Family Court in relation to an application to set aside the 79 orders that were made or alternatively under 37A of the Conveyancing Act, may be of no utility, and hence the reason why the nature of the orders when you look at them are really not freezing anything but they are an ancillary step to perhaps making that application at some point in the future. It's our position that if the sale proceeds in an ordinary manner, at or about the price that the property is advertised for, well, then we would in all likelihood not pursue applications to set aside either the orders under 79A or the agreement for those orders to be made as an alienation of property under s 37A of the Conveyancing Act. 57Judge Olsson was referred to the plaintiffs' contention that they were entitled to notice of the application that had been made in the Family Court but that point did not ultimately play a part in her Honour's reasoning. However, one of the reasons why her Honour dismissed the plaintiffs' motion against Mr Acres with costs was her finding (judgment p 12) that while the plaintiffs had a good and arguable case "there is nothing to suggest to me that [Mr Acres] is endeavouring to get rid of assets in order to avoid the consequences of a judgment debt". 58Also during March 2013 Mr Acres said to Mrs Acres: "Jan, I need money to pay my legal costs. My lawyer has told me that if I don't pay his fees he can't continue to act for me. The hearing is in June and I need money now. Can you buy me out of my share in the property?". 59In late March 2013 Mrs Acres sought legal advice as to whether she could pay out Mr Acres in accordance with his request. Her lawyer proposed that the earlier orders be varied so that in return for a payment representing the value of his interest, Mr Acres would transfer his interest in the Killara Property to Mrs Acres. 60On 2 April 2103 a further Family Court Application for Consent Orders was filed with that court. As had occurred in relation to the earlier orders, the question on the form about anyone being entitled to become a party was answered in the negative. Both Mr and Mrs Acres felt vindicated by the dismissal of the plaintiffs' District Court motion and thought that had resolved the question of any entitlement which the plaintiffs may have had to be privy to the final resolution of their (Mr and Mrs Acres') marital affairs. The further application maintained the 77/23 split which Mr and Mrs Acres had earlier agreed. No doubt due to her inability to achieve a sale in accordance with her earlier expectations (see paragraph 49 above), the value of the Killara Property was given as $1,800,000 subject to a mortgage of $711,000. 23% of that unencumbered value was $250,470. 61On 6 May 2013 the Family Court made the consent orders. 62On 15 May 2013 the plaintiffs filed an application in the District Court proceedings to vacate the hearing dates that had been fixed in June on the basis the plaintiffs' claim had increased beyond $1,000,000. 63On 17 May 2013 a settlement took place at which Mrs Acres paid to Mr Acres $250,470 and he transferred all of his right, title and interest in the Killara Property to her. 64On 20 May 2013 Mr Acres repaid from the money he had received $87,618.00 which was owing to Mrs Acres for Mr Acres' legal bills, credit cards and living expenses which she had paid on his behalf. 65On 22 May 2013 his Honour Judge Balla acceded to the plaintiffs' application to vacate the hearing date that had been fixed for the District Court proceedings. 66On 28 May 2013 the plaintiffs' solicitor became aware that Mr Acres had transferred his interest in the Killara Property to Mrs Acres pursuant to the consent orders. 67These proceedings were commenced with the filing of a statement of claim on 31 May 2013. The original statement of claim referred only to the consent orders and relied only on s37A of the CA. 68On 2 July 2013 the District Court proceedings were transferred to this Court. The plaintiffs' now claim $1,142,936.69 and they propose to join two additional defendants, being a firm of engineers and Ku-ring-gai Council. 69Pursuant to leave granted, on 29 July 2013 the plaintiffs filed an amended statement of claim adding the claim for relief under s79A of the FLA. The hearing before me proceeded by reference to that amended statement of claim. 70Since receiving the payment from Mrs Acres, Mr Acres has been spending the balance left after the repayment referred to in paragraph 64 above, on his living expenses and legal fees. Some of that balance is held in his own bank account (of which he is the sole signatory) and the rest in cash.

The CA claim - applicable legal principles 71Section 37A of the CA provides: 37A Voluntary alienation to defraud creditors voidable (1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930 , with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors. 72The legal principles concerning the application of that section are: (1)"Creditors" includes present or future, contingent or prospective creditors. (2)The existence of the requisite intent is a question of fact to be determined objectively from all the circumstances, irrespective of whether or not the person concerned appreciated the quality of their act. (3)It is easier to infer intent to defraud where the alienation is voluntary rather than for consideration. (4)An inference of intent to defraud creditors may be made in the case of subtraction of assets which, but for the alienation in question, would be available to meet the claims of present and future creditors. (5)The phrase "intent to defraud" includes an intent to delay or hinder. (6)It is sufficient to show an intent to hinder, delay or defeat creditors without also showing that the debtor wanted creditors to suffer loss or had the purpose of causing loss. (7)The intent to defraud does not have to be the sole or even predominant intent of the debtor. (8)The seriousness of the allegation of fraud is a matter which may be taken into account in determining whether the necessary intention has been proven on the balance of probabilities. (9)Section 37A may be used to undo an alienation of property effected by consent orders in Family Court property settlement proceedings. 73The propositions in the preceding paragraph are derived from: Marcolongo v Chen [2011] HCA 3; (2011) 242 CLR 546 at [19], [20], [25]. [32], [34] and [57]; Cannane v J Cannane Pty Ltd (in liq) [1998] HCA 26; (1998) 192 CLR 557 at [12] and [92]; Kang v Kwan [2002] NSWSC 1187; (2002) 11 BPR 20,623 at [187]; s140 Evidence Act 1995 (NSW); Green v Schneller [2002] NSWSC 671; (2002) 29 FamLR 346; (2002) 11 BPR 20,935.

