Thinking about getting a Divorce – What you need to know

Separating with your significant other is a nerve-wracking time. Perhaps you have been thinking about this for a while or perhaps your partner has asked for a divorce out of the blue. How will you divide your assets? What if there are children involved? How will the children cope with the new arrangements? There are so many different aspects arising from a separation or divorce – things like property settlement, parenting arrangements, spousal maintenance and so on. Here is a handy list of things to keep in mind when you find yourself in a situation like this.

  1. It is not the end of the world

Life will still continue – you will just need to adjust to a new normal. There are many people who find themselves in this situation and you are not alone. Make sure that you have a good support network around you to help you through this difficult time.

  1. Get your documents sorted

In family law matters, there is a requirement for full and frank financial disclosure. If you still have an amicable relationship with the other party, sit down together, grab a glass of wine or a cup of coffee and start going through your finances together. It will save you both time and money if you are able to the legwork yourselves. However, if you have a strained relationship with the other party and are in the dark about what property the other has, and if you are still living in the family home, use that opportunity to gather whatever documentation you can in relation to your financial affairs.

If you can’t obtain any further information from the other party about your finances, consider engaging a lawyer to help assist with this part of the process.

  1. Time limitations if you get a Divorce Order before settling your property

Many people are unaware that a Divorce Order triggers a 12-month time limit for the parties to settle their property matters. Generally, the decision is made to deal with the property matter first, and then apply for a Divorce after finalising the property matter, so that no one is under the pressure of time constraints. If you are divorced, and are yet to finalise your property, it is not the be all and end all – you may have to file an Application out of time and you will still have your entitlement to a just and equitable property settlement but it is just an extra hoop to jump through so avoid it if you can.

  1. Always act in the best interests of your child or children

When there are children involved, remember that they will also need time to adjust to the new arrangements. Time and time again, we see people involving children in conflict between adults. We can assure you that this is not looked upon favorably by the Court. Make sure that you keep the best interests of your child or children at the forefront of your mind and check in with them regularly to see if they need any further help.

  1. Speak to a family lawyer – even if you only want an initial consultation

This point is so important even if you and the other party have agreed how to move forward following your separation. Every situation is different and unique and a lawyer will help provide you with clarity and guidance as to how to formalise your agreement. Knowledge and a more detailed understanding of the process will empower you to make the best decision for you and your family.

  1. Court as a last resort

There may be some cases where Court is unavoidable. Thankfully, it is only a small number of people that find themselves in this situation. Arm yourself with legal advice from a reputable specialist family law firm.

Doolan Wagner Family Lawyers offer specialist family law advice in St Leonards on Sydney’s North Shore. If you have recently separated or have a Family Law enquiry, please contact us on (02) 9437 0010 or enquiries@familylawyersdw.com.au to discuss your matter in complete confidence. We have a team of experienced and caring professional family lawyers available to help you in this difficult time.

These posts are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us.

February 2019 Family Law Case Watch

Our February 2019 Family Law case, Wakeley & Wakeley [2018] FCCA 3707 explores  two(2) common themes and issues that often arise in Family Law matters including the:

  1. Approach taken by the Family Court in determining property proceedings; and
  2. Admissibility of affidavit evidence of a witness.

Background

In this case, the husband was born in 1951 and was 67 years of age at the time of the making of the Orders.

The wife was born in 1958 and was 60 years of age at the time of the making of this Judgement.

The parties married in 1987 and at the time of the Hearing had adult children.

At the beginning of the parties’ relationship and during the course of their marriage, each party made significant contributions to the marriage. The husband owned a number of properties and businesses and the wife held a half interest in her mother’s property and received a loan from her brother. Upon the passing of the wife’s mother, the remaining half of that property was transferred to the wife. The husband and wife also commenced a business together.

The parties initially separated in the late 1990s and Consent Orders were made on 30 January 1998. The parties sought fresh property adjustment orders and Judge Harper subsequently set aside the 1998 Orders by consent.

The wife proposed that the total net asset pool of the marriage, as asserted by her, be divided as between the parties, 80% to herself and 20% to the husband.

The husband, on the other hand, sought that the total net asset pool of the marriage, as asserted by him, be divided as between the parties, 47% to himself and 53% to the wife.

