Family law orders can counteract fake transactions

Family Law Orders can counteract Fake Transactions 

Under Section 106B of the Family Law Act, the Family Law Courts have power to set aside, cancel (or restrain) the making of a transaction by a party to proceedings, which is made or proposed to be made to  defeat the interest of their spouse/other party in those family law proceedings.

Sample Fake Transaction:

For example, if a couple have separated and the husband does not want the wife to be able to make any claim against an investment property he owns.  He quickly transfers it to his brother.  He then alleges the only assets there are to divide between him and his wife are the matrimonial home and 2 cars and says the investment was “never the property of the parties”.  The wife tells her solicitor that she is pretty sure that her husband had put money into another property but is not sure of the address but believes that her husband’s brother or father may be also involved. After some title searches are done by the solicitor,  it is revealed the property that was once in the name of the husband was recently transferred to his brother.

Types of Court Orders

In such a situation if the wife makes an application, the Court can make any of the following orders:

  • The Court may order that any money the husband received for the transfer be paid into court pending further orders;
  • If it is found that the brother was acting in collusion with the husband, the brother may be ordered to pay the legal costs of the wife in addition to the husband;
  • If no payment was received for the transfer the Court may make an order to reverse or invalidate the transfer so the property goes back into the name of the husband awaiting further orders for division of property between the husband and the wife;
  • Other orders to assist with rectifying the situation as it was prior to the fake transfer.

What happens when the separated couple do a fake transaction to try to move the assets away from the hands of banks and creditors and bankruptcy trustees?

Similar provision is made for banks and creditors where one or both of the parties in the family law proceedings have made transfers and transactions attempting to keep the property out of the reach of creditors.  If one of the parties is bankrupt, then their Bankruptcy Trustee will not only have specific power under the bankruptcy legislation to seek reversal of certain transactions, but the Trustee also can seek orders from the family law courts to protect it’s position  and the position of creditors using section 106B.

Wide power of the Family Law Courts

When challenges have been put to the Court about it’s power to make certain orders against Third Parties outside of the marriage, the Court has often taken the view that provided there is jurisdiction, the Court can use it’s discretion in making orders under this power. In the case of Yunghanns (1999) the Full Court of the Family Court of Australia reviewed the question of how courts of limited jurisdiction could have such powers and stated:

 “Before making orders in proceedings, including interlocutory orders, the Family Court of Australia as a court of limited jurisdiction must be satisfied (a) that it has jurisdiction to make those orders in the proceedings and (b) that it is appropriate to exercise that jurisdiction by making those orders on the facts of the case as then known to it.”

 “The court always has jurisdiction to entertain proceedings for the purpose of and up to the point of deciding whether it has jurisdiction to make the orders sought in the proceeding.”

The moral of the story is that you are at the mercy of the Family Law Courts if you try to get away with fake transactions when alleging there is a smaller property pool to divide between spouses.

By Maria Rigoli, Accredited Family Law Specialist

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Maria Rigoli is the principal and founder of Rigoli Lawyers which is a specialist law practice  accredited by the Law Institute of Victoria. Maria has over 23 years experience as a lawyer and her speciality areas are complex family law property disputes, business, superannuation death benefits and inheritance disputes. Maria is also an Accredited Family Law Specialist and a barrister and solicitor of the Supreme Court of Victoria and High Court of Australia and is also an expert author.


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