The CA claim - the parties' contentions 74There was no dispute that the plaintiffs are creditors of Mr Acres within the meaning of s37A of the CA. 75It was submitted by Mr DPM Ash of Counsel for the plaintiffs that the effect of the consent orders, in particular, was that Mr Acres went from having a joint interest in the Killara Property (having a value of $544,500 on the figures used in the application for the consent orders - see paragraph 60 above) to having the cash payment of $250,470.00. No one suggested he had any other significant assets. Mr Acres knew that the alienation of his interest in the Killara Property, albeit for consideration, would hinder, delay or defeat the plaintiffs' claim and there was no cogent evidence to rebut what was said to be the obvious finding that Mr Acres had the requisite intent to defraud. 76In relation to Mrs Acres' reliance on the defence of being a purchaser in good faith not having notice of the intention to defraud creditors, the plaintiffs submitted that, notwithstanding her giving valuable consideration, the Court should find she was not acting in good faith and that she was a knowing participant in Mr Acres' actions to give effect to his fraudulent intention. When pressed by the Court to identify what facts were relied upon for the finding that Mrs Acres had notice of Mr Acres' intention to defraud, Mr Ash submitted that all that was relied upon was Mrs Acres' evidence that Mr Acres had told her that he needed money to pay his lawyers' fees. From this it was said to follow that he was obviously intending to pay his lawyers in preference to his other creditors, thereby demonstrating an intention (of which Mrs Acres had notice) to delay or hinder his other creditors. 77Mr B Ilkovski of Counsel appeared for Mr Acres. He submitted that Mr and Mrs Acres' decision to end their marriage in January 2012 was genuine, as were their efforts to achieve a property settlement which fairly valued their respective interests in the Killara Property. While Mr Acres, and to a lesser extent Mrs Acres, was aware of the claims in the District Court proceedings, Mr Acres had a rationally based view that his personal liability to the plaintiffs in the District Court proceedings was no more than $20,000 to $30,000. Nevertheless, he obviously needed funds to pay his legal bills and for his living expenses. In those circumstances, the Court should accept Mr Acres' evidence that the thought that the plaintiffs might be prejudiced by his entering into the consent orders did not even enter into his head. Similarly, his denial that he intended to defraud the plaintiffs or any other of his creditors should be accepted. Finally, it was submitted that given the substantial majority of financial contributions to the marriage had been made by Mrs Acres, the consent orders did not result in a subtraction from Mr Acres' assets that would otherwise have been available to satisfy any judgment obtained by the plaintiffs in the District Court proceedings. 78Mr M A Ashhurst SC, who appeared with Ms A B Petrie of Counsel for Mrs Acres, reiterated and supported Mr Acres' submission that the plaintiffs had failed to establish that Mr Acres had the requisite intent to defraud in agreeing to the consent orders. Furthermore, referring to s37A(3) of the CA, she was a purchaser (defined in s7 of the CA as meaning a purchaser for valuable consideration) in good faith. If, contrary to her submissions, Mr Acres did have an intent to defraud creditors, she did not have notice of it. The matter relied on by the plaintiffs for a finding of notice was insufficient to make it out.

The CA claim - resolution 79For essentially the reasons advanced by Mr Acres, the plaintiffs have not satisfied the Court on the balance of probabilities (taking into account the seriousness of the allegation) that Mr Acres transferred his interest as a joint tenant in the Killara Property to Mrs Acres with the intent to defraud creditors. As against Mrs Acres, I find that she was a purchaser for valuable consideration of that interest in good faith. In particular, the plaintiffs have failed to satisfy the Court that there was any relevant intention to defraud of which she could have notice. The plaintiffs' claim under the CA therefore fails against both Mr and Mrs Acres. 80In reaching this conclusion, I have taken into account three matters which I consider to be highly significant about the way in which the plaintiffs conducted their case: (1)The plaintiffs did not dispute the genuineness of Mr and Mrs Acres' decision to end their marriage in January 2013. (2)The plaintiffs did not advance a case that Mr Acres' views as to his possible personal liability to the plaintiffs in the District Court proceedings was unreasonable, irrational or not held bona fide. (3)The plaintiffs did not advance a case that the consent orders were a sham or that they did not represent a reasonable or bona fide estimate of Mr Acres' interest in the Killara Property. 81With no disrespect to the careful and thorough way in which Mr Ash put his client's submissions on this aspect of the case, the plaintiffs' essential submissions were: (1)At all material times Mr and Mrs Acres knew that Mr Acres was being sued in the District Court proceedings for $323,254.00 plus interest and costs. (2)On the face of the certificate of title to the Killara Property, Mr Acres was a registered proprietor as joint tenant, which gave him an interest (after subtracting encumbrances) which would be available to his creditors including the plaintiffs worth more than the plaintiffs' claim (as it then stood). (3)As a consequence of the transfer of his interest in the Killara Property to Mrs Acres, Mr Acres was left with an amount less than the plaintiffs' claim in the District Court proceedings. (4)The Court should infer from those circumstances, in particular the consequence referred to in sub-paragraph (3) that Mr Acres transferred his interest in the Killara Property with the intention to defraud creditors. 