Judge Harper noted that on the asset pool, as found by him, if no adjustment was made, the wife would retain 97% of the assets and the husband would retain 3%.

Law – Property Orders

Part VIII of the Family Law Act 1975 (Cth) contains the provisions in relation to property orders. Section 79 gives the Court power to make orders for the alteration of property interests as it considers appropriate. The Court may only make an order in respect of property proceedings if it is satisfied that it would be just and equitable in all of the circumstances (s79(2)). Various factors are taken into account in considering what order should be made. These factors are set out in sections 79(4) and 75(2) of the Family Law Act.

In deciding this case, Judge Harper considered the well-established line of Family Law authorities that provide the relevant considerations for the determination of property proceedings.

The case of Hickey & Hickey & Attorney General for the Commonwealth of Australia [2003] FamCA 395 initially set out the “4 step process” in the determination of an application under section 79. This process is as follows:

  1. Identify and value, the parties’ property, liabilities and financial resources at the date of the hearing;
  2. Identify and assess the contributions of the parties as referred to in section 79 of the Act and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties, whether examined on a global approach or an asset by asset approach;
  3. Identify and assess the other factors relevant including, the matters referred to in section 75 of the Act and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
  4. Consider the effect of the above and resolve what order is just and equitable in all the circumstances of the case.

The High Court in Stanford & Stanford [2012] HCA 52 subsequently highlighted that the just and equitable requirement set out in section 79(2) should not be a discretionary determination by the Court. Rather, the Court must:

  1. Consider the current existing legal and equitable interests of the parties to the relationship;
  1. Ask whether those rights and interests should be altered pursuant to section 79(4) considerations and not assume that the parties’ rights to or interests in marital property are or should be different from those that then exist; and
  1. Determine whether an order adjusting property interests would be just and equitable in all of the circumstances of the particular case.

Further cases including Bevan & Bevan [2013] FamCAFC 116 and Chapman & Chapman [2014] FamCAFC 91 support the approach outlined above and solidify the process to be adopted by Family Law Courts in property proceedings.

Application

By the end of the Hearing, the parties in Wakeley & Wakeley, were not in dispute about what assets existed nor were they in dispute about the value of any asset.  The contention for determination was with regard to the parties’ liabilities.

In terms of initial contributions, the parties each entered the marriage with $30,000 in savings and jointly owned a property. The husband however owned another property, had a half interest share in a business and a motor vehicle.

With respect to financial contributions during the marriage, amongst other things, the:

  1. Parties were both employed;
  2. The husband sold a property and contributed the money to the joint use of the parties;
  3. The parties bought two properties by using a combination of savings;
  4. The parties lived with the wife’s parents which allowed them to save money, the wife’s family contributed to renovations for one of the properties;
  5. The wife contributed a significant sum of money to the business including a gift received from her aunt of $35,000;
  6. The husband paid over $735,000 into the bank of the wife; and
  7. The wife made the greater contribution as parent and homemaker.

In considering the above factors, Harper J assessed the wife’s contribution entitlement at 65% and the husband’s at 35%.

Judge Harper then went on to consider section 75(2), which sets out matters to be taken into account in making an order for property adjustment, and found both parties were of good health generally, both parties worked and had capacity for gainful employment. However the husband’s employment was inconsistent and he had a modest earning capacity, and whilst the wife was making mortgage repayments, the husband was renting.

Judge Harper determined that the husband should receive an adjustment of 3% in his favour for considerations under section 75(2) as set out above. Therefore, the assets of the parties would be divided as to 62% to the wife and 38% to the husband.

Judge Harper determined that leaving the assets as to 97% to the wife and 3% to the husband would not be just and equitable having regard to the above. His Honour noted the force of the husband’s submission that “any outcome, after 27 years of marriage and both parties close to or at retirement age, which left either greatly impoverished would not be just and equitable”.

(See paragraph 271 for an outline of the precise distribution of the various assets and liabilities of the marriage.)

Issue – Affidavits of witnesses

The evidence of two of the wife’s witnesses in the present case caused the judge concern. In many parts, their evidence was identical. Furthermore, one of the witnesses in cross examination conceded that her Affidavit was prepared by the wife’s solicitor and she had not told the solicitor what to write. The witness agreed that the wife arranged for the Affidavit to be prepared by her solicitor and for her to then sign it. Judge Harper stated that these considerations revealed deficiencies in the preparation of the evidence of the two witnesses.

