A financial agreement is a contract that deals with the division of a couple’s assets after they separate, or in the event that they separate. They may be made before or during a marriage or de-facto relationship, or after it breaks down.

Financial agreements are also referred to as binding financial agreements, pre-nuptial or post-nuptial agreements and cohabitation agreements. They do not require court approval.

Although any couple may enter a financial agreement, they are often used when one or both parties have previously been married or in a substantial relationship, have children to a former partner, or where one party brings significant assets into the relationship. Generally, the financial agreement will attempt to protect existing assets or anticipated inheritances, ensure children from past relationships inherit from their parent, and take account of unequal contributions.

How binding are these agreements?

Some people may be cautious about entering an agreement to finalise their property affairs without approval or intervention by the court. Certainly, there are cases where such agreements have later been set aside for various reasons.

A financial agreement is a legal contract so is presumably binding provided the statutory technical requirements are met and certain circumstances did not exist during the making of the agreement that could have it set aside.

Technical requirements

Financial agreements must comply with the relevant provisions of the legislation.

Both parties must sign the agreement and before doing so, obtain independent legal advice regarding the effect of the proposed agreement on their rights, and its advantages and disadvantages.

A legal practitioner must also provide the client and other party with a signed statement to the effect that such advice was provided. Each party must receive a copy of the financial agreement signed by both parties and their respective lawyers.

The court may order an agreement binding despite non-compliance with one or more of these formalities if it would be ‘unjust and inequitable if the agreement was not binding’. For example, in Ryan and Joyce [2011] FMCAfam 225 the Court upheld the validity of an agreement that cited the wrong section of the legislation.

When will a financial agreement be set aside?

Disputes regarding financial agreements generally arise when a party fails to honour his or her obligations and the other person applies to the court to enforce the agreement. The non-complying party may argue to have the agreement set aside on one or more of the following grounds.

The agreement was obtained by fraud

The court may set aside a financial agreement that was obtained by fraud such as non-disclosure of a significant asset. Parties should be honest in their dealings and give proper disclosure of their assets, financial resources and estimated values. Being transparent will reduce the risk of having an agreement set aside.

The agreement was made to defeat the interests of creditors or another party

An agreement may be set aside if made with disregard to the interests of a party’s creditors or to defeat or defraud the interests of the other party or a person with whom one of the parties had pending property matters.

There are material changes in circumstances

A material change in circumstances that creates hardship for a party, or affects the welfare of a child of the relationship may cause the agreement to be set aside. Similarly, circumstances that make it impracticable to carry out all or part of the agreement may invalidate it, for example, a person’s bankruptcy, the disposal of a party’s assets or an illness or injury that permanently affects a party’s earning capacity.

The agreement is void, voidable or unenforceable under contract law

As with all contracts, a financial agreement may be set aside under common law and equitable principles, for example, on grounds of uncertainty, duress, undue influence, unconscionability, misrepresentation, mistake, incapacity or public policy.

Many disputes concerning financial agreements involve allegations of undue influence and / or unconscionability. The following two cases are examples.

In Thorne and Kennedy [2017] HCA 49, an eastern European woman and wealthy Australian property developer with assets worth around $24 million, met through a website offering potential brides. The woman moved to Australia and the couple married. Shortly before the wedding the woman, who had few assets, no family connections, and spoke little English, was presented a financial agreement with an ultimatum to sign it or the wedding would not proceed. She received advice stating that the agreement was ‘entirely inappropriate’ and should not be signed but felt compelled to do so.

The marriage ended, and the woman applied for the agreement to be set aside seeking a financial settlement of $1.24 million. The man died before the matter resolved and his two children as executors defended the claim against the estate. Initially, the woman was successful on the basis that the agreement was signed under duress. On appeal to the Full Court of the Family Court, however the decision was reversed. The matter was taken to the High Court which determined that the agreement should be set aside on the grounds of unconscionable conduct and duress in circumstances where the woman was at a considerable disadvantage.

Saintclaire and Saintclaire [2015] FamCAFC 245 saw a different result. The wife argued that she had been unduly influenced when signing the financial agreement on the basis that she had been diagnosed with post-natal depression, was in debt, and the husband was abusive and threatening (it was noted that these claims were general and unparticularised). The wife was initially successful in having the agreement set aside however this decision was overturned on appeal.

The court noted that negotiations concerning the financial agreement had been on foot for around seven months. The wife had credit card debts of $100,000 the extent of which had only been disclosed later in negotiations. The wife had consulted a lawyer throughout the entire process and had successfully sought amendments to the agreement including a cash payment to her of $100,000. When the agreement was signed, the wife’s post-natal depression had resolved, and she was optimistic about her financial future. There was no evidence to suggest that the wife did not want to sign the agreement. Despite her personal debt, she was an experienced financial planner whose income had been around $300,000 before having children. In the circumstances, the court considered that the negotiations surrounding the agreement were not unconscionable nor was there undue influence.

Conclusion

A financial agreement will be binding provided it complies with the provisions of the relevant legislation, the parties make full disclosure, and the agreement is not made contrary to general principles of contract law.

There is no one-fit solution when it comes to making a financial agreement and an informed decision should be made with the assistance of an experienced lawyer. Once in place, a financial agreement made before or during a relationship should be reviewed regularly to take into account changes in personal and financial circumstances.

