23 January 2025 - Goldman Law

Full Court of Family Court Confirms There Can Be Two Types of Financial Agreement in One Document

Key Words

Financial agreements; de facto partners; Part VIIIA and Part VIIIAB financial agreement; the validity of the certificate of legal advice

Introduction

In Piper & Mueller [2015] FamCAFC 241 (18 December 2015) the Full Court of the Family Court (Ryan, Murphy & Aldridge JJ) heard an appeal against Judge Willis’ decision in Piper & Mueller [2014] FCCA 2659.

This appeal addressed the issue of having two separate agreements co-exist within one document. It was put forward by Piper that a de facto agreement pursuant to s 90UC o the Family Law Act 1975 could not exist within the same document as an agreement upon marriage pursuant to s 90B. Ryan & Aldridge JJ provided detailed reasoning to the contrary for dismissing Mr. Piper’s appeal. They found that whilst both agreements could be found to co-exist in the same document, it was clarified that only one agreement would have an operative effect at any given time, therefore, upon marriage the de facto agreement would cease to have an effect.

The reasoning at First Instance

At first instance, it was held that an agreement made under both s 90UC and s 90B of the Family Law Act 1975  binding under s 90UJ (1A). Mr Piper unsuccessfully argued that the agreement could not have been validly made pursuant to both sections of the Act, therefore, the agreement was defective as the certified legal advice referred to the “advantages or otherwise” of the agreement as opposed to “the advantages and disadvantages” of entering into the agreement required by s 90UJ.

The reasoning at the Appeal

Ryan & Aldridge JJ expressed that there was no apparent issue between people being in a de facto relationship and also contemplating marriage.  Subject to certain provisions of the Family Law Act it was possible to have a single agreement deal with the distribution of their assets upon the breakdown of their de facto relationship or the ending of their subsequent marriage.  Both judges were, however, of the view that financial agreements under Parts VIIIA and VIIIAB are different.

It was evident in this case the parties were in a de facto relationship and accordingly entitled to enter into a financial agreement under s 90UC. In addition to this, they were contemplating marriage which further entitled them to enter into a binding financial agreement pursuant to s 90B. The pivotal fact in relation to these circumstances is that the two financial agreements can exist concurrently and in one document.

This was reinforced by the fact that only one of these financial agreements could have an operative effect at any one time. This is demonstrated as the s 90B financial agreement would operate in the event of a marriage breakdown in accordance with s 90B (2) (a), which requires a prior marriage to have existed.

Alternatively, an agreement under s 90UC ceases to be binding on parties getting married in accordance with s 90UJ (3). Ryan & Aldridge JJ expressed the view that it is possible for both agreements to co-exist, however, upon entering in to a marriage, the operation of the de facto agreement pursuant to s 90UC becomes null and void, leaving the s 90B financial agreement operational. This indicates that the two agreements are complementary as opposed to exclusionary as both may be binding on parties at the time of execution, however, only one can have an operative effect at any given time.

Decision at the Full Court

Ryan & Aldridge JJ further addressed the issue of providing different types of advice in accordance with each agreement. They were both of the views that there was no reason why both types of advice could not be given to a party prior to signing a document containing both s 90UC and s 90B agreements. Murphy J delivered different reasoning but agreed that “nothing within the legislation precludes a financial agreement from including both s 90B and s 90UC agreements”. On this basis, the appeal was dismissed with costs.

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Family Court Allows Appeal for Property Settlement Application Out of Time

Key Words

Family law, property settlement; out of time; section 44, hardship, leave for out of time application.

The case of Slocomb v Hedgewood [2015] FamCAFC 219 (12 November 2015) was a Family Court of Australia (“FCA”) Full Court hearing to determine to leave to appeal a decision made by the Federal Circuit Court of Australia (“FCC”). The matter was heard by Judges May, Ainslie-Wallace & Johnston.

The Wife in the case had submitted an application for property settlement. The Application was 18 years outside of the statutory time limit. The Wife’s application was refused by the FCC as she did not provide an adequate explanation for lodging outside of the time limit. The Wife sought leave to appeal the FCC decision to the FCA.

Background

The Husband and Wife commenced living together and married in 1989. After about 5 years the parties separated in 1994. During the period they were married they had 3 children together. At the time of separation, the children were 4, 3 and 1 years of age. In September 1995 the parties divorced.

At separation, the main property available for the division was the family home with equity of $15,000, furniture worth $10,000 and a car worth $12,000. When the parties separated the Wife took the car. In 1994 the Wife’s solicitor wrote a letter to the husband proposing terms of settlement and arrangements for the children. This letter stipulated that the Wife would take the car and some items of furniture and in return the Wife would transfer her interest in the family home to the Husband. In addition, it stated that the Wife would have sole care (then referred to as custody) of the parties’ children. The Husband did not agree with the care arrangements for the children and settlement did not occur.