Law – Affidavits of witnesses

Judge Palmer in the Macquarie Developments Pty Ltd and Anor v Forrester and Anor [2005] NSWSC 67 has indicated that such circumstances devalue the evidence of witnesses, even if it may not render it worthless. Judge Palmer stated in that case that:

“…affidavit evidence of a witness which is in the same words as affidavit evidence of another witness is highly suggestive either of collusion between the witnesses or that the person drafting the affidavit has not used the actual words of one or both of the deponents. Both possibilities seriously prejudice the value of the evidence and Counsel usually attacks the credit of such witnesses, with good reason.”

This reasoning was reiterated by Judge Ward in Celermajer Holdings Pty Ltd v Kopas [2011] NSWSC 40 and Judge Black in In the matter of Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789. Judge Black relevantly expressed the view that it does not matter if identical paragraphs in Affidavit evidence is the result of collusion between the witnesses themselves or of one adopting evidence that had been copied from the other, “each substantially devalues” both witnesses’ Affidavit evidence where no explanation has been given of what occurred. Judge Black commented that the Court could not be satisfied that the witness’ evidence in such cases reflects a genuine recollection of events.

Application

Judge Harper approached the evidence of the witnesses in the present case with caution and was weary in placing weight on particular aspects of the evidence.

Conclusion

Issue 1 –

The approach taken by the Family Court in determining property proceedings is clear and well established requiring a consideration of a number of factors to accommodate for the endless range of circumstances that can arise in Family Law matters. When making a property settlement order and considering what is just and equitable in a matter, the Court should not begin with an assumption that a property adjustment should occur but the Court’s power is exercised by following legal principles solidified by legislation and subsequent case law.

Issue 2 –

The importance of witness evidence being independent and confidential is often underestimated. Affidavit evidence of witnesses can be crucial to the determination of a case and this should not be risked being “thrown out”. Collusion between witnesses and/or a party, even if undertaken with benevolent intention, may be the undoing of a case.

We hope that our February 2019 Case Watch has provided you with some clarity about these two (2) common themes and issues that often arise in Family Law matters.

If you have recently separated or have a Family Law enquiry, please contact us on (02) 9437 0010 or enquiries@familylawyersdw.com.au to discuss your matter in complete confidence. We are conveniently situated in St Leonards on Sydney’s Lower North Shore and have a team of experienced and caring professional family lawyers available to help you.

These posts are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us.

Bankruptcy and Binding Financial Agreements (Part 2)

Picking up from Part 1 of this Article, we now turn to a couple of family law cases that were handed down after the Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth) was passed.

In CPPIB Credit Investments Inc v Ren [2017] NSWSC 771, Ms Kong and Mr Ren had been married for approximately 10 years. They divorced in September 2016. In November 2016, the parties entered into a BFA pursuant to section 90C (that is, during marriage). The BFA provided that a Warrawee home worth $11.5 million be transferred to the Wife, which at the time was owned by the parties as joint tenants.

An action was commenced by CPPIB Credit Investments in the New South Wales Supreme Court against the Husband to recover an amount in excess of $50 million, for which the applicant argued that the Husband was liable under a guarantee.

On 28 April 2017, the New South Wales Supreme Court made an order freezing assets including the Warrawee home. Ms Kong (who was now the former Wife of Mr Ren) filed a notice of motion seeking that the freezing order be dissolved so far as it affected her. Ms Kong argued that the freezing order be lifted on the ground that the Warrawee property was subject to the BFA and that Mr Ren no longer had any interest in the property.

Ball J stated that it was common ground that, should the Court find that the Warrawee property was the subject of a BFA, the freezing order should not continue against Ms Kong.[1] However, should the converse be true, the freezing order was to stay pending further order of the Court.

CPPIB submitted that the BFA was not binding, primarily for two reasons:-

  1. Firstly, that the agreement was entered into after Mr Ren and Ms Kong divorced and therefore, was not an agreement pursuant to section 90C (which deals with Financial Agreements during marriage); and
  2. Secondly, that the Court could not be satisfied that Mr Ren received a copy of the Certificate of Independent Legal Advice signed by the Wife’s lawyer pursuant to section 90G(1)(ca) given that there appeared to be some inconsistencies with respect to the dates.

