Defaulting on orders can be disastrous – FamCAFC 77

In Blackwell & Scott [2017] FamCAFC 77 (28 April 2017) the parties obtained consent orders for an equal division of their property. Under the consent orders Mr Blackwell was required to pay Ms Scott $130,000 within 90 days of the date of the orders in exchange for the Ms Scott transferring to the husband all ofher right, title and interest in an investment property. This represented an equal distribution of property between them.

Mr Blackwell delayed payment for 13 months. During that time the investment property’s value increased by hundreds of thousands of dollars. As a result, Ms Scott received far less than half the property pool. Ms Scott commenced an application to have the consent orders set aside. That application was successful before the trial judge.

Mr Blackwell appealed. Under section 90SN of the Family Law Act 1975, the court can vary or set aside property orders for various reasons, including of the circumstances of the default mean that the effect of the orders are no longer just and equitable. Judge Aldridge said in the appeal:

Thus whilst it is entirely correct to say that the husband’s default did not case the house price to rise, that is not the relevant enquiry. The relevant enquiry is whether the circumstances have arisen as a result of the husband’s default that would make it just and equitable to reconsider the earlier orders. The circumstances that arose were that, as a common-sense proposition, the wife received significantly less than an equal division of the property and the husband received considerably more. That difference resulted directly from the husband’s delay in complying with the orders.

As a result of his delay, Mr Blackwell was required to pay Ms Scott hundreds of thousands more than the $130,000 he was required to pay under the original consent orders.

Goodman & Hallett [2014] FamCAFC 142

In Goodman & Hallett [2014] FamCAFC 142 the parties disputed they date upon which they ceased to live together on a genuine domestic basis by some 10 years.

The parties had a relationship from 1991 to 2000 and resided with one another in a house owned by a Mr Cadman. However, according to Mr Cadman, this relationship ceased in 2000. Mr Hallett, Mr Cadman’s gay partner, stated that this was not the end of the relationship and that the relationship did not effectively cease until 2010. According to Mr Hallett, the end of the relationship came in 2010 when Mr Cadman changed his will to significantly diminish the amount Mr Hallett was entitled to under Mr Cadman’s will.

Mr Hallett, in support of his argument, noted that even whilst he resided in the United States, and was not even living with Mr Cadman or involved in a sexual relationship with him, Mr Cadman continued to provide Mr Hallett with financial support and never communicated an intention that the relationship was over. At first instance the trial judge sound that the intention to separate was made in 2010 when Mr Cadman changed his will to significantly diminish the entitlement of Mr Hallett under his will.

Mr Cadman appealed. The Full Court upheld the trial judge’s decision that Mr Cadman first communicated his intention to end the relationship in 2010 when he changed his will to significantly diminish the entitlement of Mr Hallett under his will. On such basisand given Mr Cadman’s support of Mr Hallett whilst he was in the United States the Full Court held that the parties were living together on a domestic basis notwithstanding that the relationship involved periods during which there was no sexual relationship between the parties.

Defaulting on orders can be disastrous

In Blackwell & Scott [2017] FamCAFC 77 (28 April 2017) the parties obtained consent orders for an equal division of their property. Under the consent orders Mr Blackwell was required to pay Ms Scott $130,000 within 90 days of the date of the orders in exchange for the Ms Scott transferring to the husband all ofher right, title and interest in an investment property. This represented an equal distribution of property between them.

Mr Blackwell delayed payment for 13 months. During that time the investment property’s value increased by hundreds of thousands of dollars. As a result, Ms Scott received far less than half the property pool. Ms Scott commenced an application to have the consent orders set aside. That application was successful before the trial judge.

Mr Blackwell appealed. Under section 90SN of the Family Law Act 1975, the court can vary or set aside property orders for various reasons, including of the circumstances of the default mean that the effect of the orders are no longer just and equitable. Judge Aldridge said in the appeal:

Thus whilst it is entirely correct to say that the husband’s default did not case the house price to rise, that is not the relevant enquiry. The relevant enquiry is whether the circumstances have arisen as a result of the husband’s default that would make it just and equitable to reconsider the earlier orders. The circumstances that arose were that, as a common-sense proposition, the wife received significantly less than an equal division of the property and the husband received considerably more. That difference resulted directly from the husband’s delay in complying with the orders.

As a result of his delay, Mr Blackwell was required to pay Ms Scott hundreds of thousands more than the $130,000 he was required to pay under the original consent orders.