82While the Court should be careful to avoid falling into a variant of the post hoc ergo propter hoc fallacy ("after this therefore because of this"), in appropriate cases it is a legitimate process of legal reasoning to infer that where A does an act which has consequence B, A intended B to happen. However, taking the plaintiffs' argument set out in the preceding paragraph at face value, as the principles which I have set out in paragraph 72 above make clear, any finding of intent to defraud creditors must be made having regard to all of the circumstances. The fact that a particular consequence may have resulted is only one such circumstance. 83Allowing for the seriousness of the allegation of an intention to defraud, when I take into account the following other circumstances that have been proven, the plaintiffs fail to satisfy the Court on the balance of probabilities that Mr Acres had the relevant intention: (1)The matters set out in paragraph 80 above. (2)Having decided to end their marriage it was entirely understandable that Mr and Mrs Acres would seek to enter into a property settlement. (3)By the time of the orders in September 2012, Mr Acres had a rationally based belief that his potential liability to the plaintiffs in the District Court proceedings (as opposed to any liability which their pre-purchase inspector may have to them) was of the order of $20,000-$30,000 based upon: (a)his own assessment of the plaintiffs' Scott schedule which he had received in the District Court proceedings in or about May 2012; (b)his belief that the plaintiffs were claiming rectification costs for parts of the house on which he did no owner-builder work; (c)his assessment that claims that did not fall within the category of "works he did not do" would require minor or no repairs; (d)assessments he had received from the expert he had retained for the District Court proceedings that the value of any rectification work was "less than $30,000" and "probably worth somewhere between $9,000 and $16,000." (It was not put to Mr Acres that even on this basis he should have taken into account a potential liability for all of the plaintiffs' costs in the District Court proceedings. Mr Acres is a layman, and, if it were necessary, I would infer that a costs liability, in addition to a relatively small principal liability, is not something he would have thought about). (4)When the Killara Property had not sold by December 2012, it was reasonable that he should seek to convert his interest in the Killara Property into a cash payment in order to meet his legal bills in the District Court proceedings and his general legal expenses. (5)His evidence, unshaken by cross-examination and supported by objective circumstances of the kind to which I have referred in this paragraph that he had no intention to defraud the plaintiffs or any other creditors in transferring his interest in the Killara property and that the question of such a consequence or outcome had never "entered his head". 84In addition to the matters to which I have referred in the preceding paragraph, I also accept Mr Acres' submission that there was no relevant subtraction from his assets that might otherwise have been available to pay the plaintiffs and other creditors. In other words, on the basis of the findings I have made concerning Mrs Acres far more substantial financial contribution to the marriage generally and the Killara Property in particular, as well as the matter referred to in paragraph 80(3) above, I am satisfied that the amount of $250,470 which he received fairly represents the value of his interest in the Killara Property that would otherwise have been available to satisfy creditors.

The FLA claim 85The plaintiffs' claim, in the alternative, that they are entitled to have the consent orders set aside or varied under s79A of the FLA. Whether it was in fact possible to set aside the consent orders, which in a sense had been spent by performance, was a matter debated between the parties. Precisely how the plaintiffs wanted the consent orders to be varied (or new orders also made if the consent orders were set aside) was also a little elusive at the start of the hearing, again not least given that the consent orders had been acted upon. However, ultimately the plaintiffs sought relief (set out in paragraph 114 below) including a declaration that Mrs Acres holds the Killara Property on trust for herself and Mr Acres in equal shares. 86I have concluded this alternative claim also fails because the plaintiffs have not satisfied the Court that "there has been a miscarriage of justice" as required by s79A(1)(a) so as to enliven the power to vary or set aside the consent orders. As I explain further below, I therefore do not have to decide the points of construction of the FLA presented by the parties for the Court's consideration but can proceed by assuming, without deciding, those matters in the plaintiffs' favour. 87The relevant provisions of the FLA are: 79. Alteration of property interests (1) In property settlement proceedings, the court may make such order as it considers appropriate: (a) in the case of proceedings with respect to the property of the parties to the marriage or either of them altering the interests of the parties to the marriage in the property; or (b) in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage altering the interests of the bankruptcy trustee in the vested bankruptcy property; including: (c) an order for a settlement of property in substitution for any interest in the property; and (d) an order requiring: (i) either or both of the parties to the marriage; or (ii) the relevant bankruptcy trustee (if any); to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines. on such terms and conditions as it considers appropriate, for such period as it considers necessary to enable the parties to the marriage to consider the likely effects (if any) of an order under this section on the marriage or the children of the marriage, but nothing in this subsection shall be taken to limit any other power of the court to adjourn such proceedings. ... (4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account: (a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and (b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and (c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and (d) the effect of any proposed order upon the earning capacity of either party to the marriage; and (e) the matters referred to in subsection 75(2) so far as they are relevant; and (f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and (g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage. (5) Without limiting the power of any court to grant an adjournment in proceedings under this Act, where, in property settlement proceedings, a court is of the opinion: (a) that there is likely to be a significant change in the financial circumstances of the parties to the marriage or either of them and that, having regard to the time when that change is likely to take place, it is reasonable to adjourn the proceedings; and (b) that an order that the court could make with respect to: (i) the property of the parties to the marriage or either of them; or (ii) the vested bankruptcy property in relation to a bankrupt party to the marriage; if that significant change in financial circumstances occurs is more likely to do justice as between the parties to the marriage than an order that the court could make immediately with respect to: (iii) the property of the parties to the marriage or either of them; or (iv) the vested bankruptcy property in relation to a bankrupt party to the marriage; the court may, if so requested by either party to the marriage or the relevant bankruptcy trustee (if any), adjourn the proceedings until such time, before the expiration of a period specified by the court, as that party to the marriage or the relevant bankruptcy trustee, as the case may be, applies for the proceedings to be determined, but nothing in this subsection requires the court to adjourn any proceedings in any particular circumstances. ... (10) The following are entitled to become a party to proceedings in which an application is made for an order under this section by a party to a marriage (the subject marriage ): (a) a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the order were made; (aa) a person: (i) who is a party to a de facto relationship with a party to the subject marriage; and (ii) who could apply, or has an application pending, for an order under section 90SM, or a declaration under section 90SL, in relation to the de facto relationship; (ab) a person who is a party to a Part VIIIAB financial agreement (that is binding on the person) with a party to the subject marriage; (b) any other person whose interests would be affected by the making of the order. (10A) Subsection (10) does not apply to a creditor of a party to the proceedings: (a) if the party is a bankrupt--to the extent to which the debt is a provable debt (within the meaning of the Bankruptcy Act 1966); or (b) if the party is a debtor subject to a personal insolvency agreement to the extent to which the debt is covered by the personal insolvency agreement. ... 79A. Setting aside of orders altering property interests (1) Where, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, the court is satisfied that: (a) there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or ... the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside. (1A) A court may, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, and with the consent of all the parties to the proceedings in which the order was made, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside. ... (2) In the exercise of its powers under subsection (1), (1A) or (1C), a court shall have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested. ... (4) For the purposes of this section, a creditor of a party to the proceedings in which the order under section 79 was made is taken to be a person whose interests are affected by the order if the creditor may not be able to recover his or her debt because the order has been made. 88There was no dispute that the Court has cross-vested jurisdiction to exercise Commonwealth jurisdiction under the FLA. I am also prepared to assume in the plaintiffs' favour, without deciding, that at the time of the consent orders: (1)The plaintiffs were either creditors or persons "whose interests would be affected by the making of the orders" within the meaning of s79(1)(b) of the FLA so that they were entitled to be parties to the Family Court proceedings and to be given notice of Mr and Mrs Acres' application under Regulation 14.07 of the Family Law Rules 2004. (2)The plaintiffs were persons "affected by" the consent orders for the purposes of s79A(1) of the FLA. (3)Mr and Mrs Acres' admitted failure in seeking the consent orders to disclose the District court proceedings to the Family Court was a "failure to disclose relevant information" for the purposes of s79A(1)(a) of the FLA. 89Each of the matters I have assumed was a matter of contest between the parties and called for interpretation of the relevant provisions of the FLA. The parties were unable to refer me to any authority decided since those provisions were introduced into the FLA that deals with the non-disclosure of a disputed claim for damages the subject of litigation as opposed to, for example, an undisputed debt. 90The FLA is primarily administered by a specialist court, the Family Court. A very significant amount of family law work is now also undertaken by the Federal Circuit Court, many of whose judges have acquired close familiarity with the relevant jurisprudence. Determination of the matters I propose to assume could have a significant impact on family law practice. Considerations of comity and commonsense urge that although this Court is properly seized of jurisdiction, as a non-specialist court it should only embark on the determination of such matters to the extent it is absolutely necessary to do so, 91Because, for reasons I will now set out, the plaintiffs have not satisfied me that there was a miscarriage of justice of the kind referred to in s79A(1)(a), it is sufficient for me to assume the anterior matters in the plaintiffs' favour. It is therefore not necessary for me to decide those matters, and I do not do so, notwithstanding the careful arguments the parties addressed to each of them.

