RECENT DEVELOPMENTS IN FAMILY LAW
Parenting Matters
1. Sam Sex De Facto Parenting
Maurice v Barry (2010) 44 FamLR 62 Family Court of Australia - Faulks DCJ Facts:
• The Respondent, Ms Barry, was the biological mother of two children. The children were born following artificial conception procedures.
• Ms Barry was at all material times in a bona fide domestic relationship with the Applicant, Ms Maurice.
• The parties had not separated. The parties sought orders by consent under the Family Law Act 1975 (Cth) ("the Act”) that each have "parental responsibility" for the children.
• In explaining the reasons for the application, the parties said that they had encountered practical difficulties in relation to their children’s schools. The parties also foresaw that there might be difficulties in relation to medical questions either from doctors or hospitals in the future in the absence of the orders sought.
Law:
• The Court considered Section 60H of the Act.
• Section 60H(1) provides that if:
o a child is born to a woman as a result of the carrying out of an artificial conception procedure while the woman was married to, or a de facto partner of, another person (“the other intended parent”); and
o either:
the woman and the other intended parent consented to the carrying out of the procedure, and any other person who provided genetic material used
in the procedure consented to the use of the material in an artificial conception procedure; or
under a prescribed law of the Commonwealth or of a State or Territory, the child is a child of the woman and of the other intended parent;
then, whether or not the child is biologically a child of the woman and of the other intended parent, for the purposes of this Act:
o the child is the child of the woman and of the other intended parent; and o if a person other than the woman and the other intended parent provided genetic
material - the child is not the child of that person.
• His Honour DCJ Faulks was satisfied on the basis of the evidence that the children the subject of the application fell within the provisions set out in Section 60H(1). That is, the children were the children of the Applicant, Ms Maurice, who is the “other intended parent”.
• His Honour held that as a consequence of Section 60H(1), an order made by the Court as to parental responsibility would be to a large extent unnecessary, at least from a legal perspective. In the ordinary course of events where a family is still intact, it would appear that Section 61C is applicable. That is, that parents each retain parental responsibility for their child unless or until there is an order of the court to the contrary.
• His Honour said that the parents may have sought an order for "equal shared parental responsibility", however such order might be more appropriate where parents have separated. Such order would require parents to make major long-term decisions regarding the child jointly. Further, such order would invoke Section 65DAA(1) of the Act, requiring the court to consider whether equal or significant and substantial time arrangements would be appropriate in the circumstances. These matters are more applicable to parents who are separated and any orders in these terms would not make a great deal of sense.
• However, DCJ Faulks noted that a relevant consideration in this case was the status of the Applicant (i.e. the “other intended parent”) as a “parent” under the Act.
• His Honour stated that Section 60H(1) of the Act had the effect that each of the children was “a child of … the other intended parent”. However, it was not immediately clear that the persons for whom the child was a child within the meaning of that section were also to be regarded, for other purposes under the Act, as a “parent”.
• This was a matter the subject of consideration by the Full Court of the Family Court in
Aldridge v Keaton [2009] FamCAFC 229; (2009) FLC 93-421; 42 FamLR 369.
o The Full Court considered that the intention of the legislature when introducing the relevant legislation was that children, regardless of the circumstances of their conception or birth, should have the same rights, protections and privileges under the Act to receive proper parenting from either a biological parent, or that biological parent’s partner (including a same-sex co-parent), as biological children born to men and women who have been legally married, living in a de facto relationship or who have never lived together.
o The Full Court noted weren’t sure that the legislation had had that effect. They considered that further legislative amendment may be necessary to clarify the non-biological person’s status as a parent.
• Although the Full Court in Aldridge v Keaton expressly reserved the question of whether Section 60H would enable a person who is the “other intended parent” to be a parent for the purposes of the Act, His Honour Faulks DCJ in this case considered that a purposive construction of Section 60H, in combination with the explanatory memorandum, would suggest that Section 60H at least impliedly contemplates an “other intended parent” being a “parent”.