This article is intended to provide general information only. You should obtain professional advice before you undertake any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

In certain circumstances a divorce granted overseas, even of a marriage performed in Australia, can be recognised here. In this article we look at the factors that the Court will take into account before recognising a foreign divorce.

Divorce in Australia

Briefly, in order for a married couple to get divorced in Australia they, or one of them, must prove that they have been married for at least two years, that they separated 12 months before filing the divorce application and have lived apart since then, and that there is no reasonable likelihood of the couple living together again.  In addition, at least one of them must be an Australian citizen, regard Australia as their home and intend to live here indefinitely, or ordinarily live in Australia at the time of filing the divorce application as well as for the preceding 12 months.

If the couple have minor children, the Court must be satisfied that proper arrangements have been made for the children’s care, welfare and development, taking into account things such as their maintenance, education, living arrangements and time with both parents.

Remarriage

Australian law does not permit polygamous marriage. So, if a married person wishes to remarry in Australia, he or she must first be divorced, having received a final divorce order from the Court.

Australian divorce orders become final one month and one day after the Court hears and grants the divorce.

Foreign divorce

But what if a person obtains a divorce in another country? In what circumstances will that divorce be recognised by Australian law so that those parties, or one of them, could remarry in Australia?

The first step in determining whether a foreign divorce will be recognised as valid in Australia is whether that foreign divorce was effected according to the law of that foreign country. If not, then the foreign divorce cannot be treated as valid in Australia.

Then the Court must look at whether the applicant for the foreign divorce, the respondent or both of the parties were domiciled or ordinarily resident in or nationals of that foreign country at the time the foreign divorce proceedings were commenced. The Australian Court is likely to recognise that the foreign divorce, if it is valid in the relevant overseas country and if the respondent to the divorce application was a national of or domiciled or ordinarily resident in that foreign country at the time the divorce application was started.

If those factors do not apply to the respondent, the foreign divorce could be recognised in Australia if the applicant for the foreign divorce was domiciled in the overseas country at the time he or she files for divorce, or if he or she was ordinarily resident in that country at the time of starting the divorce proceedings and had been ordinarily resident there for the previous 12 months, or was at that time a national of that country. In some circumstances it would also be relevant that the parties last lived together in that foreign

country.

Finally, in order for a foreign divorce to be recognised as valid in Australia, the Australian Court must be satisfied that both parties were afforded natural justice. That is, were each of them made aware of the application and given an appropriate opportunity to respond to it and, if appropriate in that foreign country, to appear and be heard at the hearing of the divorce application?

What about the laws of a third country?

When an Australian Court recognises a foreign divorce as valid in Australia, either of the parties to that former marriage may then remarry in Australia (so long as they are not still married to someone else at that time). That is the case even if the foreign divorce would not be legal or recognised as valid in some third country.

Summary

Australian law does not permit polygamous marriage. Therefore, someone who has been previously married (whether in Australia or elsewhere) must first obtain a divorce (or divorces if there was more than one earlier marriage) before he or she can remarry in Australia.

Australian law will recognise foreign divorces as valid in certain circumstances, taking into account factors such as whether the foreign divorce was obtained in accordance with the laws of that overseas country, of which country the parties were each citizens at the time the divorce proceedings were started and in which country the parties were each living at that time.

If you need assistance or advice on how to proceed please contact us on 07 3281 6644 or email mail@powerlegal.com.au

Once a couple is separated, their superannuation (Super) is treated as property under the Family Law Act 1975 (Cth) (FLA) and the value of the couples’ Super benefits will be taken into account when determining a property settlement.

Super is held in trust and differs from other types of property, there are rules that govern when a party is able to access their Super funds. Laws regarding Super splitting apply to both married and de facto couples equally, except in Western Australia (WA).

Super splitting can be a complex area of law and you should ensure you know exactly where you stand regarding Super entitlements after separation or divorce.

Valuing your superannuation

The Family Law (Superannuation) Regulations 2001 (Regulations) provides different methods for valuing Super interests. The methods provided in the Regulations can be confusing, overwhelming or inappropriate for some Super interests. This is why we strongly recommend you seek advice from an experienced family lawyer on the best valuation method available for your type of Super fund.

If you want to obtain information about your Super for valuation purposes, you will need to do the following:

• Complete a Form 6 Declaration;
• Complete a Superannuation Information Request Form;
• Send both forms to the trustee of the fund.

These forms can be found on the Family Court website. Your Super fund may charge a fee for processing the forms. Your lawyer is also able to complete the forms on your behalf, which is recommended as family lawyers have experience in filling out Super Information Kits. This will ensure the forms are completed correctly at first instance, helping you save time and money.

What factors are considered when determining the value of the superannuation split?

Financial contributions are not the only factor considered when assessing the value of a Super split. Non-financial contributions such as care of children of the relationship and the family home may also be considered. The Family Court may also consider the financial position of both parties after their divorce or separation when determining the value of a Super split.

Splitting your superannuation

Before negotiations commence in relation to the splitting of Super, it is vital to speak to a lawyer who can help you place a “payment flag” on both parties’ Super accounts. This will prevent any party withdrawing money from the accounts before the accounts have been valued.