Violence and parenting

In Stott & Holger and Anor [2017] FamFC 152 a maternal grandmother successfully appealed an order of the Family Court of Australia that permitted a 10-year-old child who lived with her to spend time with his father who had a history of serious violence.

In reaching its decision, the Full Court of the Family Court of Australia noted the test of unacceptable risk and the fact that when an unacceptable risk is alleged it is incumbent upon the Court to give a real and substantial consideration to the facts of the case and whether those facts could be said to give rise to an unacceptable risk.

On the facts before the primary judge it was evident that the father had a propensity towards violence and aggression, which propensity was, in part, established by his lengthy criminal history. The Full Court held that the primary judge did not undertake appropriate consideration of this propensity in arriving at its conclusion that it was appropriate for the young boy to spend time with his father.

In reaching its conclusion that the primary judge did not give real and substantial consideration to the facts of the case and whether those facts could be said to give rise to an unacceptable risk, the Full Court of the Family Court of Australia said:

[39] We find merit in the argument that this did not occur here …

[40] All the more is this so in the face of findings by the primary judge that the father seemed incapable of accepting his history and was dismissive of his propensity to violence … the father’s trenchant denials accompanied by “barely restrained anger when giving evidence” and being “aggressive” and at times raising his voice “to a frightening level” … and findings that the father was not a truthful witness about either his criminal history or the nature of his engagement historically with the child’s mother …

The Family Court can direct the Commissioner of Taxation to substitute husband for wife in relation to tax debt

The Family Court can direct the Commissioner of Taxation to substitute husband for wife in relation to tax debt
In Tomaras&Tomaras and Anor and Commissioner of Taxation [2017] FamCAFC 216 the Full Court of the Family Court of Australia considered whether section 90AE of the Family Law Act 1975 (Cth) (the Act) conferred power on a court to make an order that the husband be substituted for the wife as debtor to the Commissioner of Taxation for the sum of $256,078 plus interest.

The Commissioner for Taxation relied on Bropho v State of Western Australia [1990] HCA 24 arguing that the Court must presume that general statutory provisions like s 90AE do not bind the Crown.

Thackray& Strickland JJ found the presumption that the Crown is not bound by a statute applies only to provisions which impose an obligation or restraint upon the Crown.  In their view, it was reasonable that section 90AE benefits the Crown since:

  • It would transfer responsibility for paying a tax liability from a person who could not afford to pay it to someone who could;
  • Instead of one spouse being liable to pay a tax liability, both spouses may be held liable;
  • While an order might be made leaving the less wealthy spouse to pay the tax liability, such an order could not be made if the less wealthy spouse could not afford to pay; and
  • The Act permits the court to make such orders it considers just for the payment of the reasonable expenses of the creditor incurred as a necessary result of the order.

Thackray& Strickland JJ also found that section 90AE could only operate to the detriment of the Crown if the court made an order that:

  • Relieved a spouse of their obligation to pay tax which they would have paid if the order had not been made; and
  • Instead imposed the obligation to pay tax on a spouse who, although appearing to be able to pay the liability, was in fact unable to pay for some unforeseeable reason.

Accordingly, Thackray& Strickland JJ determined that the possibility that the Commissioner for Taxation would be adversely affected by an order under section 90AE does not arise by operation of the Act itself but only by an unforeseeable event that could not reasonably have been anticipated by both the Court and the Commissioner for Taxation.

What are the steps involved in property settlement?

When arriving at property settlement orders, the court undertakes a four-step process. Step 1: The court will determine the assets and liabilities of the parties. This includes superannuation entitlements as well as assets held personally, jointly or in trusts, businesses or companies. Step 2: The court will determine the contributions each party has made to the acquisition, preservation, improvement or maintenance of any asset. Financial as well as non-financial contributions, as well as contributions as a parent and homemaker, are considered. Step 3: The court will consider the future needs of each party, matters such as who has the care and control of children as well as the respective earning capacities of the parties. Step 4: The court will consider whether the orders and settlement it proposes to make are/is just and equitable.

Once the court has completed this four-step process, the marital pool of assets will be divided between the parties in the proportion the court considers just and equitable in the circumstances of the case.

The Marriage Amendment (Definition and Religious Freedoms) Act 2017 (Cth)

The Marriage Amendment (Definition and Religious Freedoms) Act 2017 (Cth)(Marriage Amendment Act) which came into force on 9 December 2017 legalises same-sex marriage in Australia.