Ball J accepted both these submissions.

In relation to the first point, Ms Kong unsuccessfully submitted that the Court could not be satisfied that her divorce would be recognised in Australia, given that she had filed divorce proceedings in China in or about April 2016. Ball J rejected this argument, positing that the circumstances were sufficient to conclude that the divorce satisfies the requirements of section 104, and therefore, would be recognised.

In relation to the second point, Ball J acknowledged that, under section 90G(1A), a Financial Agreement may be binding if section 90G(1)(ca) was not formally complied with “if a court is satisfied that it would be unjust and inequitable if the agreement were not binding” – however, went further to say that there was no evidence before the Court to come to this conclusion.

Ms Kong also unsuccessfully submitted that, even if the document was not found to be a BFA, the freezing order should not be continued because there were multiple freezing orders over the property, each with differing conditions as to how the proceeds of sale were to be dealt with, which in turn may not be possible to comply with.

The Court ordered that Ms Kong’s motion be dismissed with costs and that the freezing order made by the Court continue pending further order of the Court.

The Husband became bankrupt on 5 April 2018.

It appears that, had the parties complied with the strict legislative requirements to render a BFA binding in nature, the outcome of this case may have been starkly different.

In Official Trustee in Bankruptcy v Galanis [2017] FamFC 20, a separated Husband and Wife entered into a BFA requiring the Husband, a discharged bankrupt, to transfer all his right, title and interest in the former matrimonial home to the Wife.

The Official Trustee in Bankruptcy (“Trustee”) had filed an application seeking orders that the BFA between the Husband and Wife be set aside.

The Family Court of Australia was tasked with the question of whether it had the jurisdiction to hear and determine this matter, given that the Appellant was arguing that the primary judge erred by failing to find that proceedings brought by the Official Trustee fell within the definition of a “matrimonial cause” in sections 4(1) and 4A.

In this matter, Ms Galanis (the first respondent) and Mr Dukas (the second respondent) commenced their relationship in 1999 and purchased a property together in 2002 as tenants in common with Ms Galanis owning 60 per cent and Mr Dukas owning the remaining forty (40) per cent. Despite the unequal ownership, Mr Dukas submitted that Ms Galanis provided the entirety of the purchase price. The parties married in 2006 and subsequently separated in October 2011.

In 2008, Mr Dukas (the Husband) became bankrupt. He was subsequently discharged from the bankruptcy in October 2011 – at the same time of his separation.

In February 2013, the parties entered into a BFA pursuant to section 90D (after a Divorce Order is made) requiring the Husband to transfer to the Wife all of his right, title and interest in the former matrimonial home. The Wife was also to discharge the mortgage and indemnify the Husband against any further liabilities relating to the property.

In July 2013, the Trustee filed an application in the Federal Circuit Court of Australia seeking that:-

  1. The Financial Agreement between the First Respondent and the Second Respondent be set aside;
  2. Forty (40) percent of the net proceeds from the sale of the matrimonial home be paid to the Applicant for distribution amongst creditors in the bankrupt estate of the Second Respondent Husband; and
  3. That the Court considers the issue of costs.

In January 2014, the Wife filed an Application in a Case seeking that the proceedings be dismissed, successfully arguing that the Court did not have the jurisdiction to hear the matter because the application by the Trustee did not constitute a “matrimonial cause” as contained within section 4(1). Upon its transfer to the Family Court of Australia, the matter was dismissed. The Trustee appealed.

On appeal, the Trustee contended it was a “government body acting in the interests of the creditor” pursuant to section 4A(1)(b)(iii). The Wife again, submitted that the Court did not have jurisdiction. The Court expressly stated that the Trustee was not a government body under that definition, contrasting the role of the Trustee with ASIC, which is a Commonwealth entity.

Accordingly, the appeal was dismissed with costs.

Thus, BFAs are entered into to provide certainty and predictability to parties in relation to the division of assets or the maintenance of a party when a relationship breaks down. Put simply, they are intended to protect a party’s financial position. Ultimately, there is no effective method of predicting the future with certainty when dealing with a change of circumstances or impracticability of adhering to the agreement – which appears to be the biggest weakness of using BFAs as an asset protection vehicle.