Splitting super does not necessarily convert the amount split into a cash asset.  After the agreed amount has been transferred to a parties’ super account, it must remain there until a condition of release of Super is satisfied, for example preservation age reached, severe financial hardship or terminal illness.

In WA, further legislation to give effect to a scheme for superannuation splitting for parties in a de facto relationship is yet to be passed. Once this occurs, parties who have been in a de facto relationship will be eligible to seek Super splitting only if:

• they are separated;
• have not made a BFA; and
• there are no final Family Court Orders existing between them.

Married couples in WA are able to obtain super splitting orders which are subject to Commonwealth laws when determining a Super split.

Methods used to split superannuation

There are a few methods in which Super can be split. The method applied will largely depend on whether both parties can come to an agreement on the amount of Super that will be included in the property settlement.

Super may be split as part of a binding financial agreement (BFA). If your BFA did not provide for a Super split, it is still possible to add a Super agreement to the BFA after your relationship has ended. If there is no BFA in place and both parties have agreed to a Super split, they can file an application for Consent Orders with the Family Court.

The Family Court will review the parties’ Consent Orders to ensure they are fair and reasonable. The Consent Orders will then be made into a Court Order, which means the orders are then legally binding on both parties.

If parties are unable to reach a mutual agreement on splitting their Super, the Family Court will determine the division of the Super split by considering a range of factors. This type of Court Order is known as a Financial Order.

As is clear from the above discussion, splitting Super can become a complex task. This is why we recommend seeking further advice and guidance from an experienced family lawyer.

Conclusion

Couples who are going through divorce or separation proceedings can feel stressed and overwhelmed, especially when it comes to property division. Super splitting is usually a complex area of property division, especially when parties cannot reach a mutual agreement.

There are various and complex methods of valuing and splitting Super funds under the Regulations, some people may also discover that none of the valuation methods are suitable for their Super account. After the agreed amount has been transferred to a party’s Super account, it must remain there until a condition of release of Super is satisfied.

If you want to ensure you receive the correct amount of a Super split, we strongly recommend you seek legal advice from one of our experienced family lawyers.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Separating couples should make reasonable attempts to agree on the future living arrangements, care and responsibility for their children. The Family Law Act 1975 (Cth) provides that, unless there are extenuating circumstances, dispute resolution is compulsory if agreement cannot be reached, prior to bringing an application for parenting orders to the family law courts.

Unless exempt, parties wishing to proceed to the Family Court for parenting orders must first provide a certificate stating that they have attempted dispute resolution. This is required even if there are existing orders with respect to a child for which amended or additional orders are sought.

What is Family Dispute Resolution?

Family Dispute Resolution (FDR) is a mediation service conducted by accredited Family Dispute Resolution Practitioners. Practitioners are registered on the Family Dispute Resolution Register and services are provided by individuals, Family Relationships Centres and other community organisations. Your lawyer can assist in finding a practitioner near you.

The objective of attending dispute resolution is to try to resolve children’s matters without the stress, burden, and financial costs of attending Court, with the best interests of the children being paramount.

If an agreement is reached, a parenting plan can be developed, or consent orders filed with the Court.

Do I need to attend FDR?

There are circumstances in which FDR is either not appropriate for the parties or not required. These include where:

• the parties are applying for consent orders;
• a party is responding to an application (already filed in the Court);
• the matter is urgent;
• the matter involves family violence or child abuse issues;
• due to a party’s incapacity or location, he or she is unable to effectively participate;
• the application is for a contravention of an existing order made within the past 12 months and a person has shown a serious disregard to his or her obligations under the order.

Parties claiming an exemption from attending mediation must provide an affidavit setting out the relevant circumstances with their application to the Court.

Going to Family Dispute Resolution

It is important that those who cannot resolve matters concerning the children attend FDR and understand the process involved. Family members or support persons are permitted to attend. If you would like your lawyer involved, you should discuss this with the practitioner conducting the mediation beforehand.

Children do not usually attend however in some cases a family counsellor or child psychologist will communicate with a child and if required, prepare a report before the mediation.

The role of the FDR practitioner is to assist the parties to cooperate in a positive manner and to work through the real issues.

The parties attending should make genuine efforts to resolve the issues in dispute and explore options for workable parenting arrangements that will be in the best interests of the child or children. The FDR practitioner should ensure that each party understands the process and the terms of any agreement reached.

Unless the FDR practitioner has a legal obligation to disclose information, all communications exchanged during FDR are confidential and cannot be used as evidence if the matter ultimately proceeds to Court. Information that must be disclosed includes matters concerning child abuse or a risk of child abuse, or that would prevent serious harm to a person or the commission of a crime.

The costs of attending FDR may depend on your financial circumstances but it is likely to be much less costly than attending Court.

What happens with any agreement reached?

Arrangements agreed for the ongoing and future care of the children may be documented in a parenting plan. Parenting plans are not legally enforceable however may be considered if a party subsequently applies to the Court for a parenting order to vary the parenting plan.

Alternatively, agreements can be documented in consent orders which are legally binding and can include various aspects of the parenting and care arrangements for the children. Consent orders can be prepared by your lawyer and filed in Court. You or your ex-partner will not need to attend Court however the orders will have the same force as an order made after a Court hearing.

