Higgins’ $2.4m payout could be protected

EXCLUSIVE

Legal experts believe Liberal Senator Linda Reynolds could struggle to recover her costs if she wins her defamation case against Brittany Higgins because a $2.4 million compensation payout may be “protected” if the former political staffer is forced into bankruptcy.

The legal question may turn on a section of the Bankruptcy Act and whether or not damages for personal injury or a wrong done to the bankrupt are recoverable in these circumstances

Senator Linda Reynolds is facing steep legal bills. Her lawyer says the politician has been forced to remortgage her house to fund legal representation.

It follows Senator Reynolds’ legal attempts to “freeze” Ms Higgins assets, seek legal advice on the status of her French home and gain information about a trust established to manage the payout.

Emeritus Professor Christoper Symes is one of Australia’s pre-eminent insolvency law researchers.

While Prof Symes is not involved in the case, he said the issue of whether or not Brittany Higgins could ever be forced to hand over the money if she loses the defamation case was a fascinating legal question.

Prof Symes said he was surprised after reading the relevant case to law to surmise that the money probably was protected.

“I would lean towards it being protected,’’ he said.

“Look, I reckon, the trustee in bankruptcy would take it on, they would sort of say, you know, ‘I’ve got this property. I want to grab it’.

But he said the whole matter would likely end up back in the court.

The legal question that would arise if Ms Higgins loses and is forced into bankruptcy is whether or not funds received from a 2022 compensation payout from the Commonwealth could be accessed by her former boss.

“I think it probably comes down to is this damages and compensation or is it something else?’’ Prof Symes said.

Brittany ‘doesn’t have deep pockets’

“Before you sue anybody, you basically do a search of property registers to see whether they own any land and so you know, you want to sue the people with deep pockets,” Prof Symes said.

“Brittany Higgins is hardly a person with deep pockets because you know, she was 23 (when it happened) and OK she got a payout but you know, that’s, that’s about it. You tip her upside down and she’s not going to have a lot more.”

Ms Higgins told the Federal Court she received around $1.9 million after taxes and legal fees and has not worked since 2021 and is living off the proceeds of the payout. She has been repeatedly hospitalised for mental health reasons since that time.

Last month Justice Michael Lee found that the former Liberal staffer was raped in Senator Reynolds’ ministerial office by Bruce Lehrmann.

News.com.au has contacted Senator Reynolds and her legal representatives for comment.

‘Exempt’: Law expert on Higgins’ $2.4m payout

Professor Jason Harris, a specialist in corporate law, insolvency law and commercial law in the Sydney Law School and director at the Ross Parsons Centre of Commercial, Corporate and Taxation Law said that his reading of the deed of settlement suggests the proceeds could be protected even if Senator Reynolds wins the case.

“A payment of compensation for a wrong done to a person (either before or during bankruptcy) is exempt from distribution to creditors if the person becomes bankrupt,’’ Professor Harris said.

“A wrong done to the person would include actions such as personal injury or defamation. The deed …shows the claims are for victimisation and discrimination rather than say unfair dismissal, so they would be likely to come within the exception.”

Professor Harris said assets bought with exempt money – such as compensation funds – were also “exempt from distribution to creditors”.

“A settlement deed would still involve payment of compensation for personal wrongs, you don’t need a formal court order of payment in order to come within the exception.”

Professor Harris said there were ways however to exit bankruptcy early, like the method that businessman Alan Bond had used.

“If (Brittany Higgins) declared bankruptcy in anticipation of an adverse order or was made bankrupt by Ms Reynolds following a successful outcome and a court order for payment and costs, then Ms Higgins would remain bankrupt for 3 years,” he said.

“There is an option to provide creditors with a deal by including non-distributable assets/money (this is called a s73 composition, and was used by Alan Bond years ago to exit bankruptcy), which if accepted by the creditors (which would include Ms Reynolds) will allow the bankrupt to exit bankruptcy early.

“So she could go bankrupt and then propose a composition to get out of bankruptcy early. Bankruptcy would require Ms Higgins to come under the supervision of her bankruptcy trustee and she would have to report her income and may need to make annual contributions to her creditors out of her income for each of the years that she is bankrupt. She would also have to disclose all of her assets and liabilities.”

Higgins’ fiancee will not fight case

Senator Reynolds has begun separate defamation proceedings against Ms Higgins and her fiancé David Sharaz in the WA Supreme Court.

It’s already expected that the case will force Mr Sharaz into bankruptcy.

Ms Reynolds’ lawyer has predicted David Sharaz will end up “bankrupt” and criticised Brittany Higgins’ fiancé for crying poor while living in a French “chateau.”

Mr Sharaz announced in March that he was throwing in the towel and no longer had the financial resources to fight the defamation case.

The unemployed expat has not held a full-time job since he parted ways with a Brisbane radio station shortly after Senator Reynolds announced she was suing him for defamation over social media posts in 2023.

Senator Reynolds’ defamation lawyer Martin Bennett said he had defamed his client and that the case against Mr Sharaz would proceed regardless of whether or not he was legally represented.

“If he’s impecunious as he asserts in France, he’ll go bankrupt,” he said.

“He defamed my client. You can jump off litigation but it’s a costly exercise.”

Mr Sharaz said he could not afford the ongoing legal battle against Senator Reynolds.

“Despite our best efforts, Linda Reynolds has not accepted attempts to resolve this matter through mediation and Brittany may now be exposed to another trial. It will be her third,” he said.

“I cannot afford to pay legal costs to defend myself over a six-week trial.

“As a result, I have today informed the court that I will not fight Reynolds’ legal action anymore.

“I now appeal for Senator Reynolds to settle her litigation against Brittany, a rape victim, by agreeing to disagree and putting all of this behind them.

“It’s time to move on. It’s time to let Brittany heal.”

Senator Linda Reynolds is suing Mr Sharaz over tweets he made and a Facebook comment in 2022.

Her statement of claim includes references to imputations that her lawyers say was carried by the social media posts.

She also claims she was also defamed by Mr Sharaz’s reply to a comment on her Facebook page that asked how she was still in politics having “destroyed” Ms Higgins.

The commenter added, “You’re a monster who deserves to be in jail”.

According to the statement of claim, Mr Sharaz then responded: “Thanks for reminding her. I hope she hears this every day until she dies”.

If an agreement cannot be reached during the second round of mediation talks, the trio will face off in the WA Supreme Court for a three-week trial next month.