Out of Time Application

When asked why her Application was brought 18 years out of time, the Wife stated she was not aware of the time limit. The Primary Judge considered the parties’ circumstances including that the Wife had taken the children into her care after separation, she had made no contribution to the mortgage on the home, she received the car at separation and some items of furniture. The Husband had paid child support for the children and he had paid the mortgage on the parties’ home and improved the property.

In considering if leave should be granted for property settlement outside of the statutory time limit, the Primary Judge referred to section 44 of the Act. Section 44(3) stops proceedings being brought outside 12 months from the date of divorce. However, leave can be granted under section 44(4) to bring an application for settlement outside of the time limit where hardship can be established. The Primary Judge found that hardship could be established. This was because while the Wife could pursue her property rights through State courts, her post-separation contribution would not be considered by State courts.

Despite hardship being found, the Primary Judge concluded that leave should not be granted. The grounds of refusal being that the Wife did not have an adequate explanation for bringing her Application 18 years out of time and allowing her to proceed would prejudice the husband.

Principles for Out of Time Applications

The Wife submitted an Application to the FCA for leave to appeal the FCC’s decision. In considering the Wife’s application for leave to Appeals the Court considered the case of McDonald and McDonald (1977) FLC 90-317. This case determined that in order to bring an out of time application an applicant must establish:

1. that a case for relief exists;

2. that denial of the claim would cause hardship; and

3. an adequate explanation for the delay.

In considering these principles, the Court established that the first two principles had been met. The Wife had a case for property settlement and she would be in hardship if her Application was denied.

The Court considered the Wife’s explanation for bringing her Application out of time. The Wife’s stated she was not aware of the time limit. The Court took into account that the Wife engaged a lawyer after a separation and the time limit was stated on paperwork for her divorce.

The Court referred to the case of Althaus and Althaus (1982) FLC 91-233; (1979) 8 Fam L R 196 where it was found that the degree of hardship experienced by an applicant may outweigh an inadequate explanation for bringing an out of time application.

The Court then stated that while considering the three principles in McDonald and McDonald, it also had to consider any prejudice to the other party. The Court considered the case of Sharp and Sharp [2011] FamCAFC 150; (2011) 50 Fam LR 567 where that Court stated there is a presumption of prejudice to a party where an application is brought out of time. However, the Court determined the Husband had not pursued his settlement rights until 2012 and this should be taken into account.

The Court using the principles above decided that the Primary Judge had made an error of law in the original finding. The Court granted the Wife’s leave for appeal and determined that the matter should be reheard. The primary reason was that it would be unjust to both the Husband and Wife if their legal position with regard to their property were to remain as is. While the parties could pursue their property rights in State court this would not ameliorate the Wife’s hardship and this outweighed the Wife’s inadequate reason for bringing her Application out of time and any prejudice caused to the Husband.

Conclusion

In this case, the Wife brought an Application for property settlement 18 years after the expiration of the statutory time limit found under section 44 of the Act. However, section 44(3) allows the court to accept an application outside of the statutory time limit but only where a case for the relief sought exists, denying the claim would cause hardship and an adequate reason for the delay has been provided. Other factors a court will take into account include prejudice to the other party for allowing an out-of-time application.

In this case, the Court decided that it would be unjust to both parties to leave property matters between them unsettled. The Court granted leave to appeal and determined the matter was to be reheard.

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Court Confirms That Income from a Loan Agreement Is Income for Child Support Assessment Purposes

Key Words

Child Support; Social Security Appeals Tribunal; unreasonableness, WednesburyUnreasonableness, financial resources

In Baylden & Anor [2015] FCCA 2886 (29 October 2015), the father appealed against a Social Security Appeals Tribunal (“SSAT”) decision on various grounds, one of which was that the SSAT made an erroneous finding that its decision was unreasonable and/or an offence to logic.

The father was self-employed and received $15,000 per month by way of repayment of loans to him under a loan agreement. As such, the Child Support Registrar reflected the father’s income with the receipt of loans for the purpose of child support assessment.

Decision at the SSAT

The Tribunal found that Mr. Baylden had an annual resource being the terms of a loan of $180,000 per annum tax-free, or $287,000 grossed up. Although the loan agreement may be acceptable to the Commissioner of Taxation, the benefits under the loan have a different treatment for the purposes of child support.

According to the Tribunal, it could not be argued that Mr. Baylden was receiving $15,000 per month under a ‘loan’ contract yet not receiving any wages despite the fact that he was responsible for the operation of the business. Furthermore, evidence from Mr. Baylden that he cannot be paid a salary whilst the business was in its growth stages was unconvincing, especially given that he employed 10 staff and the company turnover was in the vicinity of $2 million per annum.