What if an agreement cannot be reached?

If both parties attend FDR and the outcome is unsuccessful, the practitioner will issue a certificate noting each parties’ attendance and verifying that each made a genuine attempt to resolve the dispute.

Alternatively, the certificate may indicate that one party failed to attend, one or both parties failed to make a genuine attempt to resolve the dispute (either initially or part way through the mediation), or that FDR was not appropriate in the circumstances.

Non-attendance at FDR (unless an exception applies) may result in a delayed Court hearing or adverse costs orders.

Going to Court

The Family Court has discretion when determining children’s matters. If agreement cannot be reached regarding parenting issues it may be necessary to apply to Court for the appropriate orders. The overriding principle considered by the Court is that the best interests of the child are paramount. Essentially, this means that children:

• should have the benefit of a meaningful relationship with both parents;
• be protected from physical and psychological harm; and
• receive parenting that allows them to reach their full potential.

Conclusion

In parenting cases, attendance at FDR is generally compulsory before filing proceedings in Court.

Attending FDR can result in an agreement for the ongoing care and responsibility for your children which can be documented in legally binding orders. If the matter is not fully resolved, attending FDR may at least narrow the issues in dispute or encourage the parties to communicate more positively about their children.

You may not need to attend FDR in certain circumstances, for example, if there is a risk of family violence or abuse. Your family lawyer will assess your situation and assist you in reaching a workable plan for your children.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Family law proceedings can become very stressful. The last thing you should be worrying about is exorbitant legal fees. However, your family law fees do not necessarily have to become a burden. We have provided our top 10 tips on ways in which you can keep your legal fees reasonable!

Although family law proceedings can at times be costly, ensuring you get proper legal advice is very beneficial and can help reduce stress by providing you with an understanding of your rights and what’s involved in family law proceedings.

In our experience, having a family lawyer represent you in family proceedings can help you receive a more favourable property settlement outcome compared to parties who represent themselves.

Here are our 10 top tips to help you save money on your family law fees

Get legal advice early

Obtaining advice early in proceedings is important so that you and your lawyer can come up with a plan on what your matter will involve. At the end of each meeting with your lawyer, ask about the next step in your matter so that you remain up to date with proceedings.

 Make a list of questions you want answered before every appointment

 Having a list of questions and concerns regarding your matter will result in a shorter appointment time as you won’t need to take time to recall the questions you had planned to ask. It will also help eliminate the need for you to call your lawyer after your appointment to ask the questions you had forgotten. Remember, every time you call to speak to your lawyer, you may get charged! We also recommend you send your list of questions to your lawyer before your meeting so that your lawyer can be prepared.

Take notes of discussions with your lawyer

 Taking notes during your meetings and telephone calls with your lawyer will help you recall what was discussed between you, eliminating the need to ask your lawyer the same question twice. This reduces the time spent on speaking with your lawyer and in turn will help reduce your legal fees.

Prepare your financial documents

 You will usually be required to provide 12 months’ worth of bank statements, including savings accounts, all mortgage statements, your last three tax returns, and recent payslips, including current superannuation statements. We also recommend sending a request for you and your ex partner’s superannuation fund details as this will provide information to both lawyers about assets and liabilities of the relationship. This will also give both parties an approximate indication of the total value of financial assets. Taking this extra step can save your lawyer time and help reduce your fees even further.

Limit your questions to only legal issues

We empathise that family law proceedings can become stressful and emotional. Your family lawyer will support you to the best of their ability, however, they are only qualified to give legal, not emotional advice. Keep your discussion to legal issues only, this will help keep your meeting shorter and reduce your fees. If you need emotional support, we recommend you arrange an appointment with a counsellor and ask them if you are eligible for free counselling or rebate through Medicare for counselling fees.

Try to remain reasonable when undertaking settlement negotiations

 When it comes to family law proceedings, both parties will need to make concessions. It is more productive and cost effective to resolve matters sooner by conceding some issues, which may seem to appear important at the time. Avoid being unreasonable or threatening litigation as a way of punishing your ex-partner. If you continue to be unreasonable or refuse to negotiate with your ex-partner, you will also be punishing your wallet!

 Avoid incessantly calling your lawyer

 We understand waiting to hear from the other party may be nerve racking, however your lawyer will contact you as soon as possible with any replies from the other party. Constantly calling your lawyer to find out if you have a reply from the other party will only increase your legal fees. If you only have a basic message you want to pass onto your lawyer, it is best to leave the message with their legal assistant.

 Provide your lawyer with any information they request

 Your lawyer will most likely request written material to prepare court documents (such as information for an affidavit). Providing your lawyer with written material will result in greater efficiency in preparing any legal documentation and as a result, reduced legal fees.

Organise all documents before sending to your lawyer

 Before providing your lawyer with any requested documents or information, ensure you organise these documents in chronological order and make a list reflecting all the documentation provided. Providing an electronic version of the list and documents where possible, will also save the law clerk’s time and help keep your legal fees down.

Finally, respond to your lawyer’s requests in a timely manner!

 We cannot stress how important this is! Lawyers have deadlines they must meet, including responding to the other side’s requests. If you don’t want to pay extra for your lawyer to keep following up with you or for unnecessary appeals and motions, respond to their requests as soon as possible. You also do not want to give the other side an excuse to claim for legal costs they have incurred because of your delays, so always ensure you respond to your lawyer’s requests promptly.