In terms of its use as an asset protection vehicle when a party subsequently becomes bankrupt – evidently, it was often misused to the bankrupt’s advantage prior to the amendments to the Bankruptcy Act 1966 (Cth) following ASIC v Rich and Anor [2003] FAMCA 114. However, apart from the result in CPPIB Credit Investments Inc v Ren [2017] NSWSC 771 which occurred due to a drafting error and deviation from the strict legislative requirements, the cases discussed above were found in favour of the parties seeking to uphold the BFA in the face of bankruptcy – albeit, due to technicalities. It appears that whilst the effectiveness of BFAs in protecting assets from attack in a bankruptcy has diminished somewhat, they have also done what was intended to be achieved.

Key Takeaways:

  1. It is important to remember that Binding Financial Agreements are not “bulletproof” and can be set aside in certain circumstances such as fraud, duress, a change in circumstances and so on.
  2. The 2005 amendments now allow creditors to have standing to apply to set aside a Binding Financial Agreement.
  3. Those seeking to enter into Binding Financial Agreements are well advised to obtain a second opinion from another legal professional and obtain financial advice from other professionals.

Doolan Wagner Family Lawyers offer specialist family law advice in St Leonards on Sydney’s North Shore. If you have recently separated or have a Family Law enquiry, please contact us on (02) 9437 0010 or enquiries@familylawyersdw.com.au to discuss your matter in complete confidence. We have a team of experienced and caring professional family lawyers available to help you in this difficult time.

[1] CPIBB Credit Investments Inc v Ren [2017] NSWSC 771 at [5].

These posts are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us.

How Much Does A Divorce Cost?

Wanting to know what a divorce will cost?

Concerned about the fees a family lawyers will charge?

Interested in understanding how the costs of family lawyers can be minimised?

If so then read on…

Unless you qualify for a waiver or reduction in the court’s filing fee you’re going to spend a minimum of $900 on the filing fee charged by the court – go onto the court’s portal and take a look.

Your costs to get a divorce can end there – you can complete the application yourself, even get your ex to join in if you were to do it jointly – no more costs for you and hey presto… it’s done.

“D-day” arrives and it’s ended up hugely cheaper than the wedding and contrary to recent bad press about the exorbitant costs of divorce lawyers, quite possibly cheaper than the costs of the last birthday party you hosted for one of your children!

You may end up paying a much greater price though down the track if along the way you don’t get expert family law advice.

BEWARE – Getting a Divorce triggers consequences that you may not be aware of… it also does not necessarily achieve some of the things that you thought it would –

Some simple facts :-

  1. Once a divorce order is made, you only have twelve (12) months from the date it becomes absolute to make an application for the court to deal with your property and financial affairs. This matters.  If you cannot persuade the court that it should exercise its power after 1 year has passed you may be left in a financial position that is not ideal.
  1. A divorce does not equate to a financial settlement. The informal deal you jotted down “on the back of the envelope” is not binding.  You still must get your financial arrangements sorted and settled.
  1. Getting a divorce does not protect your estate from a claim by your ex. Your ex-spouse is still eligible to make a claim against your estate once you die.  Do you really want to leave your executors, possibly your adult children, having to deal with such a situation?  Probably not and time and again couples that separate simply overlook this fact.  So again, beware because when it rains, it pours.  On the flip side it can be resolved, relatively easily, you just need to ask.

Professional services are not cheap – if they were you should be concerned.  A family lawyer making promises that are too good to be true – most likely are – “Pay Peanuts, Get Monkeys” as the saying goes.

But, you are entitled to feel and in fact should receive value for your investment.  You need to ask “Are the fees that are being contemplated worth it?”; what “value added?” is being offered.

Nothing is a substitute for expertise and experience…

You must however ensure that your relationship with your family lawyers is strong – if you don’t get what they are saying or you get a sense that they’re not really listening, pushing their own agenda or simply going through the motions, then any experience or expertise that they have is unlikely to be able to be applied to benefit you in your family law matter.

The relationship between a separated person and their family lawyer is a sophisticated and very important one, so –

  1. Don’t be shy to ask the hard questions
  2. Trust your gut
  3. Shop around

Bizarrely it’s a bit like tinder (or at least my understanding of what tinder is from the accounts of third parties!!).