2. Relocation
MRR v GR [2010] HCA 4
High Court of Australia - French CJ, Gummow, Hayne, Kiefel and Bell JJ On Appeal from the Full Court of the Family Court
Facts:
• The parents lived together in Sydney from 1993 until 2007 and had one daughter. In January 2007 the family moved to Mount Isa to allow the Husband to gain work experience.
• The parents separated in August 2007. Following separation, the Wife and child returned to Sydney without the Father's consent. However, the Federal Magistrates Court made interim orders requiring them to return to Mount Isa.
• On 1 April 2008 the Federal Magistrates Court made final parenting orders, which provided that the parents have equal shared responsibility for the child and that the child spend equal time with each of them. The orders were made on the basis that both parents would live in Mount Isa.
• The Husband made it very clear that even if his daughter were living in Sydney with the Wife, he would not consider leaving his employment in Mount Isa to find alternative work in Sydney.
• The Wife was living in a caravan park in Mount Isa and relying on welfare payments and income from casual employment to support herself. She was suffering depression arising out of her poor living conditions, lack of employment opportunities and isolation from her family in Sydney.
• The Wife appealed the decision to the Full Court of the Family Court and then to the High Court.
Law:
• The High Court set out the fundamental principals underlying parenting orders.
• The Family Court and the Federal Magistrates Court may make parenting orders under Section 65D of the Act. Section 60CA provides that the Court must regard the best interests of the child as the paramount consideration in making parenting orders. Under
Section 61DA the Court must apply a presumption that it is in a child’s best interests for the child’s parents to have equal shared parental responsibility, though the presumption may be rebutted. If the Court is considering making an equal shared parental responsibility order then it must, under Section 65DAA(1), consider whether it is in the child’s best interests, and whether it is reasonably practicable, for the child to spend equal time with each parent. If both of those things are so, the Court may consider making an order for the child to spend equal time with each parent.
• The High Court said that the Federal Magistrate had applied the presumption that equal shared parental responsibility was in the child’s best interests. However, in considering whether he should therefore make an order under s 65DAA(1) for the child to spend equal time with each of her parents, the Federal Magistrate addressed only the question of whether it was in the child’s best interests to spend equal time with each of her parents. He made no assessment of whether spending equal time with each parent was actually feasible. That is, he failed to make a finding about a statutory condition which was mandatory in determining whether an order for the child to spend equal time with her parents could be made.
• The High Court held that if the Federal Magistrate had undertaken that assessment, the evidence before him would not have permitted him to find that it was ‘reasonably practicable’ for the child to spend equal time with each parent. Thus he had no power to make orders for equal time parenting.
• The High Court allowed the Wife’s appeal and ordered that the orders of the Federal Magistrates Court be set aside. The matter was remitted to the Federal Magistrates Court to be reheard.
Collu and Rinaldo [2010] FamCAFC 53
Full Court of the Family Court - May, O’Ryan and Strickland JJ Facts:
• This was the first case to be decided by the Full Court after the High Court decision of MRR v GR.
• The parties commenced a relationship in 2003. The child was born in 2005.
• The parties resided in Sydney for the majority of their relationship. In March 2007, the Mother relocated with the child to Dubai with the Father’s consent. However, the agreement was that the Mother would only live in Dubai for 13 months.
• The Mother subsequently sought an order that she be permitted to remain in Dubai for a period of two years. She brought an application to this effect, with an alternative proposal that she and the child relocate to North Queensland and for the child to spend three months of the year with the Father in Sydney.
• Prior to the appeal, the arrangement in place for the child was that he live with each parent on a month about basis in Dubai and Sydney. The Full Court criticised that arrangement as being unsatisfactory.