Conclusion

As you can see, there are numerous ways you can help keep your legal fees as low as possible. Our family lawyers will be happy to discuss and advise you on what you can do to help achieve this throughout managing your matter.

Although legal fees can at times be costly, we cannot stress the value of obtaining legal representation from an experienced family lawyer in the long run, as it can help you receive a more favourable property settlement.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Dividing property after partners separate is generally stressful, with each party concerned about his or her financial future. The bankruptcy of one party adds a further dimension of complexity to a family law property settlement.

Even partners whose relationship is intact should seek urgent advice if one of them is facing bankruptcy or insolvency issues. In particular, the non-bankrupt party should take immediate action to protect his or her interests in assets.

This article provides an overview of bankruptcy laws, how property is usually divided after a relationship breaks down, and how the processes interact when one of the parties to a property settlement is bankrupt. Bankruptcy and family law are complex areas and the information in this article is general only. Parties should obtain professional advice relevant to their individual circumstances.

What happens when a person becomes bankrupt?

A person is considered bankrupt when he or she is unable to pay his or her debts. Apart from certain protected property, the bankrupt’s assets vest in an appointed trustee in bankruptcy who may sell those assets to satisfy the claims of creditors. Protected assets generally include clothing, certain personal possessions, tools of trade, a motor vehicle to a prescribed value, awards of compensation and superannuation and life policies.

The trustee controls the bankrupt’s financial affairs while the bankrupt is protected from being personally sued by creditors.

How is property divided after a relationship breakdown?

The division of property after a relationship breakdown generally requires a four-step process to:

• identify the parties’ pool of assets available for distribution;
• determine the parties’ respective financial and non-financial contributions;
• consider the parties’ future needs; and
• determine a split that is, in all the circumstances, just and equitable.

What happens when one of the parties to a property settlement is bankrupt?

When a relationship breaks down and one of the parties is bankrupt, the interplay of the Bankruptcy Act 1966 which regulates individual bankruptcy, and the Family Law Act 1975 which governs the division of property, must be considered.

The Family Law Act enables a person to apply for the alteration of property interests after the breakdown of a relationship, and specifically includes circumstances where property is vested in a trustee for bankruptcy if one of the partners is bankrupt.

This allows the Court to alter the interests of property that would otherwise vest in the trustee, enabling the non-bankrupt partner to claim an interest in vested assets for his or her benefit and / or the benefit of any dependants. The legal title to the property in such cases is irrelevant.

The interests in the family home of a non-bankrupt party may also be protected. The family home is generally not a protected asset and the bankrupt’s interest is available to a trustee to satisfy creditors. However, where legal title to a family home is held solely by a bankrupt, the Court may nevertheless conclude that the home is held jointly thereby protecting the interest of the non-bankrupt party.

A person affected by an order or proposed order such as a creditor, may apply to have it varied or set aside. In some circumstances, a trustee will apply to be joined as a party to the proceedings and to have orders set aside on grounds of fraud, duress or a failure to disclose relevant information. This could result in the recovery of certain assets to satisfy creditors.

The Court must balance the competing rights of the creditors and the non-bankrupt party and make orders that are just and equitable in the circumstances. It may take into account a range of factors including:

• the non-bankrupt partner’s direct and indirect financial and non-financial contributions to the relationship;
• the effect of a proposed order upon either party to the relationship;
• the future needs of the non-bankrupt party including the responsibility for caring for children, employment status and health;
• the effect any orders will have on creditors of the bankrupt person including whether the debt will be repaid in full.

The need to achieve a just and equitable outcome may result in the non-bankrupt partner and his or her dependants obtaining a share of certain assets that would otherwise be vested in the trustee, to the detriment of the creditors.

Key takeaways

• The property of a bankrupt individual vests in the trustee in bankruptcy for distribution between creditors.

• The ex-partner of a bankrupt person may pursue a property division despite the bankruptcy.

• Court proceedings for a family law property settlement when one partner is bankrupt will generally be between the non-bankrupt party and the trustee in bankruptcy.

• In such proceedings, the Court may be required to determine:

–        applications by the non-bankrupt party to restrain the trustee from dealing with certain property and / or distributing funds amongst creditors;

–        claims that property vested in the trustee and otherwise available to satisfy creditors should be altered for the benefit of the non-bankrupt partner;

–        claims that exempt property or property not vested in the trustee should be made available for distribution to creditors.

If you or your partner are facing insolvency issues, whether or not your relationship has ended, or is likely to end, you should obtain immediate legal advice.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

The division of assets after couples have separated can be finalised by financial agreement, consent orders or proceedings in the Family Court.

The Family Law Act 1975 (Cth) requires parties to make genuine efforts to resolve disputes. Generally, parties must participate in dispute resolution, explore options for settlement and comply, as far as practicable, with the duty of full and frank disclosure.

These ‘pre-action procedures’ must be followed before commencing proceedings in the Family Court, the objectives being:

• to encourage early disclosure through the exchange of information;
• to minimise the potential for legal action by reaching an early settlement;
• to construct a process to resolve a matter quickly and to limit costs; and
• if proceedings are necessary, to assist in their efficient management by identifying the real issues in dispute.