Your family lawyer must be :-

  1. Smart
  2. Brave
  3. Committed – they work for you

Your family lawyer must not be :-

  1. Your friend
  2. A salesperson, or
  3. Too busy

Your family law matter counts and if you start thinking in this way the costs that you actually pay for the work your family lawyer does for you following your separation will be appreciated for a very long time.  In short you will no longer be googling “how much does a divorce cost?” because you will just be thankful that you engaged the right family lawyers.

Engaging the right family lawyer is also important if you hit a roadblock obtaining a Divorce Order.

Whilst an Application for Divorce is often a straightforward process, extra work is sometimes required to satisfy the court that it is proper for the Divorce Order to be made.

When can this happen?

3 common roadblocks that arise when making an application for divorce include:-

  1. Providing the court with sufficient evidence to satisfy itself that it has jurisdiction to make the order because you have legal standing or are entitled to be an applicant. Proof of citizenship or evidence of your domicile may be necessary.
  2. Satisfying the court that you are really separated in circumstances where you continue to live with your ex under the same roof. If this applies to you then you must file an additional affidavit setting out the circumstance of your living arrangements with your ex.  An extra affidavit from a 3rd party is also required to corroborate your version of the facts.
  3. Asking the court to make an order to substitute the service of the application on your ex if he or she is being evasive or uncooperative or cannot be found. In these cases extra evidence must be given to the court to satisfy itself that you have exhausted all realistic possibilities and it is probable that the application has come to the attention of your ex even if he/she is avoiding service.

Our family lawyers help each day with these matters.  We are trained to overcome these roadblocks in your Divorce Application and assist you finalise financial and parenting matters following your separation.

Doolan Wagner Family Lawyers offer specialist family law advice in St Leonards on Sydney’s North Shore.  If you have recently separated or have a Family Law enquiry, please contact us on (02) 9437 0010 or enquires@familylawyersdw.com.au to discuss your matter in complete confidence.  We have a team of experienced and caring professional family lawyers available to help you in this difficult time.

These posts are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us.

Bankruptcy and Binding Financial Agreements (Part 1)

What happens when parties enter into a Binding Financial Agreement and one party subsequently becomes bankrupt?

What do you do when the one asset pool to be divided is in circumstances where there are competing claims between the bankrupt’s spouse or partner and the bankrupt’s creditors?

If you find yourself in a situation like this and are unsure of the next steps, read on.

Broadly speaking, individuals thinking about asset protection are primarily concerned with protecting assets from attack either through a family breakdown, poor business or investment decisions, bankruptcy or a family provision claim.

So, what happens when family law and bankruptcy intersect?

In such circumstances, the non-bankrupt partner may find him or herself competing against claims from unsecured creditors for a share in the bankrupt’s assets. Conversely, in a scenario where one party intends to frustrate or prevent their former partner from obtaining a share of assets, that party may attempt to use bankruptcy proceedings to put assets out of the reach of their former partner. In a situation like this, the non-bankrupt partner may find him or herself competing for a share of the assets against “fake creditors”.

Generally, in relation to both married and de facto couples, the presence of a third party in proceedings and the subsequent conflict between the claims of the former partner and creditor(s) is dealt with extensively in Part VIIIAA (subsections 90AA to 90AK) of the Family Law Act 1975 (Cth).

With respect to Binding Financial Agreements (‘BFAs’), the items of property that can be dealt with by parties in a domestic relationship under such a document may comprise of assets including domestic and international real estate, personal property, superannuation, spousal maintenance, child support, and future inheritances. There are strict legislative requirements to enter into same and, of course, one needs to consider the grounds for review as to what circumstances may set them aside.

In relation to bankruptcy proceedings, they are dealt with under the Bankruptcy Act 1966 (Cth). A person may be made bankrupt either by a creditor’s petition[1] or through a debtor’s petition.[2] A trustee in bankruptcy is then appointed and the bankrupt’s property then vests in the trustee,[3] albeit he or she is permitted to retain certain household items and any interest in a regulated superannuation fund.[4] The bankrupt’s property consequently becomes available to be divided amongst his or her creditors.[5]

So how do BFAs hold up in the face of bankruptcy?

Prior to the Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth), BFAs held up pretty well in that the tax man was generally unable to obtain a share of a bankrupt’s assets once a BFA had been correctly executed. This was seen in the case of Australian Securities and Investments Commission v Rich and Anor [2003] FAMCA 114 wherein O’Ryan J was tasked with answering the question as to whether the Family Court had the jurisdiction to set aside Financial Agreements on the application of a third party, in this case – the Australian Securities and Investments Commission (‘ASIC’).