In brief the Marriage Amendment Act contains amendments to the Marriage Act 1961 (Cth) (Marriage Act) and other relevant legislation.  Some of the most significant amendments are listed below:

The main amendments to the Marriage Act include:

  • Creating a legal framework to “allow civil celebrants to solemnise marriage, understood as the union of 2 people to the exclusion of all others, voluntarily entered into for life; and to allow ministers of religion to solemnise marriage, respecting the doctrines, tenets and beliefs of their religion, the views of their religious community or their own religious beliefs; andto allow equal access to marriage while protecting religious freedom in relation to marriage”;
  • Changing the definition of “authorised celebrant”, which now includes a minister of religion, a person authorised to solemnise marriages, a marriage celebrant, a religious marriage celebrant, a chaplain and an officer, other than a chaplain, authorised by the Chief of the Defence Force;
  • Redefining marriage by omitting the words “a man and a woman” and substituting “2 people”;
  • Revising the laws in relation to the identification, rights and obligations of religious marriage celebrants;
  • Providing for ministers of religion, religious marriage celebrants and religious organisations to refuse to solemnise marriages and provide goods and services based on holding certain religious beliefs; and
  • Repealing section 88EA which previously did not recognise unions between “a man and another man; or a woman and another woman”.

TheMarriage Amendment Actalso contains amendments to the Sex Discrimination Act 1984 (Cth) (Sex Discrimination Act) by amending subsection 40(2A) to enable a minister of religion, a religious marriage celebrant or a chaplain in the Defence Force to refuse to solemnise a marriage in any of the applicable circumstances outlined in the Marriage Act.

The Marriage Amendment Act also provides for the recognition of same-sex marriages that were solemnised in Australia, its external territories and same-sex marriages performed outside of Australia.

What impact does the Marriage Amendment Act have on Family Law?

The Marriage Amendment Act provides for amendments to the Family Law Act 1975 (Cth) (Family Law Act).  The amendments made to the Family Law Act largely constitute substituting gender specific phrases with gender neutral phrases, i.e. from “a man and a woman”, or “the husband or the wife” to “2 people” and “party to the marriage” respectively.

How will the amendmentsinstituted by the Marriage Amendment Act impact married same-sex couples?

While the Family Law Act previously recognised that de facto relationships included same-sex couples it is nonetheless sometimes more difficult for someone in a de facto relationship to show that they have standing to make a financial application as they first need to prove that they lived with their partner on a ‘genuine domestic basis’.  Accordingly, an applicant would need to prove to the Court that they were in a de facto relationship before the Court could then proceed to hear the substance of the financial application.

The amendments also mean that same-sex couples who are married in a foreign jurisdiction will now be able to divorce in Australia.  Previously same-sex couples who married in a foreign jurisdiction were not able to divorce in Australia as the marriage was not ‘valid’ under Australian law.

Is my binding financial agreement binding?

The High Court of Australia recently set aside a binding financial agreement in the case of Thorne v Kennedy [2017] HCA 49. The case involved a financial agreement between a 67-year-old property developer husband and his 36-year -old wife. The husband was a man of considerable means, with a net worth of $18,000,000 to $24,000,000. The wife was of limited means. The couple met in the middle east but eventually decided to marry and settle in Australia, which required the wife to move to Australia. The Husband told the wife prior to the marriage that she would have to sign a financial agreement if the marriage was to take place. The wife was not shown the financial agreement until 20 September 2007 just 10 days prior to the couples’ wedding on 30 September 2007. The wife sought independent legal advice in relation to the agreement and was told not to sign it but did so anyway.

The High Court upheld the decision of the trial judge to set aside the financial agreement due to unconscionable conduct and noted that the agreement could have been set aside for duress. In reaching her decision the trial judge noted the unfair and unreasonable terms of the agreement as well as the fact that the wife had felt she had “no choice” and was “powerless” to resist the agreement if she was to marry the husband. The trial judge also noted:

  • The wife’s lack of financial inequality with Mr Kennedy
  • The wife’s lack of permanent status in Australia at the time of the marriage
  • The wife’s reliance on the husband for all things
  • The wife’s emotional connectedness to the relationship and the prospect of motherhood
  • The wife’s emotional preparation for marriage
  • The publicness of her upcoming marriage

In reaching its decision, the High Court noted a list of factors which may have prominence in determining whether or not to have a financial agreement set aside:

  • Whether the agreement was offered on a basis that it was not subject to negotiation
  • The emotional circumstances in which the agreement was entered, including any explicit or implicit threat to end a marriage or engagement
  • Whether there was any time for careful reflection
  • The nature of the parties’ relationship
  • The relative financial positions of the parties
  • The independent advice that was received and whether there was time to reflect on that advice

It would appear that binding financial agreements are not all too binding after all.