The FLA claim - applicable legal principles 92Section 79A only applies to circumstances occurring before or at the time of the making of the order: Molier v Van Wyk (1980) 7 FamLR 18 at 21. 93Assuming in the plaintiffs' favour the matters set out in paragraph 88 above, the question becomes whether there has been a miscarriage of justice for the purposes of s79A(1) of the FLA. The meaning of this expression was considered by the Full Court of the Family Court in Barker v Barker [2007] FamCA 13; (2007) 36 FamLR 650: 120. A miscarriage of justice under s 79A(1)(a) will occur if circumstances exist which "for some significant reason, make the order contrary to law and justice according to law as it relates to the integrity of the judicial process [original emphasis]" (Bigg v Suzi (supra) at 84,982). See also Suiker (supra); Public Trustee (as executor of the estate of Gilbert) v Gilbert (supra)). Whilst cases such as Suiker (supra), Holland v Holland (1982) FLC 91-243 and Gebert v Gebert (1990) FLC 92-137 indicate that the words "miscarriage of justice" should not be construed narrowly and the phrase "integrity of the judicial process" should not be taken only to refer to the hearing in the court, the circumstances creating the miscarriage must nevertheless have been such as to have had an influence on the outcome of the litigation. As the Full Court said in Holland (supra): To succeed in an application under sec. 79A, the wife must show some circumstance leading to a miscarriage of justice. Agreement to a consent order which may not adequately reflect a party's entitlements under section 79 does not, of itself, show that there has been a miscarriage of justice. There may be cases where the order consented to is so far outside the ambit of what is just and equitable that the Court may infer that a party has acted under duress, in ignorance or as a result of incompetent advice. ... 123. As previously discussed, in order for a claim under s 79A(1) to succeed, the Court must be satisfied that a miscarriage of justice has resulted. It is not sufficient to merely establish the existence of one or more of the stated grounds, such as suppression of evidence. In Livesey v Jenkins (supra), Brandon LJ had this to say about the nexus between non-disclosure and setting an order aside (at 445-6): I would end with an emphatic word of warning. It is not every failure of frank and full disclosure which would justify a court in setting aside an order of the kind concerned in this appeal. On the contrary, it will only be in cases when the absence of full and frank disclosure has led to the court making, either in contested proceedings or by consent, an order which is substantially different from the order which it would have made if such disclosure had taken place that a case for setting aside can possibly be made good. Parties who apply to set aside orders on the ground of failure to disclose some relatively minor matter or matters, the disclosure of which would not have made any substantial difference to the order which the court would have made or approved, are likely to find their applications being summarily dismissed, with costs against them, or, if they are legally aided, against the legal aid fund. 94Adopting the language of Barker, it is not sufficient for the plaintiffs to establish (as I have assumed) that there was a failure to disclose relevant information. They must demonstrate that the non-disclosure led the Family Court to make orders (the consent orders) which are substantially different from the order which would have been made had the disclosure taken place. This means the plaintiff must satisfy the Court as to what order the Family Court would have made had the disclosure taken place.

Miscarriage of justice - the parties' contentions 95The plaintiffs' written submissions seem to suggest that the Court could be satisfied that there had been a miscarriage of justice because, acting upon a false premise provided to it by the defendants, the Family Court made an order which was manifestly to the disadvantage of Mr Acres' creditors. This submission fails to address the critical point identified in Barker. 96In oral submissions the plaintiffs contended that if notice had been given and the plaintiffs had been present when the consent orders were sought, the Family Court would have stayed Mr and Mrs Acres' application for a property settlement until the District Court proceedings had been determined. In support of this argument the plaintiffs relied on the decision of the Full Court of the Family Court In the marriage of MJ Bailey and the Estate of HR Bailey (1989) 13 FamLR 652, where the Court said (at 658): There was no suggestion that the claims by the interveners were other than genuine and being legitimately pressed. The relative sizes of the claims and the assets of the estate of the deceased are such that if the orders sought by the wife were ultimately made the intervener claimants would be defeated. In these circumstances, in our view, it was proper in the circumstances for His Honour to have granted the stay until such time as the common law claims had been dealt with by the Supreme Court. It would not be until those proceedings had been completed that it would be known whether there was any property in the estate in respect of which orders could be made pursuant to s 79. 97It was submitted for both Mr and Mrs Acres that the plaintiffs had simply failed to demonstrate what orders would have been made if the District Court proceedings had been disclosed. It was particularly submitted for Mrs Acres that the plaintiff had not adduced any evidence of what orders the Family Court would have made if it had been informed of the existence of the District Court proceedings.