In this case, the Husband was a founding Director of One.Tel Ltd and had numerous business interests. Between 17 May 2001 and 4 June 2001, the Husband transferred and altered the ownership of his assets. On 29 May 2001, the board of Directors of One.Tel Ltd resolved to place the company into administration. On 31 May 2001, the parties entered into the Financial Agreement pursuant to section 90C (during marriage). On that same day, ASIC started investigating the Husband in relation to suspected contraventions of the Corporations Act 2001 (Cth).

ASIC tried to rely upon sections 90KA and 90K(1)(b), arguing that the Financial Agreement was void or voidable. However, this point was futile if ASIC did not have standing, being the ability to bring an action before the Family Court.

Both the Husband and Wife in that case filed responses seeking an order that the application by ASIC be dismissed for similar reasons. The Husband submitted that there was no jurisdiction to grant the relief whereas the Wife submitted that the application should be summarily dismissed as there was an absence of a triable issue and that the application was so flawed that it could not succeed.

The Court reasoned that the definition of a “matrimonial cause” provided that the proceedings be “between the parties to a marriage”. Accordingly, given that ASIC cannot be a party to the marriage – the application by ASIC was not a “matrimonial cause”. Thus, the Court did not have jurisdiction to hear the matter by ASIC and subsequently dismissed the application. His Honour did note, however, that “there are good policy reasons why” it is appropriate for the Family Court to determine whether third parties may apply to set aside BFAs – however this did not address the issue of jurisdiction.[6]

Further, His Honour went on to state that:

it is of concern to me that the consequence of my finding is that the Family Court has no jurisdiction to deal with an application by an unsecured or contingent creditor to set aside a financial agreement in circumstances where the interests of such a third party are or may be adversely affected by the terms of the agreement. This position in contrary to that taken by the court over a number of years in circumstances where an order was made under section 79 or an agreement approved under section 87.”[7]

Following this case, the legislation was amended to rectify this position and it is now easier for trustees in bankruptcy to attack BFAs resulting in them being more susceptible. Why? Because prior to the amendments, the Bankruptcy Act 1966 (Cth) exempted a ‘maintenance agreement’ from its purview. This is no longer the case. The definition of ‘maintenance agreement’ contained within s 5(1) of the Bankruptcy Act 1966 (Cth) was further clarified so as to exclude “Financial Agreement within the meaning of the Family Law Act” following interpretation issues.

We will continue looking closely at the intersection between Binding Financial Agreements and Bankruptcy in our next article, so remember to return to our website soon. In particular, in our next post we will look at a couple of cases following the amendments to the Bankruptcy Act 1966 (Cth) and how this affects BFAs in Family Law.

[1] Bankruptcy Act 1966 (Cth) s 43.

[2] Bankruptcy Act 1966 (Cth) s 55.

[3] Bankruptcy Act 1966 (Cth) s 58.

[4] Bankruptcy Act 1966 (Cth) s116(2).

[5] Bankruptcy Act 1966 (Cth) s116(1).

[6] Australian Securities and Investments Commission v Rich and Anor [2003] FAMCA 114 at [95].[7] Australian Securities and Investments Commission v Rich and Anor [2003] FAMCA 114 at [115].

Doolan Wagner Family Lawyers offer specialist family law advice in St Leonards on Sydney’s North Shore. If you have recently separated or have a Family Law enquiry, please contact us on (02) 9437 0010 or enquiries@familylawyersdw.com.au to discuss your matter in complete confidence. We have a team of experienced and caring professional family lawyers available to help you in this difficult time.

These posts are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us.

Judicial Mediations in Family Law

Has the other party in your matter proposed Judicial Mediation?

Do you need help in understanding what this entails? If so, read on.

In late 2018, Practice Note 1 was issued relating to judicial mediations for family law matters in the Federal Circuit Court of Australia and it commenced on 1 January 2019.

Essentially, what this entails is a mediation that is facilitated by a judicial officer of the Court rather than a Family Dispute Resolution Practitioner or Mediator. There are numerous reasons why judicial mediation may be considered advantageous to parties trying to resolve their family law dispute and the community in general.