Reason for Decision

Counsel for the Child Support Registrar argued that it was reasonable for the Tribunal to find that the money that was received under the loan agreement was a financial resource as it was clearly a financial benefit that enhanced the Appellant’s capacity to provide the proper level of financial support to his children.

Furthermore, the SSAT’s decision was not ‘unreasonable’ to the extent of being an error of law because there is no error of law in making a wrong finding of fact, as stated in Tasman & Tisdall (SSAT APPEAL) [2010] FMCAfam 425.

Mr Baylden argued that the tribunal’s decision was so unreasonable that no reasonable decision-maker could have reached it. This is known as the Wednesbury unreasonableness test (Associated Provincial Picture houses Limited v Wednesbury Corporation [1947] EWCA Civ 1; [1948] 1 KB 223 at 230). However, Katzmann J stated that the tribunal’s decision was not unreasonable, let alone so unreasonable that no reasonable decision-maker could have reached it.

As such, the Court agreed with the submission that the Tribunal was entitled to find from the Appellant’s evidence at the hearing that he received $15,000 per month from the business. The Court was not satisfied that it was unreasonable of the Tribunal to make the finding that it did, which was that the Appellant’s annual income and financial resources should be used in the child support formula set out in the Child Support (Assessment) Act. As such, the father’s appeal was subsequently dismissed.

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Full Court Finds No Error In An Interim Injunction To Preserve Assets Pending Determination Of Jurisdiction

Key Words

 Interim Injunctions;  Jurisdiction, Binding Financial Agreements; Family Law Act 1975 (Cth)

Background

In Teh & Muir [2015] FamCAFC 224 (2 December 2015), the Full Court heard an appeal by a 36-year-old Ms. Tey against an interim asset prevention order that was made by Dawe J.

The appellant and her son moved to Australia in January 2010 on a temporary visa and lived with the 85-year-old respondent’s, Mr Muir’s, home. On 19 February 2014, both parties purportedly entered into a financial agreement under section 90UC of the Family Law Act 1975 (Cth) that provided that upon the breakdown of the parties’ relationship, all properties shall be divided equally regardless of whose party’s name is on the title of the assets.

The respondent subsequently moved into a nursing home and on 29 May 2014, Ms. Tey issued proceedings to enforce the financial agreement whereby the respondent filed his response by case guardian (his daughter). The respondent argued that he had never been in a de facto relationship at the time of the financial agreement and that he did not have the mental capacity at that time to make the said agreement. As such, he sought an order that the agreement be set aside and the net proceeds of the sale of his home are paid to him.

At First Instance

In the first instance, Dawe J made interim orders that half of the proceeds be paid to the respondent and the other half be held in his solicitor’s trust account. The appellant, Ms. Tey, was also to disclose statements for bank accounts in her and her son’s name and be restrained from dealing with or disposing of any funds held in any bank account except for day-to-day needs.

As a result, Ms. Tey appealed and argued that because of the binding financial agreement that was in place, the judge had no jurisdiction to make the aforementioned orders.

At the Appeal

The issue at hand on appeal was whether or not a de facto relationship ever existed between the respondent and the appellant. If there was no such relationship, there would be no jurisdiction in a court exercising jurisdiction under the Family Law Act to determine the dispute between the parties.

On the other hand, if there was a de facto relationship in existence and the respondent continued to challenge the validity of the allegedly binding financial agreement, the question for the court was whether the jurisdiction of the Court to make orders concerning the financial matters of the parties would be excluded until the status of the agreement had been determined.

Finn & Strickland JJ said that it was appropriate for the Family Court to preserve the sale of the proceeds that were in dispute by granting an interlocutory injunction while the Family Court determined whether or not it has jurisdiction to hear the matter. As such, the judge in the first instance did not err in making the order that would preserve the disputed funds pending determination of issues concerning the jurisdiction of the Court to make orders concerning those funds.

Ryan J agreed with Finn & Strickland JJ but gave different reasons for his decision.

Section 31(1)(aa) of the Family Law Act states that the Court has original jurisdiction to determine matters that arise under the Act in respect of de facto financial causes, which includes proceedings to a financial agreement. As such, the primary judge was invested with jurisdiction to determine the various challenges made by the respondent to the validity of the binding financial agreement.

Furthermore, the restriction to the applicant’s access to her accounts and the proceeds of the sale of the property are interlocutory asset preservation orders that are designed to ensure that the property in dispute is preserved pending final orders. As such, the applicant’s challenge to the interlocutory orders made by the primary judge failed.

It was held that because section 34 of the Family Law Act 1975 confers general power to the Court to make orders (including interlocutory injunctions) provided that the Court has jurisdiction (which it has as explained in the previous paragraphs), hence the appeal was dismissed with costs.

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