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Couple's odd bid to split assets, not the marriage

An attempto hide remove assets from the reach of creditors using FCofA

Couple's odd bid to split assets, not the marriage

27 October 2003

He's wealthy. The marriage is intact. So why is the Family Court worried that his wife has ended up with most of their property? Elisabeth Sexton writes.

The husband was represented by the leading family law barrister Grahame Richardson, SC, who described his client as "not impecunious" (having little or no money).

Counsel for the wife, Malcolm Broun, QC, arrived with sworn statements, including one from the nanny, about the potential impact of the case on the children. But the two silks were not in dispute. They sat next to each other in court 7A of the Lionel Bowen Building in Goulburn Street on Friday and put forward similar arguments. That's understandable, because the couple have not separated.

So what were they doing in the Family Court?

According to a third barrister on the opposite side of the bar table, the case had nothing to do with family law at all.

Paul Brereton, SC, said the couple's aim was to defeat people who were owed a lot of money by the husband. And they had received ethically dubious advice from their solicitors that they could hide behind the Family Law Act to do so.

Mr Brereton appeared for a government agency which is trying to overturn a gift of property from the husband to the wife.

The Herald is unable to name the agency or the couple because of the privacy provisions of the Family Law Act.

The case, the first of its kind, hit an initial hurdle on October 15, when Justice Stephen O'Ryan ruled that he did not have jurisdiction to hear it because there was no dispute before the court between the husband and wife.

But the Federal Government is concerned that this could put questionable asset transfers beyond challenge.

A spokesman for the Attorney-General, Philip Ruddock, said yesterday he was "looking at amendments that would deal with the jurisdiction issue and how they might be urgently progressed".

Mr Brereton's client is also planning a fresh case in the NSW Supreme Court, using a section of the Conveyancing Act that allows the court to overturn any property transfer made "with intent to defraud creditors".

The case is the first challenge to a controversial rule that came into force in December 2000 and allows couples to sign binding financial agreements without separating or divorcing. All they need are certificates signed by their lawyers showing that both parties had proper legal advice before the documents were signed.

It emerged on Friday that Justice O'Ryan had found that Mr Brereton had an arguable case that the couple had made a deliberate attempt to use the mechanism of the Family Law Act to put assets beyond the reach of creditors "while one spouse is facing substantial liabilities".

At first blush, the advice from the wife's solicitor that a Family Court judge might order that she receive so much of the family property stretched credulity, the court heard. And while it remained open whether the transfer had broken the law, the judge had also queried whether it was ethical for solicitors to advise clients to enter such agreements.

Mr Brereton asked Justice O'Ryan to waive the usual privacy provisions because the matter "does not begin to touch on personal issues." The act was "never intended to protect the affairs of those who mix their private affairs with their public affairs and their public roles".

Mr Brereton also argued that solicitors who advise their clients to enter such arrangements needed to know that Justice O'Ryan had found they might be breaching professional ethics.

"Not just the profession needs to know, the public needs to know that what [the husband and wife] are alleged to have done is not ethical. Mr and Mrs Smith should be able to read The Sydney Morning Herald and say we can't do what (the couple in question) seem to have done, at least we can't do it ethically."

Mr Richardson and Mr Broun argued that the full judgement and the identity of their clients should not be published because Justice O'Ryan had only examined the issue of jurisdiction.

"Despite the gravity of the allegations there are no findings as yet," Mr Richardson said.

Mr Broun said: "It's by no means a lay-down case that (the agency) may succeed when the full history of the financial relationship between (the husband and wife) is examined." A full investigation "might show the agreement is not as odd as it looks".

Justice O'Ryan reserved his decision on publishing his full reasons and the identities of the parties.

What is done for you, let it be done, what you must do, be sure you do it, as the wise person does today that what the fool will do in three days - Buddha
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