What is the impact of a failure to disclose an asset or a debt when filing a consent order?
When a client reaches an agreement with their former partner about the division of their property, we make it our first point to say congratulations as it means they can finally draw a line in the sand and start to move on with their life.
But what if you and/or your ex partner fail to disclose an asset or a debt in the consent order that is relevant and significant to the outcome of the matter?
In these circumstances it is possible for the agreement to be varied or set aside so that the disadvantaged party can re-open all or part of the property settlement, pursuant to section 79A Family Law Act 1975.
But what if both parties are conscious of the suppression of evidence of a debt in their application for consent orders such that arguably neither party is disadvantaged directly in the consent orders being made and neither party wants the consent orders set aside?
Beware, whether you or your ex partner hides a relevant fact, asset or debt, in appropriate circumstances, even where you have no knowledge of the failure to disclose, you could find yourself in the same position as the parties in the matter of Trustee of the Bankrupt Estate of Hicks & Hicks and Anor  FamCAFC 37 where the consent orders were set aside.
Read on to find out what they did to derail their own consent order agreement.
Case Study: Trustee of the Bankrupt Estate of Hicks & Hicks and Anor  – Failure to Disclose 606K debt in their application for consent orders
In Trustee of the Bankrupt Estate of Hicks & Kicks and Anor  FamCAFC 37 the majority of the Family Court allowed an appeal by the Trustee in Bankruptcy against a decision of the Primary Judge to dismiss an application by the Trustee in Bankruptcy to set aside consent orders made by Mr and Mrs Hicks.
The trustee argued at trial that the consent orders should be set aside as the parties had entered into the consent orders with the intention to defeat a creditor by applying for those orders without divulging to the Court in the consent orders that “Mr S” was suing Mr Hicks for $606,000 (judgment was entered against him a week after the orders were made) or notifying Mr S of the orders they proposed.
At first instance, Mrs Hicks conceded that there was a miscarriage of justice but she persuaded the Court not to set aside the consent orders.. The Trial Judge found that Mrs Hicks had no involvement in Mr Hicks debt to Mr S, the debt was not incurred for a matrimonial objective and the trustee of bankruptcy would find itself in no better position if the order were set aside.
The Court of Appeal however found that the Trial Judge had not taken into account the likely outcome of the property settlement proceedings if the orders were set aside. It was further held that the debt of $606K was incurred during the marriage and the projects which were linked to the loan (for which the judgement debt of 606K became payable) were intended to benefit the marriage relationship.
In conclusion, Justice Murphy stated:
“ . . . It would in my view be . . . a highly exceptional case for a conscious abuse of the court’s process – in effect a fraud on the court – to not result in orders being set aside . . .”
What have we learned?
Failure to disclose an asset or a debt in a consent order that is relevant and significant to the outcome of your matter may result in your consent orders being set aside, regardless of whether the asset or debt is in your name or that of your ex partner.
Beware of any failure to disclose
If you have reached an agreement with your ex partner in relation to the division of your assets, it is important that you seek legal advice with respect to the nature of the agreement and the drafting of the agreement to ensure it ticks all the boxes and that there is no risk your agreement will later be set aside by your ex partner or a third party creditor.