Holland & Holland: Excluding Post-separation inheritance is an error in principle

In August 2017 the Full Court in Holland & Holland [2017] FamCAFC 166 allowed an appeal by the wife against a property order in a case where the parties had cohabited for 17 years and had two children before separating in July 2007 and obtaining a divorce in 2012.

The husband inherited property in February 2011 from his late brother worth an estimated $715,000.  At first instance the Judge excluded the husband’s inheritance from the asset pool and the wife appealed.

In delivering its judgement the Full Court said:

“In our view it is wrong as a matter of principle to refer to any existing legal or equitable interests in property of the parties or either of them as ‘excluded’ or ‘immune’ from, consideration in applications for orders pursuant to s 79”.

The Full Court found that if the Judge at first instance adopted an ‘asset by asset’ or ‘two pools’ approach, they would be required to assess the contributions of both parties in respect of the property acrossboth the period of cohabitation and the period of separation.  The Judge would then needto assess the parties’ contributions to the property pool separately to ascertain each of their interests.

This case demonstrates that all existing legal and equitable property interests must be identified and valued for the purpose of obtaining orders in relation to property.

Family Law Act 1975 (Cth) Review

On 27 September 2017 Attorney-General George Brandis announced the first review of the Family Law Act 1975 (Cth) (the Act), the first such review since the establishment of the Family Court in 1976.

The review, which commenced on 1 October 2017, is to be undertaken by the Australian Law Reform Commission (ALRC) pursuant to Section 20(1) of the Australian Reform Commission Act 1996 (Cth) and will be conducted by Professor Helen Rhoades of the University of Melbourne.  It is scheduled to be completed on or before 31 March 2019.

The Attorney-General’s rationale for ordering the review is partly driven by the “profound social changes and changes to the needs of families in Australia over the past 40 years” as well as the “importance of ensuring the Act meets the contemporary needs of families and individuals who need to have resort to the family law system”.

Accordingly, the ALRC in its review is required to consider whether, and if so what, reforms to the family law system are necessary or desirable, with particular focus to be placed on:

  • appropriate, early and cost-effective resolution to all family law disputes;
  • the protection of the best interests of children and their safety;
  • family law services, including (but not limited to) dispute resolution services;
  • family violence and child abuse, including protection for vulnerable witnesses;
  • the best ways to inform decision-makers about the best interests of children, and the views held by children in family disputes
  • collaboration, coordination, and integration between the family law system and other Commonwealth, state and territory systems, including family support services and the family violence and child protection systems;
  • whether the adversarial court system offers the best way to support the safety of families and resolve matters in the best interests of children, and the opportunities for less adversarial resolution of parenting and property disputes;
  • rules of procedure, and rules of evidence, that would best support high quality decision‑making in family disputes
  • mechanisms for reviewing and appealing decisions
  • families with complex needs, including where there is family violence, drug or alcohol addiction or serious mental illness;
  • the underlying substantive rules and general legal principles in relation to parenting and property;
  • the skills, including but not limited to legal, required of professionals in the family law system;
  • restriction on publication of court proceedings;
  • improving the clarity and accessibility of the law; and
  • any other matters related to these Terms of Reference.

In conducting its review, the ALRC will have reference to existing reports relevant to the family law system, including reports on surrogacy, family violence, access to justice, child protection and child support.  It will also be required to consider the interplay between the family law system and other fields including family law services, family violence, child protection and other child support services in the States and Territories.  The ALRC will also produce consultation documents to enable relevant experts, stakeholders and the community to contribute.

Considering the ALRC’s broad mandate it seems likely that its reform recommendations will be systemic in nature and will include procedural and substantive measures intended to reduce the overall cost to the parties and the length of court proceedings with preference given to dispute resolution over litigation.  It is also likely that the ALRC will recommend that greater focus is placed on the rights of victims and children, in cases where family violence and child abuse is involved.