Trust is the First Casualty

In a recent divorce case called Lane & Lane the parties thought they had got the right result by fair means, one of the parties then believed they got the wrong result by unfair means, a trial judge decided they got the right result for the wrong reasons, and in the Full Court, two of three judges decided the judge got the right result for the wrong reasons.

After agreeing to the terms of financial settlement, the parties applied to the Family Court to give effect to that settlement by consent. To do this, each party discloses his and her financial position and the net effect of the settlement.

Mr Lane said he was worth $187,000. He was also a beneficiary of a Trust but said he did not know its worth. The wife said that she was worth $38,200. The parties settled, and agreed the husband would pay the wife $100,000.

In 2010, Mrs Lane applied to the Family Court to set aside these Orders claiming they were obtained by suppression of evidence. She said he knew very well that the Trust was worth: quite a lot but she did not know.  He told neither her, nor the court.  On her revised figures, the wife got 15% and the husband 85%.

Section 79(A)(1)(a) says that a Court Order can be set aside if there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence, the giving of false evidence or any other circumstance. The court then may vary the Order or set it aside and if appropriate, substitute another Order in for it.

The husband said that the wife knew about the Trust even if she didn't know its value. The trial judge decided that the wife could not show she agreed to the Orders because of his suppressing evidence. However, the judge found that the wife had had legal advice, and that the fact that what she got was, in her view, manifestly inadequate, did not make a miscarriage of justice.

The appeal judges said that three steps had to be taken. First, the wife had to establish that the husband had suppressed relevant evidence. Second, if she could, did the suppression of evidence amount to a miscarriage of justice. Third, if both of those things could be established, the Court had to decide whether to set aside or vary the Orders.

It was shown that when the husband denied knowing the Trust's value he had the accounts valuing it at $812,735. He later applied for a bank loan by showing the value of the Trust and his personal assets to be $1.8 million and $1.7 million, respectively. Therefore, the first step was satisfied: evidence of significance had been supressed and the Court and the wife were misled about the value of the husband's assets. The Full Court found that because she did not know the value of the Trust, she did not join in the suppression of relevant information. This suppression of evidence affected the Court's approval of the original Consent Orders.  The court was misled.

But was there a miscarriage of justice? The correct question for the trial judge to have answered was whether the Court was misled.  It was.  

But the final step had to be taken: if there is a miscarriage of justice, does that mean that the Orders get torn up? Here, oddly enough, the two Appeal Court Judges returned to the material that the trial judge wrongly referred to in deciding whether evidence was suppressed. They agreed that the wife knew a good deal about the Trust and its significance. Therefore, the appeal judges, having decided that the judge had erred in two of the three steps, joined him in taking the final step by refusing the appeal and refusing to set aside the original Orders.  She didn't know everything, but she knew enough.