What is the duty of disclosure?

Broadly, the duty of disclosure requires that the parties exchange information and documents (whether or not these are known to both parties) that are relevant to an issue in the case.

The disclosure obligations exist from the beginning of the matter and continue until the case is resolved. This means that a party must disclose when certain circumstances change or new information or documents come to that person’s attention.

Full financial disclosure is essential to enable a lawyer to properly advise a party on his or her rights and disclosure obligations must be followed even if the parties settle their financial affairs without going to Court.

Disclosure in property matters

The information and types of documents required to be disclosed in property matters will depend on the asset pool and the business or financial interests of the parties.

The Rules set out an exhaustive list of disclosure requirements. Compliance may be met by providing a statement of financial circumstances, producing certain documents and / or answering specific questions.

Generally, the types of disclosure documents required include:

• all sources of earnings including income from paid employment and business interests, rental income and interest on shares and investments;
• other financial resources;
• financial interests whether existing or contingent, in property, including real estate and other assets;
• details of property disposals (whether by sale, transfer, assignment or gift) made within 12 months before separating;
• taxation returns and assessments;
• superannuation details;
• market valuations for certain assets, particularly if values are not agreed;
• liabilities and contingent liabilities.

More exhaustive information is required if the parties have interests in a company, trust or partnership. The parties will need to provide balance sheets, profit and loss statements, business activity statements, recent annual returns, deeds and agreements.

Additionally, where there are matters in dispute, such as an assertion by one party of having made significantly greater financial contributions, then evidence to support those claims is required.

A practical approach

The duty of disclosure refers to ‘relevant’ matters and for compliance ‘as far as it is practicable’. Whilst this is not a mechanism for avoiding the disclosure obligations, it does foster a sensible and practical approach.

Disclosure is required so that an understanding of the parties’ asset pool can be ascertained. It need not extend to disclosure of information from third parties unless that person’s financial circumstances are relevant to the issues in dispute.

Matters that are common knowledge between the respective parties do not need exhaustive documentation. For example, a bank balance of say $200 need simply be noted without providing the past three years’ bank statements.

Locating, identifying and collating the necessary disclosure information can be onerous. Your lawyer will explain the extent of your obligations and provide guidance to assist you in meeting your obligations.

Risks of non-disclosure

Lack of disclosure and ongoing disputes regarding the parties’ financial circumstances will exacerbate settlement, add unnecessary legal and other costs, and risk depleting valuable resources.

Importantly, there are significant penalties that may be imposed by the Court for failing to disclose relevant information or attempting to mislead the other party.

A person failing to disclose a relevant document as required or providing a false or misleading document may result in that person:

• being unable to rely on the document as evidence in proceedings;
• having his or her matter dismissed or postponed;
• having the Court attribute a value to an undisclosed asset (which is generally not in that party’s favour);
• being found guilty of contempt, leading to fines or imprisonment;
• being ordered to pay legal costs.

Conclusion

The parties to a family law property settlement have an obligation and ongoing requirement to be transparent with respect to their financial affairs.

The duty of disclosure ensures that the Court is fully informed of the parties’ financial position and is relevant whether or not a matter proceeds to Court.

This article is intended to provide general information only. You should obtain professional advice that is relevant to your circumstances before you undertake any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Unfortunately, many separations end in hostile disputes over money. A common situation when trying to resolve property matters is when one partner makes a considerable dent in the family finances by squandering assets or racking up additional debt.

A bitter ex-partner may go on a spending spree, ignorant of the consequences. Alternatively, he or she may have been reckless during the relationship either through risky business ventures, gambling or other addictions.

Whether the wastage has occurred before or after the relationship ends, the potential for a fair split of the assets after separation may seem flawed. Fortunately, the Family Court is empowered to use discretion to achieve a just outcome. These discretionary processes have traditionally included the concept of ‘add-backs’.

This article explains how a family law financial settlement may be dealt with when one party independently deals with property to the detriment of the other.

Dealing with property matters generally

It is first useful to outline the steps a Court takes to determine how property should be divided. The process involves:

1. identifying the assets, liabilities and financial resources of the parties;
2. assessing the parties’ respective financial and non-financial contributions;
3. evaluating the parties’ future needs taking into account their relative earning capacities, state of health and the need of the primary carer of children to provide a suitable home;
4. in all of the circumstances, making orders that are ‘just and equitable’.

The starting point is usually an equal distribution of assets before consideration of several other factors.

Notional property and add-backs

The Court’s approach to a financial settlement is discretionary, allowing it to consider the parties’ circumstances with the objective of providing an outcome that is fair and just.

Adding back property means including into the pool of assets a notional value for property or funds that have been wasted, exhausted or prematurely disposed of for the benefit of one party or a third party.

The ‘notional’ property will form part of the asset pool from which a division of property is made. The purpose is to bring back the value of assets that would otherwise have been available to both parties, had the other party not caused the asset to be depleted.

When will an add-back be appropriate?

The starting point is that assets accrued or losses sustained (whether jointly or individually) during the course of the marriage or relationship should be shared between the parties, although not necessarily, equally. However, in exceptional circumstances it is appropriate for the Court to deviate from this principle. Generally, add-backs will arise in the following circumstances:

• losses incurred as a result of a party’s deliberate efforts to diminish or deplete the value of assets, such as a premature distribution of assets;
• losses sustained by a party’s reckless, negligent or wanton conduct;
• where a party has used joint funds to pay for his or her own legal costs.