• In light of the recent High Court decision in MRR v GR, their Honours provided the parties withan opportunity to make further submissions. The Mother’s complaints as to the trial Judge's decision were summarised into three broad areas:
o the Mother’s attitude to the relationship of the child and Father and her capacity to provide for the emotional needs of the child;
o the trial Judge failing to adequately assess and weigh up all of the relevant considerations regarding the best interests of the child; and
o the trial Judge failing to adequately deal with the statutory considerations for considering whether the child should spend equal or substantial and significant time with each parent.
Law:
o The trial Judge erred in relation to the factors she took into account in assessing the Mother.
o The trial Judge failed to consider, weigh and assess the evidence regarding the best interests of the child.
o The trial Judge was required to undertake what the High Court in MRR v GR
described as a "practical assessment" of whether equal time or substantial and significant time was "feasible".
3. Applicant Children and the Airport Watch List
Kandal v Khyatt and Others (2010) 43 Fam LR 344 Federal Magistrates Court of Australia - Dunkley FM Facts
• The Applicant was a 17-year-old girl ("child"). She sought orders restraining her parents and stepfather from removing her from Australia against her will.
• The child telephoned the Australian Federal Police (AFP) in a frightened state telling an officer that she believed she would be taken against her will to Lebanon to be married and that she was booked on a flight out of the country in 15 days time.
• The child told the AFP officer that she was aware of airport watch list provisions and wanted to be placed on the watch list.
• The child gave enough personal details to the officer to enable verification checks as to identity and residence to be undertaken. Those checks were confirmatory of the information provided to the AFP.
• The AFP notified DHS and the appropriate cultural organisations, who offered intervention and emergency housing for the child if required.
• The child's solicitors, Legal Aid NSW, assisted the AFP and appeared on an amicus and duty basis for the child.
Law
• The Court allowed the child to be a party to the proceedings under Section 65C of the Act, which states that a parenting order may be applied for by a child. Under Section 64B, a parenting order is defined to include an order relating to any aspect of the care, welfare and development of the child.
• On its own motion, and so as to protect the child from physical or psychological harm or from being subject to or exposed to abuse, neglect or family violence, the Court made injunction orders under Section 68B of the Act.
• The Court ordered that the child be placed on the airport watch list, and that the parents of the child be restrained from removing her from Australia.
• The Court also ordered that the child's parents be restrained from assaulting, threatening, harassing or intimidating the child.
• The Orders were made on an ex parte basis, due to the "real possibility of parental interference".
• In reaching its decision, the Court gave significant weight to the child’s wishes given her age, the maturity and resourcefulness shown by her actions and her real appreciation of the situation at hand.
• Given how the AFP were contacted, there was no requirement for the child to personally swear a supporting affidavit.
Financial Matters
4. Same Sex De Facto Financial Matter
Barry & Dalrymple [2010] FamCA [unpublished] Family Court of Australia - Coleman J
Facts
• The Applicant alleged that he and the Respondent had been living in a same-sex de facto relationship. The Respondent denied the de facto relationship.
• The Applicant was 36 years old. The Respondent was 77 years old.
• The parties cohabited for a period of disputed duration, probably commencing in late 2006 and concluding in March 2010.
• The Applicant was employed as the Respondent’s personal assistant and carer.
• Prior to cohabitation, the Applicant (who carried on business as an escort) was engaged by the Respondent on three occasions to provide sexual services.
• During cohabitation, the Applicant enjoyed a lavish lifestyle at the Respondent’s expense. The Respondent paid for his living expenses, extensive and luxurious travel, parties and motor vehicles.
• The parties did not, at any time during cohabitation, including during travel, share a bedroom or bathroom. The Applicant had a separate, locked part of the Respondent’s house.
• The Applicant was paid a termination payment at end of the association.
• Within 3 weeks of the termination of the association, the Applicant instructed solicitors to request financial disclosure of the Respondent.
Law
• Section 4AA of the Act sets out the meaning of de facto relationship:
o (1) A person is in a de facto relationship with another person if … (c) having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.