Generally, a typical mediation process would entail the following:

  1. Introductory stage / brief description of the issues (i.e. why are we here today);
  2. Summary by the Mediator (depending on the particular Mediator);
  3. Discussion and exploration of the issues and/or agenda;
  4. Private meetings between the parties and the Mediator;
  5. Discussion of options and alternatives;
  6. Evaluations of proposals; and finally
  7. A decision is reached – whether or not that means settling the matter or proceeding with Court action.

It must be kept in mind that the above process is an approximate outline only. Mediation styles often vary greatly between different Mediators and the circumstances of your family law matter.

Having regard to the unique circumstances of every family law matter, the flexibility of mediations allows for a more individually tailored approach, which is advantageous especially for people after separation who may find themselves self-represented considering that, otherwise, they may experience greater difficulties with the formal and strict processes involved in litigation in the Federal Circuit Court of Australia and/or the Family Court of Australia.

The Practice Note sets out guidelines in relation to matters such as the criterion for suitability for mediation, preparation, attendance and conduct at the mediation and confidentiality. Your family law matter may be suitable for judicial mediation if it meets any of the following criteria:

  1. If both parties are legally represented;
  2. If the docket Judge determines that the matter is suitable for judicial mediation;
  3. Property disputes;
  4. Parenting disputes when there are no serious allegations of risk and/or domestic and family violence;
  5. Appropriate child support matters;
  6. Compliance with orders for a prior unsuccessful private mediation;
  7. A risk that your legal costs and time of the trial will greatly outweigh the subject of the dispute; and
  8. Any other matter that the docket Judge deems to be suitable.

Subject to notifying all other parties, a party who wishes to have a Judge facilitate a Mediation and help finalise their family law matter can make an oral application in the Federal Circuit Court of Australia or apply in writing to the docket Judge in Chambers. You will also be able to set out, either orally or in writing, the basis for why you think the matter is suitable for Judicial Mediation. The other party will then be given a chance to respond as to whether or not he or she will consent to the Judicial Mediation.

It should be kept in mind that the docket Judge for your family law matter cannot be the Judicial Mediator due to the vital need of impartiality. It is for this reason, that in the event that you are ordered to attend judicial mediation, your mediation will be facilitated by another judicial officer of the Court. Following the mediation, if you and the other party were unable to reach an agreement, the Judicial Mediator will have no further involvement in your matter.

Judicial Mediations, like any other mediation, are still subject to the confidentiality provisions in Section 131 of the Evidence Act 1995 (Cth). This will allow both you and your ex-partner to explore the options and alternatives frankly, without the fear of the other party using any information against you later in Court. Additionally, the Judicial Mediator will not, without the express approval of all parties, meet individually with a party and his or her lawyer. Rest assured that whatever is discussed in those private meetings will remain confidential and the Judicial Mediator will not disclose information provided in those sessions to the other party without your consent.

Finally, Judicial Mediation is not intended to be a substitute for private mediation conducted by appropriately qualified mediators, but may be an option for appropriate matters. It is expected that the parties and their lawyers will exhaust all mediation alternatives, prior to judicial mediation. It should be kept in mind that judicial mediations are to only be utilised as a last effort or attempt to resolve the matter before proceeding with the litigation.

Apart from mediation, there are different forms of Alternative Dispute Resolution available to people with family law matters. The Family Law Rules 2004 suggests that people should attempt direct negotiation, arbitration and counselling prior to litigating a family law dispute. This is especially important when considering the preservation of ongoing relationships in parenting matters. At Doolan Wagner Family Lawyers, we are very mindful of preserving our clients’ costs and their post-separation relationships and we will work together with you to reach an appropriate outcome for your family law matter.

If it is the case that your Judicial Mediation was unsuccessful, your matter will then be referred back to the docket Judge, who may then make further directions, and if needed, trial directions.

Doolan Wagner Family Lawyers offer specialist family law advice in St Leonards on Sydney’s North Shore. If you have recently separated or have a Family Law enquiry, please contact us on (02) 9437 0010 or enquiries@familylawyersdw.com.au to discuss your matter in complete confidence. We have a team of experienced and caring professional family lawyers available to help you in this difficult time.

These posts are only intended as an overview or comment on current issues that may interest you and are not legal advice. If there are any matters that you would like us to advise you on, then please contact us