Premature disposition of assets

Occasionally, a party deliberately sets out to diminish the matrimonial assets, making them unavailable for distribution. This may occur by selling or transferring property to a third party or making extravagant or lavish gifts.

To justify an add-back, the Court will need to assess the reasonableness of the expenditure in light of the surrounding circumstances, including an assessment of the overall asset pool and the amount spent. For example, in one case, the wife assisted her adult daughter by gifting $15,000 as a deposit to purchase a property. The Court considered that it was not unusual for parents to assist their children and, given the magnitude of the asset pool, it was unreasonable for that amount to be added back.

In another case the husband sold his taxi licence and vehicle, which had been used to operate a business throughout the course of the marriage. He benefited from the proceeds and the Court determined that the value of the funds received should form part of the asset pool for distribution between the parties on the basis that the wife had a legitimate interest in the taxi business.

Reckless conduct and waste

Money wasted on individual pursuits or gambling addictions during or after the relationship may be added back to the asset pool. The conduct of the spendthrift party will be relevant in determining such cases and the Court plays a discretionary role in deciding whether or not the losses should be borne individually or jointly. Considerations may include whether the person has an underlying illness, and his or her attempts to obtain help.

Adding back legal costs

Parties are required to fund their own legal costs and outstanding legal fees do not constitute a liability forming part of the asset pool.

Money taken from a joint account by one party to pay his or her legal fees may be subject to an add-back. This however is a matter for discretion and will depend on the particular circumstances – if the funds existed at the time of separation and both parties have an interest in them, then it is likely they would be added back. Conversely, if funds used to pay legal costs were sourced from a party’s own efforts or provided as a gift or loan post-separation, then it is unlikely these will be added back to the pool of assets.

Key points

• Separating couples should share financial losses incurred during the relationship unless those losses result from one party’s negligence, recklessness or intentional conduct to reduce or deplete matrimonial assets.
• Each case will turn on its merits and the entire circumstances of the expenditure is considered when assessing its reasonableness.
• Funds existing at the time of separation and subsequently used for reasonably necessary living expenses are not added back to the asset pool.
• Clear evidence is required of assets and expenditure before and after separation and separating parties should take care to record assets and liabilities at the time of separation and thereafter.

Conclusion

High Court cases such as Stanford v Stanford [2012] HCA 52 and Bevan v Bevan (2013) FLC 93-545 suggest that concepts of add-backs and notional property may have become outmoded and their application more the exception than the rule.

There is no guarantee that a dissipated asset will be notionally ‘returned’ to the asset pool on a dollar for dollar basis. However, and as confirmed in subsequent cases, the Family Court has discretion to adjust property interests by considering a myriad of factors and on a just and equitable basis. Such factors include circumstances where assets are purposely, negligently or recklessly depleted.

It is important to obtain good legal advice before or soon after you separate from your spouse or de facto partner. An experienced family lawyer can assist in preserving hard-earned assets, preventing wastage and maximising your chances of a fair property settlement.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Most property settlements are reached through negotiation, without the need to attend Court. Negotiations can be formally documented through a binding financial agreement or consent orders. As a last resort, the parties may need to initiate Court proceedings whereby orders will be made regarding the division of the parties’ property.

No matter how a property settlement is reached, it is important to be aware of the financial impact of the proposed agreement before finalising it. Family lawyers often recommend working with a financial advisor to ensure a property settlement delivers an optimum financial outcome for the client. We explain below some of the benefits in working collaboratively with a financial advisor and lawyer.

Identifying and classifying assets and liabilities

A financial advisor can help to properly identify, classify and evaluate the parties’ assets and liabilities, whether these are held jointly or individually. Assets can be held in various ways, whether through a trust, company or shares and it is important that a full portfolio of the asset pool is obtained. Only by presenting a complete picture of the parties’ financial position, might a fair and reasonable property settlement be negotiated.

In some circumstances, a financial advisor or lawyer will recommend that certain assets, such as business interests and company shares, be formally valued.

Recommending tax effective strategies

Understanding the tax implications of a proposed property settlement can have a significant impact on the net result for each party.

The retention, transfer or division of different types of assets can have different stamp duty and tax consequences.

A financial advisor can recommend strategies and structures for the division of assets to take advantage of duty concessions and tax exemptions or deferrals that are unique to family law property settlements. This may include recommending that a certain asset be retained or transferred. Depending on the stamp duty and tax consequences applicable to that class of asset, it may be more advantageous to retain one type of asset over another.

A financial advisor can also flag and calculate potential future CGT liabilities which is an important consideration when negotiating the division of property. Advice on transactions concerning companies and trusts may also play a significant part of the advisor’s role.

Advising on superannuation

If a superannuation split forms part of the proposed property division then you will either end up with more, or less in your superannuation account. This may require a reassessment and restructure of your retirement plans. A financial advisor can evaluate the net effect of a proposed superannuation split and assess future needs and contributions towards superannuation.

Assessing future needs and planning ahead

Most financial advisors have sound knowledge of family tax payments and child support and can assist in determining entitlements and / or obligations.