• Section 4AA(2) inclusively lists factors that may be considered part of ‘all the circumstances’:
o duration of relationship;
o nature and extent of common residence; o existence of sexual relationship;
o degree of financial dependence/interdependence, and arrangements for financial support;
o ownership, use & acquisition of property; o degree of mutual commitment to shared life; o whether relationship registered;
o care and support of children; and
o reputation and public aspects of relationships.
• Section 4AA(3) states that no particular finding in relation to any circumstance is to be regarded as necessary in deciding whether the persons have a de facto relationship.
• Section 4AA(4) states that a court determining whether a de facto relationship exists is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the Court in the circumstances of the case.
• His Honour Coleman J considered the s 4AA(2) factors as follows: o Duration
This did not assist in determining if there was a de facto relationship. o Nature and extent of relationship
The extent of the common residence was not significant.
The nature of the common residence was not supportive of the existence of a de facto relationship.
The association between parties was more consistent with the Applicant being a live-in assistant/carer than a domestic partner. o Sexual relationship
A sexual relationship was not established. There was sexual contact on four occasions:
• The first three were ‘of a purely business nature’.
• The ‘fourth may or may not have been, but did not occur at a time when the parties were living together on a genuine domestic basis’.
The Applicant was generously remunerated by the Respondent (and the Respondent’s company).
Therefore, the Applicant could not say that he was financially dependent on the Respondent.
o Ownership, use & acquisition of property The Respondent sold his apartment.
There was no evidence of the Applicant being consulted about this. The Applicant’s unauthorised use of the Respondent’s funds for
three significant purchases was inconsistent with the assertion of a ‘loving and caring domestic relationship’.
o Mutual commitment to shared life
There was no support for the conclusion ‘that there was a mutual commitment to a shared life, of any degree.’
o Reputation and public aspects of relationship
There was no evidence that these aspects were consistent with a genuine domestic relationship.
• Coleman J also considered MW v Director-General, Department of Community
Services (2008) 82 ALJR 629, per Gleeson CJ:
o It is the common intention of the parties as to what their relationship is to
be, and to involve, and as to their respective roles and responsibilities that primarily determines the nature of that relationship. The intention need not be formed in terms of legal status: to some people that is important; to others it is a matter of indifference… The intention may be expressed, or it may be implied.
• His Honour found that there was no common intention that the association was to be a de facto relationship.
5. Setting Aside Binding Child Support Agreements
Appleton v Appleton [2011] FamCA 70 Family Court of Australia - Austin J Facts:
• The parties were married in 1996 and separated in 2006. There were 3 children of the marriage.
• On 11 September 2007, the parties entered into a child support agreement, which was subsequently registered with the Child Support Agency. The agreement provided for the Father to pay periodic child support of $400 per child per week (adjusted by CPI) until each child completed their high school education and non-periodic child support by way of school fees.
• The parties also struck a binding financial agreement at the time of making the child support agreement. Each agreement was entered in consideration for the other. Final consent orders regulating parenting arrangements for the children were also made thereafter.
• From that time on the parties became enmeshed in conflict, which was compounded by the Mother’s knowledge that the Father had commenced a relationship with the Mother’s former sister-in-law, and the Father’s knowledge that the Mother had commenced another relationship.
• The Father filed an Initiating Application seeking to set aside the child support agreement as from 17 July 2009 (the date from which arrears had started to accrue).
• Between the time the child support agreement was entered into and the Father made his Application, relevant parts of the Child Support Legislation Amendment (Reform of the
Child Support Scheme – New Formula and Other Measures) Act 2006 (Cth) (“the
Amending Act”) came into force, which had the effect of amending the Child Support
(Assessment) Act 1989 (Cth) (“the Assessment Act”). In particular, the Amending Act
introduced concepts of “binding child support agreements” and “limited child support agreements”. It also reformulated the provisions of Section 136 with respect to the circumstances in which child support agreements could be set aside.