Miscarriage of justice - resolution 98I do not accept Mrs Acres' submission that it was necessary for the plaintiffs to adduce evidence of what orders the Family Court would have made if it had been informed of the existence of the District Court proceedings. As Tobias JA observed in Attard v James Legal Pty Ltd [2010] NSWCA 311; (2011) 80 ACSR 585 (Beazley and Giles JJA agreeing) (citations omitted); [131] In this context it may be noted that it is now well-established that on the questions of professional legal practice, particularly in professional negligence cases, and except possibly, but not necessarily, in specialist legal areas, a court does not need expert evidence to be advanced as to the appropriate professional standards from which it is alleged a defendant has departed. The court can resort to its own knowledge of such practices. [132] The position would, in any view, be a fortiori where, as in the present case, the issue is whether a Supreme Court judge would, on the facts approved and applying the law thereto, as a matter of probability refuse leave to proceed pursuant to s444E(3) of the Corporations Act. After all, such a judge is presumed to be an expert in all relevant areas of the law within the court's jurisdiction. 99Such evidence may have been admissible but it was not necessary. Notwithstanding the diffidence I have expressed in paragraph 90 above concerning interpretation of the FLA by a non-specialist judge, the question posed at this point of the inquiry ("would the Family Court have stayed Mr and Mrs Acres' application?") involves the application of established principles under s79 of the FLA. It is necessary for me to answer that question and I will do so. 100Nevertheless, with or without evidence, the plaintiffs have set themselves the task of persuading me that if they had been present in the Family Court on 6 May 2013, the outcome would have been a stay or, perhaps, an adjournment of the proceedings until Mr Acres' liability to the plaintiffs had been ascertained by the resolution of the District Court proceedings. This outcome is a fact, like any other in civil proceedings, which must be proven on the balance of probabilities. The plaintiffs have failed in that task for the following reasons. 101First, it is necessary to expose the hypothesis which I have assumed underlies the plaintiffs' submission. That must be that, having received notice of the further application for the consent orders, the plaintiffs would have attended at a hearing in early May 2013. Mr and Mrs Acres would presumably have continued to press for the consent orders. The plaintiffs would have applied for a stay or adjournment of Mr and Mrs Acres' application pending determination of the District Court proceedings. I have also assumed in their favour they would have deployed the claim of in excess of $1,000,000. I should emphasise that there is no evidence about any of these things. I have assumed them as what seem to me to be necessary concomitants of the plaintiffs' submission that the order the Family Court would have made if they had been in attendance would have been a stay. 102Second, I do not understand Bailey to be authority for the proposition that whenever there are undetermined third party litigious claims against a party to a marriage, property settlement proceedings must be stayed as though the presence of those claims was determinative of the court's discretion. In their day, matters arising from the controversial psychiatric practices of Dr Harry Bailey were matters of considerable notoriety. Mrs Bailey brought proceedings for property settlement against her husband under s 79 of the FLA. Shortly after the proceedings were commenced Dr Bailey died. His will appointed Mrs Bailey sole executrix and beneficiary of his estate. Her proceedings for a property settlement had not been disposed of at the time of his death. 103The interveners in Bailey had commenced proceedings in the Supreme Court against Mrs Bailey, as executrix of the estate of her husband, and the Medical Defence Union for damages for negligence for the treatment administered to them by Dr Bailey. The Full Court records (at 655) that: The position was that when the matter came before his Honour it was accepted for the purposes of the proceedings before him that if the claims by the interveners in the Supreme Court of New South Wales was successful against the estate of the deceased, each claim would amount to some $300,000 and if all the claims were successful there would be a total liability of $2,500,000. Before his Honour it was agreed that for the purposes of the application the estate of the deceased amounted to $230,000. It was the case, as his Honour observed, that even if only the present interveners, Oswald and Crawford, were successful the possible gross liability to them of $600,000 would exceed by far the assets of the estate. 104There is a fundamental point of distinction between Bailey and the present case, namely that in Bailey there were no jointly held assets in his estate (the estate is described at p 654). Thus the Court was entitled to focus on the question of whether at the time of Mrs Bailey's application it was possible to determine whether there was or would be any property in the estate in relation to which a s 79 order could be made. That is not this case. Given that the property in this case was almost entirely the jointly held Killara Property, at least half was prima facie Mrs Acres' (assuming for the purposes of the exercise that the enforcement of any judgment by the plaintiffs would lead to Mr Acres' bankruptcy and the severance of the joint tenancy). Putting it another way, the available property was ascertainable, although Mr Acres' share was subject to the plaintiffs' claims in the District Court proceedings. 105Furthermore, in Bailey there was, in effect, only one defendant. Here there are two. As was acknowledged by the plaintiffs' own counsel in the District Court proceedings (see paragraph 56 above), on a proper analysis there is a very real possibility that the amounts for which each of them may be liable to the plaintiffs will differ. Next, as the passages I have quoted from Bailey in paragraphs [96] and [103] above demonstrate, there was no need to consider the strength of the interveners' claims against the estate. In this case, precisely because of the likelihood that any respective liability to the plaintiffs of each of the defendants will differ, I have no doubt that the strength and likely quantum of the plaintiffs' claim against Mr Acres alone would have been the subject of some examination in the Family Court. 106The Full Court in Bailey also observed: For the Family Court when exercising jurisdiction under s79 to fail to take into account liabilities which term encompasses claims of all sorts as referred to above, would be to ignore and in many cases to defeat legitimate claims of the third parties in respect of whom the liabilities had been incurred and this, in our view, it is not entitled to do ... The combination of the statement by the High Court in Ascot Investments and Harper and s79A clearly indicates to us that it is not proper for the Court to proceed in the property application without due regard to liabilities of a party which are either established or in the process of being determined where the liabilities are of such magnitude as to be defeated by the order being sought in the Family Court. 