Your financial adviser can help implement strategies on how to get back on your feet, financially, after separation. This may include budgeting advice and money management strategies, recommending appropriate insurance to protect your income, managing and protecting assets, and developing plans to work towards your financial goals.

Estate planning and death benefits

Once a property settlement has been reached and finalised, a financial advisor and lawyer can work together to implement an effective estate plan in consideration of your new personal and financial circumstances.

They will identify the most tax-effective beneficiary for superannuation entitlements and death benefits and help structure your assets to ensure maximum protection against future family provision claims.

Conclusion

Separating couples are often anxious about their immediate and future financial needs and may seek assistance to achieve a fair and reasonable property settlement. In doing so, it is important to remember that lawyers provide legal advice and not financial advice. Including a financial advisor in your professional team can provide significant benefits when negotiating a property settlement.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Dividing property after separation can be challenging and, while avoiding court is the preferred approach to finalise a property settlement, this is not always possible. Court proceedings can exhaust time and money. When the pool of assets is quite modest, the impact of excessive legal and court costs can put a significant dent in the value of the property a couple has worked hard to obtain.

To target these issues, the Government has introduced a Small Claims Property Pilot program to help parties with small asset pools reach a fair division of assets with minimal cost and without extensive delay, as is often the case for family law matters. Known as the Discrete Property List, the program has been implemented by the Federal Court registries in Brisbane, Parramatta, Adelaide and Melbourne.

The program commenced in January 2020 and will run for two years. Afterwards, its success will be assessed with the possibility of expansion into other regions and on a more permanent basis.

If you are separated with a net joint asset pool of $500,000 or less, you may be eligible to access the program and have your matter dealt with more efficiently and cost effectively by the Federal Court.

The Discrete Property List

The program forms part of the $98.4 million Women’s Economic Security Package (WESP) to fund services and initiatives aimed at supporting victims of family violence and resolving family law disputes.

Traditionally, apart from urgent matters, family law property cases progress through the court in the same manner and within the same timeframe irrespective of the size of the asset pool or complexity of issues involved. This approach has contributed to an excessive backlog of cases which could potentially be lifted by fast tracking some of the smaller, simpler matters.

The program deals with property related matters only, which are referred to as Priority Property Pools under $500,000 (PPP500) cases. A PPP500 case is one where:

• the parties’ net property (including superannuation) is $500,000 or less; and
• there are no entities owned or controlled by either party that will require valuation or expert investigation (for example, a family trust, company or self-managed superannuation fund); and
• neither party is seeking orders for parenting or child support.

The objectives of the program are to:

• fast-track and finalise simple property matters involving small asset pools at minimal expense for the parties involved;
• reduce the current backlog of cases within the family law system and the waiting time for other matters;
• assign a Magistrate to deal with smaller, less-complex matters while freeing up Judges to deal with more complex matters and children’s matters.

Processes and timeframes

The Federal Circuit Court has issued practice directions for parties involved in a PPP500 case. Rather than waiting to be heard by a Judge, matters in the Discrete Property List will, in the first instance be assigned to and case-managed by a Registrar.

In most cases, the matter will be dealt with exclusively by the assigned Registrar with an outcome anticipated within 90 days or the matter referred to a Judge for case management or listed for hearing.

The program fosters early dispute resolution and features intensive monitoring for compliance and exchange of documentation between the parties. To improve the potential outcome using these processes, there is close involvement to ensure cases are properly prepared before alternative dispute resolution takes place.

A PPP500 case will typically take the following path:

• Proceedings are commenced by the parties filing an Initiating Application and a Financial Summary. Prior to the first court date, the case will be confirmed as a PPP500 and preliminary directions made by the Registrar in chambers for financial disclosure and the exchange of relevant documents, such as valuations and expert reports, between the parties.
• On the first court date before the Registrar, and assuming the parties have exchanged the required financial information, a ‘balance sheet’ is settled and the parties may be referred to private mediation, a conciliation conference or Legal Aid conference.
• Alternative Dispute Resolution may take place with a Registrar, external mediator or at a Legal Aid conference. Following, the parties may be in a position to settle the matter by consent, and in such cases, legally binding orders can be made.
• If the matter does not settle, a second court date is arranged – factual issues are identified, the balance sheet is re-checked and settled, and the Registrar’s involvement comes to an end. The case is then referred to a Judge.
• A procedural hearing is convened where issues are identified, and directions made for a final hearing. Parties may have the option to consent to a less adversarial hearing on the papers. If a traditional hearing is preferred, the parties should identify the issues in dispute and relevant evidence in support of their respective positions.
• Final hearing takes place.

Conclusion

Legal and other costs for small property cases can be grossly disproportionate to the actual value of the asset pool. With cases taking up to two years to reach a final hearing, parties endure expenses in addition to legal and court costs such as maintaining and insuring assets pending their potential sale, storage fees and short-term accommodation costs. The parties must also contend with the emotional impact of court proceedings and the feeling of being ‘in limbo’ until a property division is finalised.

It is anticipated that PPP500 cases will proceed more expeditiously through to settlement, alleviating some of the emotional and financial stress to those with modest asset pools and freeing up the Court to deal with more complex family law matters.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.