• In accordance with the new legislation, the Court may set aside a binding child support agreement if the Court is satisfied that:
1. the party’s agreement was obtained by fraud or a failure to disclose material information; or
2. that another party to the agreement, or someone acting for another party exerted undue influence or duress in obtaining that agreement or engaged in unconscionable or other conduct to such an extent that it would be unjust not to set aside the agreement; or
3. in the case of a binding child support agreement—that because of exceptional circumstances, relating to a party to the agreement or a child in respect of whom the agreement is made, that have arisen since the agreement was made, the applicant or the child will suffer hardship if the agreement is not set aside.
• The Court considered that the child support agreement in question was a “binding child support agreement” and that the Father was required to satisfy the current provisions of Section 136 of the Assessment Act in order to succeed with his application.
• The Father sought to have the child support agreement set aside on the basis of "exceptional circumstances" for the following reasons:
o That there had been a substantial reduction in his net income since making the child support agreement, namely a reduction in distributions received by him from a family trust known as the Appleton Family Trust.
o That the binding financial agreement was generous, particularly in circumstances where his ability to vary the child support agreement had been affected by retrospective legislation.
o That the level of child support required to be paid relative to a formula assessment was very high.
o That he had been required to dispose of assets in order to meet his ongoing financial commitments under the child support agreement.
o That the global financial crisis had had a significant effect on the nature of his business activities, such crisis being unforeseen at the time of entering into the agreement.
o That he was unable to adequately support himself from his remaining net income after his child support commitments were met.
o That he was unable to continue to meet his child support commitments without the sale of assets.
o That in the past he had sold assets, including a share of the Appleton Family Trust to meet his financial obligations.
o That the level of his child support commitments were unsustainable.
o That there had been a change in the tax treatment of distributions from the Appleton Family Trust as a result of an ATO taxation ruling, reducing his income and creating tax liabilities.
• Interim orders were made restraining the Mother from enforcing the child support agreement, or payment of the accrued arrears, pending determination of the Father’s application.
Law:
• The Court rejected the Father’s submission that he was in effect prejudiced by retrospective legislation. The Father received independent legal advice before entering into the agreement and understood the obligations to which he agreed and the consequences arising therefrom.
• The Court rejected the Father’s submission that the disparity between the child support payable under the agreement and the child support that would be payable pursuant to a legislative formula is a reason why there are exceptional circumstances and hardship occasioned to the Father. The Father must have or should have understood when he entered into the child support agreement that he was agreeing to pay child support considerably in excess of the amount that would be payable under the legislative formula.
• The Court rejected the Father’s submission that a recent ATO taxation ruling placing limitations upon his ability to distribute income under the Appleton Family Trust was a material consideration in respect of either exceptional circumstances or hardship. The Court found that the Father did not even begin using the tax-effective structure in question until well after the child support agreement was struck.
• The Court stated that, in essence, the Father's grievance was that for various reasons his capital and income had diminished to the point where he was simply unable to maintain the generous child support payments demanded by the child support agreement. The Court stated that the Father’s case rose or fell on whether the deterioration in his financial circumstances since the agreement was made constituted exceptional circumstances by reason of which he would suffer hardship if the child support agreement was not set aside.
• His Honour Austin J referred to Venson & Venson (No. 2) [2010] FamCA 963.
o “The test of “exceptional circumstances” has been the subject of judicial
interpretation in respect of s 136(2)(d) of the Act (see Balzano & Balzano [2010] FamCAFC 11; (2010) FLC 98-048 at [38-41]) and also s 79A of the Family Law Act 1975 (Cth) (see Christian & Donald [2008] FamCAFC 44 at [34-45]; Marriage of Simpson & Hamlin (1984) 9 Fam LR 1040 at 1045). The term “exceptional circumstances” has not been defined with precision, but generally encompasses events which are quite extraordinary, which occurred unexpectedly, and
which could not have been reasonably foreseen or contemplated. Those features incorporate both subjective and objective considerations. Although that is the general characterisation, neither one nor all of those characteristics is either necessary or sufficient to meet the test. It is a question of fact and degree in each case."