107The decision of Bailey is authority for the proposition that, in the circumstances before him, the trial judge was correct in staying Mrs Bailey's application pending determination of the interveners' Supreme Court claims. The factual circumstances of this case are different. However, the passages to which I have just referred primarily counsel that the Family Court in exercising jurisdiction under s 79 must take into account liabilities to third parties and must not proceed without due regard to those liabilities. That counsel is now reflected in the FLA. In considering what order (if any) should be made in property settlement proceedings, s79(4)(e) requires the Court to take into account "the matters referred to in sub-section 75(2) so far as they are relevant". Section 75(2)(ha) identifies "the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt so far as that effect is relevant". 108"Creditor" is undefined in the FLA. However, even if the Family Court were to accept the proposition that the term did not extend to prospective or other creditors whose claims were contingent upon the outcome of litigation, I have no doubt that in the general exercise of its discretion under s 79 (in particular s 79(2) to be satisfied that "in all the circumstances, it is just and equitable to make the order") the interests of the plaintiffs would have been taken into account. 109Does all of that mean that, on the balance of probabilities, the outcome would have been a stay? These considerations leave me unpersuaded that a stay or adjournment would have been the outcome: (1)Notwithstanding the plaintiffs' claim, the property available to comprise the settlement was readily ascertainable. Importantly, as it was almost exclusively the Killara Property, that property was jointly held. On the simplest view, Mrs Acres was entitled to at least half of it. Once her very substantial (indeed, exclusive) financial contribution to the marriage and the acquisition of the Killara Property in particular, were taken into account, it would have been obvious that she was entitled to even more than what would otherwise be her 50% (which 50% would never be available to Mr Acres' creditors on his bankruptcy). (2)Following from the preceding point, in circumstances where it is clear Mrs Acres was entitled to the majority of the property, she would have been able to mount a powerful case that she should not be delayed in resolving her matrimonial affairs and having unfettered access to her assets because of the unresolved claim against Mr Acres. (3)There would inevitably have had to have been an examination of whether there was a credible basis for Mr Acres being liable for the whole of the amount claimed in the District Court proceedings. In the District Court (see paragraph 56 above) the plaintiffs' own counsel had apparently accepted the proposition that this might not be the case. Furthermore, in the conduct of the proceedings before me, the plaintiffs eschewed any opportunity or invitation to address the strength or the true quantum of their case against Mr Acres. As I have recorded in paragraph 80 above, they declined to put any submission that Mr Acres' firm belief that his liability, if any, was relatively small was irrational, unreasonable or not held bona fide. Given the plaintiffs have chosen to conduct their case on this aspect in this way, I cannot be satisfied that the Family Court would have accepted that there was a real prospect that Mr Acres' ultimate liability to the plaintiffs would be in the large amount they asserted as opposed to the considerably smaller amount for which he contended. (4)The Court would have counted against the plaintiffs their forensic decision to pursue (unsuccessfully) the orders which they sought in their District Court motion rather than immediately approaching the Family Court. That was a calculated, forensic decision (see the plaintiffs' counsel quoted in paragraph 56 above). Had the plaintiffs approached the Family Court in March 2013, it would have been at a time before there had been any real alteration in the status quo as between Mr and Mrs Acres. To the extent the Family Court would have been minded to do so, orders protecting the interests of the plaintiffs could have been made much more readily because no money or interests had been exchanged at that time. (5)A further matter which I consider the Family Court would have weighed against the application for a stay would be that, to have granted it would in effect have conferred security for judgment in advance of execution, something to which unsecured litigants are not entitled (Cardile v LED Builders Pty Limited [1999] HA 18; (1999) 198 CLR 380 at [50].) (6)The circumstance referred to in the previous sub-paragraph would be particularly unjust as against Mrs Acres. There could be no good reason to holding up the resolution of what was plainly her entitlement to a very substantial proportion of the Killara Property. (7)The Family Court would have accorded some weight to Mr Acres' entitlement to have access to what was otherwise his property for the purposes of being able to finance his living expenses and litigation costs. Even if asset preservation relief had been granted (a variant of which the District Court had refused to grant only a few weeks before), it would have necessarily allowed Mr Acres to have access to his assets for the purposes of his living expenses and legal costs. 110I have no doubt that the plaintiffs would have contended before the Family Court that there was a very real risk, perhaps even a certainty, that if the consent orders were made Mr Acres would not have the assets that would otherwise have been available to them to enforce against if they ultimately obtained judgment. That is, in itself, a debatable proposition given the conclusion I have reached (see paragraph 84 above) that the consent orders did not in fact work a diminution in the assets that would have been available. Quite apart from that consideration, I am of the view that the Family Court, like Judge Olsson in the District Court, would not have perceived anything about the consent orders which suggested that what was being done was to make Mr Acres judgment proof. Unsecured litigants run the risk every day in our courts that as a result of the legitimate expenditure by defendants of their assets, including on the litigation, defendants may ultimately have no assets left against which a judgment can be enforced. 111Taking all of these matters into account, I am unable to conclude on the balance of probabilities that the Family Court would have ordered a stay or adjournment of Mr and Mrs Acres' application for consent orders. In those circumstances the plaintiffs have failed to demonstrate that the Family Court would have made an order substantially different from the consent orders had the plaintiffs been given the opportunity to appear. In accordance with the principles I have identified in paragraphs [92] to [94] above, this means that the plaintiffs have failed to demonstrate that the making of the consent orders brought about a miscarriage of justice within the meaning of s 79A(1)(a) of the FLA. The plaintiffs' claim for relief in reliance under that section therefore fails.