• His Honour looked at the Father’s financial affairs and noted that immediately preceding the parties’ entry into the child support agreement, the father’s annual income had been on an upward trajectory. However, shortly after entering the agreement, the trend of escalating income ceased. The Father attributed that to the onset of the global financial crisis. In general, the Court acknowledged that after entering the child support agreement, the Father’s income had decreased, he’d sold a key capital asset and his liabilities had increased.
• However, the Court accepted the Mother’s submissions that the decrease in the Father’s financial position was of a temporary nature and that the Father had contributed to his own demise. The Father had voluntarily entered into certain transactions which increased his liabilities, failed to curb his expenditure and continued to live an enviable lifestyle. For example, he’d moved into a more expensive residence, gone on overseas holidays and purchased a new luxury BMW motor vehicle. He also made considerable
provision for his new partner, Ms N, by paying all joint household expenses, allowing her to incur substantial credit on his accounts, transferring funds into her banking accounts, frequently giving her cash sums, paying legal fees for her and leasing a car for her. The Court noted that the Father had continued to make expenditure of a discretionary nature on leisure and entertainment, such as the purchase of apparel at David Jones and subscriptions to internet dating websites, at the expense of meeting child support payments in full.
• His Honour also noted the case of Balzano v Balzano [2010] Fam CAFC 11:
o There need not be a direct temporal correlation between a child support liability
and the capacity of the payer to pay the child support. The absence of such a
correlation does not of itself constitute exceptional circumstances or hardship.
• Further, the parties expressly agreed that the Father would make generous child support payments as consideration for the Mother agreeing to the division of assets under the binding financial agreement. The two agreements were entered into as consideration for one another so that the resolution of the parties’ legal affairs was achieved as a package. If the child support payments were reduced as a consequence of the child support agreement now being set aside, the Mother would be faced with the prospect of still being bound by the terms of the binding financial agreement. Self-evidently, that would sound in some degree of unfairness to the Mother.
• For those reasons, the Court was not persuaded that the Father had demonstrated the circumstances necessary to warrant the invocation of Section 136(2)(d) of the Assessment Act in order to set aside the child support agreement.
6. Property Division where Parties Insolvent
Athanastos & Athanastos [2011] FamCA 66 Family Court of Australia - Cohen J
Facts:
• The property dispute of the parties was beset with major difficulties, including: o The values of major items of property were unclear.
o There was a substantial deficit of assets over debts. o There was a lack of evidence about contributions.
o Both parties lacked credit. The wife was not candid about her earnings and the husband failed to disclose important documents relating to his businesses.
• The assets of the parties comprised a joint interest in a property at S, personalty and effects and some superannuation. There was also a property at A owned by the Wife.
• The debts of the parties comprised two joint mortgages, a joint credit card, the Wife's credit card, the Husband's 6 credit cards, a joint overdraft facility and a loan to the Wife from her sister.
• In total, at the very least, the net debt of the parties was said to be $271,732. They were both likely to become bankrupt.
• Both parties incurred significant debts throughout the relationship. In particular, both parties had a substantial gambling problem.
Law:
• The question for the Court was how to settle the parties’ property and debts so that they would fall in a just and equitable manner.
• In terms of initial contributions, the Wife contributed a property, car, savings and a sales business (as well as some debts) whereas the Husband contributed nothing.
• In terms of contributions during the marriage, both parties worked. The Court considered that the Wife made a significant contribution as homemaker and parent, whereas the
Husband did not. The Wife made mortgage payments whereas the Husband did not. The Wife's family also made significant contributions.
• The parties both gambled irresponsibly, "as might be expected from people who met in a casino". The Wife said that she observed the Husband betting and losing larger amounts than she did. He would carry “large amounts of cash” and when he lost he would draw on credit cards and often require his personal assistant to deliver cash to the casino. The Court considered it was likely that the Husband wasted more money gambling than the Wife.
• The Wife took steps to obtain treatment and counselling for her addiction, with good results. The Wife alleged that the Husband continued to gamble.
• The Court considered that the contributions by the parties during the course of their cohabitation were likely to have been greatly in favour of the Wife.
• In terms of future needs, both the Husband and the Wife claimed to earn low income, which the Court did not accept. The Wife had the care of the children going forward and constraints upon her income-earning capacity.
• In the Court's assessment, justice required that the Husband share a greater burden of the parties’ debts than the Wife. However, given the construction of the asset pool, the only realistic thing the Court could do was to order the transfer to her of the Husband’s interest in the S property, in the hope that one day it could be sold for a reasonable price or otherwise taken from her by a bankruptcy trustee, to reduce her bankruptcy debt. To transfer some of the joint indebtedness to the Husband would be in vain as such an order would not affect the creditor’s rights to look to the Wife for payment. An order that the Husband indemnify her was likely to be useless.
7. Sham Transactions
Bourke v Bourke and Another (Final Hearing Costs) (2010) 43 Fam LR 139 Family Court of Australia - Cohen J
Facts:
• This was a judgment on a discrete issue within property proceedings, being whether the disposition of real property was made to defeat an anticipated order under the Act and could therefore be set aside under Section 106B of the Act.
• In June 2002, the Husband entered into a joint venture with his friend (Mr O) and a company controlled by Mr O (third party), to purchase land and develop units.
• On 29 March 2006, the Husband and Wife separated on a final basis.
• On 15 August 2006, the Husband sold one of the units, owned by him, to the third party, for a consideration price of $235,000.
• The consideration was never paid. It was recorded in the third party’s financial statements as a partial repayment of debt owed by the Husband in relation to the joint venture. The third party later alleged a further debt of $99,000, and proposed to claim it against the matrimonial estate.
• The Wife alleged that the disposition of the subject property was a sham, or, alternatively, was made to defeat an anticipated order, or with the knowledge that it was likely to defeat an anticipated order.
• The Wife sought to have the disposition set aside and have the subject property transferred to her as just and equitable property settlement.
Law
• Section 106B of the Act provides as follows:
1. In proceedings under this Act, the court may set aside … disposition by … a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
2. The court may order that any money or real or personal property dealt with by any … disposition referred to in subsection (1) … may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale must be paid into court to abide its order.
3. The court must 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. A party or a person acting in collusion with a party may be ordered to pay the costs of any other party or of a bona fide purchaser or other person interested of and incidental to any such instrument or disposition and the setting aside or restraining of the instrument or disposition.
5. In this section: "disposition" includes: (a) a sale or gift …"interest": (a) in a company includes: (i) a share in or debenture of the company.
• Murphy J held as follows:
o If a sham was established, a disposition could clearly be set aside.
o On the facts, the disposition had an ‘aura of collusion and concoction’, but there was insufficient evidence to prove a sham (i.e. deliberate, collusive fraud between the Husband and Mr O).
o However, His Honour considered that a reasonable person in the position of the Husband would have anticipated an order being made at the time of the disposition.
o His Honour considered that if the pre-conditions of Section106B were met, the court’s discretion was enlivened and was controlled and measured by the justice of the situation and, in that respect, proper consideration of a bona fide purchaser or other person interested.
o The third party here was not a disinterested purchaser. However, the disposition was not an arms-length commercial transaction and the interests of the third party did not stand in the way of the disposition being set aside.
o His Honour considered that the justice and equity of the situation required that any debt allegedly owing by the Husband should not be taken up as a liability of the parties in Section 79 proceedings in reducing the available pool of property.
Rather, any such debt (if it exists) was a matter more justly left to litigation between the third party and the Husband.
His Honour ordered that the disposition be set aside, and that the Husband then transfer the subject property to the Wife to effect a just and equitable settlement of property.