The FLA claim - discretion 112It is clear from the terms of s 79A that even if I were satisfied there had relevantly been a miscarriage of justice, the Court retains a discretion whether or not to vary or set aside the earlier order that had been made and make a further order under s 79. Both Mr and Mrs Acres submitted that, if I came to the conclusion that the statutory pre-requisites for the exercise of the discretion in s 79A were satisfied, I should not do so in the exercise of discretion. 113Mr Acres submitted the following matters weighed against interfering with the consent orders: (1)The plaintiffs, knowing the extent of Mr Acres' share under the orders made in September 2012 did not seek to set aside, vary or otherwise interfere with those orders when they had the opportunity to do so, but rather pursued their unsuccessful motion in the District Court. (2)Mrs Acres has paid valuable consideration for Mr Acres' interest and he has already expended part of the money he received to pay his legal fees, continue his defence of these and related proceedings and pay for his ordinary living expenses. 114Mrs Acres drew attention to the following additional matters as suggesting any discretion should not be exercised: (1)The plaintiffs have failed to demonstrate the amount of any likely judgment against Mr Acres and, therefore, the likely effect of the consent orders on any amount they might ultimately have recovered from Mr Acres. (2)The failure by the plaintiffs, after they became aware of the Family Court proceedings, to take any action to stay or restrain the consent orders. (3)The fact that Mrs Acres has paid Mr Acres $250,470 for his interest in the Killara Property as a result of the consent orders. (4)The difficulty in identifying what property distribution orders the Court could now make in place of any consent orders that are set aside, given the relative changes in circumstances and expenditures that have taken place by both Mr and Mrs Acres. 115The orders which the plaintiffs ultimately sought under s 79A were: a) The Court orders that Rebecca Chan and Warren Cox be joined to the proceedings. b) An order that the orders made on 6 May 2013 be varied by addition of the following: i) The Court declares that the Applicant Wife holds her registered proprietorship of the Killara property on trust for herself and the Respondent Husband in equal shares. ii) The Court orders that the Applicant Wife and the Respondent Husband be restrained from transferring, further encumbering or otherwise dealing with the Respondent Husband's share in the property until the determination of proceedings first commenced by the Joined Parties in the District Court of New South Wales in the Sydney registry with the proceeding number 2012/48496. iii) An order that the Respondent Husband pay to the Applicant Wife the sum of $125,235. c) Liberty to the Applicant Wife and the Respondent Husband to apply for a variation of the injunction, in the event that they wish to sell the property, upon giving seven (7) days' notice to the Court and to the other parties. d) Liberty to any party to apply for orders consequential upon the determination of the proceedings referred to in Order (b)(iii), above. 116Even if I had been satisfied that the consent orders had brought about a miscarriage of justice for the purposes of s 79A(1)(a), I would have refused to grant that relief in the exercise of the Court's discretion for these reasons: (1)The heart of the plaintiffs' proposed relief is a declaration that Mrs Acres now holds the Killara Property on trust for herself and Mr Acres in equal shares. To make that declaration would give effect to a fiction that has no basis in the evidence. Even before Mr Acres transferred his interest in the Killara Property to Mrs Acres, it is clear on the evidence that by reason of her financial contributions and the absence of contributions from him, her interest in the Killara Property, including in equity, far outweighed his. To make this order would put the plaintiffs in a better position than they could have hoped to have been in even if they had been notified of either of Mr and Mrs Acres' applications for consent orders to the Family Court. (2)I would not make the order sought for repayment of $125,235 from Mr Acres to Mrs Acres. On the evidence that amount represents the bulk of what must remain from the sum Mr Acres received and would deprive him of money for living expenses and to pay his legal costs. As I have observed above, even if he were the subject of the freezing order, such an order would permit him to retain and spend money for those purposes. (3)The fact that Mrs Acres gave valuable consideration for Mr Acres' interest in the Killara Property and that he has now expended parts of that for legitimate purposes such as living expenses and legal costs. (4)I find that Mr and Mrs Acres' failure to notify the plaintiffs of their applications to the Family Court were not motivated by any deceitful or dishonourable intention to deceive the plaintiffs or to hide something from them. Even if their failure to notify was, as I have assumed but not found it to be, wrong in law, their subjective belief was clearly that the amount for which Mr Acres might be liable to the plaintiffs was in the order of $20,000-$30,000 and therefore not materially affected by the consent orders. Furthermore, after their victory in the District Court, they held the not unreasonable view as lay people that their opinion that the plaintiffs were not entitled to know of their personal arrangements had been vindicated. (5)Finally, were I to make the declaration and injunction sought, this would in effect give the plaintiffs security for judgment, something to which they are not entitled. While it is an entirely understandable ambition on the part of an unsecured litigant, the practical effect of all their endeavours since becoming aware of the Family Court's orders has been to achieve that result. So much was made clear at the outset by the plaintiffs' solicitors' letter of 27 February 2013 referred to in paragraph [51] above. I am fortified in relying upon this consideration by my inability to find that anything Mr and Mrs Acres have done in relation to their property settlement was undertaken with an intention to render Mr Acres judgment proof.

Orders 117The orders of the Court are: (1)Amended Statement of Claim dismissed. (2)The plaintiffs to pay the defendants' costs of and incidental to the proceedings. (3)The injunction against the second defendant originally granted on 31 May 2013 and continued until further order on 4 June 2013 is dissolved. (4)The subpoenaed material and exhibits are to be returned forthwith, the latter to be held by the parties or their solicitors in accordance with Practice Note SC Gen 18.

Amendments 04 November 2013 - ergo proctor changed to ergo propter Amended paragraphs: 82 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 November 2013

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