Property Case Law Update NQLA 25 May 2013

Property Case Law Update NQLA 25 May 2013
Justine Woods

Overview of the categories of property cases to be considered
Advising clients correctly: when finalising Binding Financial Agreements; when the marriage is intact; when the marriage has been short; when the marriage has been long and produced significant wealth; when there are allegations of illegality; when the parties have been long divorced;

Overview of the categories of property cases to be considered
Keeping the clients going and getting paid: interim and partial property settlement orders; orders for legal funding.

When is a Financial Agreement binding?
Hoult & Hoult [2011] FAMCA 1023 In this case the court considered whether or not a Section 90B agreement entered into between the husband and wife was binding within the meaning of s 90G. The agreement contained the standard clauses regarding the parties having entered the Agreement of their own free will, that neither had relied on representations made by the other and that they had each received independent legal advice.

The wife argued that the agreement was not binding asserting that she was not provided with any advice, or, at least, advice in the form or of the type which s 90G requires. This was based on her assertions that she was not informed by her solicitor as to the effect of the agreement on her rights or about the advantages or disadvantages to the wife of making the agreement. Murphy J considered the nature of the required advice under s 90G(1)(b) at [65]:

Murphy J considered the nature of the required advice under s 90G(1)(b) at [65]: But, at least in the case of a pre-nuptial (i.e. s 90B) agreement, it is by no means clear what is contemplated by the requirement in s 90G that advice must be given as to "the advantages or disadvantages of the agreement at the time that the agreement was made". That advice must, as it seems to me, depend, at least in part, upon the myriad of circumstances which may (or may not) arise in the course of the parties' married lives (including, indeed, whether they separate at all, in which case the terms of the agreement providing for respective entitlements will not become operative). How is the justice and equity (in s 79 terms) of the agreement to be determined at the time it is signed if it does not become operative until separation occurs?

If advice as to "the advantages and disadvantages" is not to be given by reference to prospective s 79 entitlements, what criteria or reference point or points are the measure of "advantage" or "disadvantage"? The terms of an agreement might be seen to be wholly just (or "advantageous") if separation was to occur a week later and wholly unjust (or disadvantageous) if separation was to occur 25 years later. The terms of an agreement may be seen to be wholly just (or advantageous) if the parties have modest assets at the time it is made but be seen to be wholly unjust (or disadvantageous) should, 20 years later, one of the parties acquire very significant wealth. Permutations are innumerable.

Murphy J considered the nature of independent advice under s 90G(1)(b) at [72]: I do not accept, then, the wife's assertion that the husband provided "instructions" to Ms K [the solicitor for the wife] about any advice which was or was not to be given by her to the wife. Precisely the same considerations apply to the extent that those same assertions are made in respect of any advice provided to the wife by Mr W. I specifically accept his evidence that he provided no such advice. Accordingly, it is clear I accept that such advice as was given was "independent" within the meaning of the section.

Murphy J considered the adequacy of the advice provided at [88]-[91]: I consider that the certificate is, without more, insufficient to satisfy the onus of establishing that the relevant s 90G requirements have been met. It will be clear that I have reservations generally about the veracity and reliability of the wife's evidence as I do about the reliability of the solicitor's evidence. I can be confident, and specifically find, that there was a consultation with Ms K lasting 50 minutes. I can be confident, and specifically find, that, during that consultation, the agreement (including, as I find, its schedules) was read verbatim to a person whose first language is not English.

Despite my general reservations about the wife's evidence, I accept her evidence that she received little, if anything, in the way of advice about her rights under the agreement and about its advantages or disadvantages. I consider that evidence is consistent with the evidence of the length of consultation with the solicitor and what occurred there, consistent with the findings just made about which I am confident. I also consider the wife's evidence in that respect is consistent with the actions of the solicitor in not forthwith providing written confirmation of such advice as was given and the failure to take any diary note of any such advice.

Murphy J concluded that the agreement was not binding at [102]-[104]: I am not satisfied that either advice as to rights under the agreement, or advice as to the advantages and disadvantages of the agreement was given (or that, pursuant to the alternatively applicable sub-section, that advice was given as to whether it was prudent for the wife to enter the agreement or whether its terms were fair and reasonable). In that respect, the certificate signed by the solicitor does not, of itself, provide a sufficient evidentiary foundation so as to reach any of the conclusions just referred to.

I find, therefore, that the agreement is not binding within the meaning of s 90G of the Act. However despite finding that the wife was the weaker party and at a special disadvantage, His Honour was not persuaded that the husband exploited that dynamic in a manner which meant that it was unconscionable for the husband to seek to rely upon the agreement at [163]-[165]:

The wife can be so described by reason of the combination of factors and circumstances earlier found, namely: the intimate relationship of the parties as partners and soon to be marriage partners; the economic dependence of the wife upon the husband for her and her daughters' futures; the wife's lack of business acumen and commercial knowledge generally and the husband's financial affairs specifically; the disparity in the parties' knowledge as to commercial and business matters; the fact that English is not the wife's first language; the husband had accountants well familiar with his business and asset position acting for him and the wife had no such persons; the wife had a very short time in which to consider an agreement which purported to remove

significant rights; by that time, a wedding was arranged in an overseas country and was to take place within nine days of the wife receiving the agreement in its final (and purportedly binding) form and she was to leave Australia the day after; the wife felt under very considerable pressure to sign the agreement as a result of that; and there was a limited time for the wife to herself ruminate upon the terms of the agreement in its final and purportedly binding form. I consider that those matters rendered the wife in a position of "special disadvantage" to the husband as that expression is referred to in the authorities earlier referred to.

The husband knew, or plainly ought to have known, of that special disadvantage constituted in the manner just described. But, I am not persuaded that the production of the document in its final form, preceded, as I have found, by earlier discussions and the participation of the wife in those discussions including making alterations to a draft that found their way into the final document, constitutes the husband taking advantage of the wife's "special disadvantage", notwithstanding the imminence of the wedding and the wife's departure from Australia for it. Nor, ultimately, do I consider that the husband's behaviour in doing so was unconscientious. An agreement that, as I have found, had been some time in the negotiation and, as I have found, had undergone earlier drafts and discussions was sought to be finalised prior to marriage as it had to be if it

was to be effective in accordance with its terms as a s 90B financial agreement. The understandable desire to formalise the agreement, whilst, ultimately, occurring in circumstances of haste and where the wife, as I find, felt under pressure, cannot in my view be described as unconscientious behaviour on the part of the husband. Murphy J concluded that the financial agreement between the parties was not binding and consequently s 90G(1A) became operative. This section effectively means that an agreement has not met the strict tests of s90G and thus the court must consider whether to make an order declaring that the agreement is nonetheless binding.

Unjust and inequitable?
Hoult & Hoult [2012] FAMCA 367 In this decision His Honour considered in what circumstances the court would be satisfied that it would be ‘unjust and inequitable’ if the financial agreement between the parties were found not to be binding under 90G(1A)(c). In deliberating whether to exercise the court’s discretion, Murphy J considered the following points important:

The construction of the legislation as a whole, at [28]: No specific criteria provided within the section, or otherwise within the Act, guide or govern the ambit of the discretion inherent to s 90G(1A)(c). Yet, in my view, the terms of the section, the nature of a financial agreement as a creature of the Act, and the place of Part VIIIA within the overall scheme of the Act, must each and all be relevant to the exercise of the discretion.

The construction of Part VIIIA of the FLA, at [31]-[32] By way of (stark) contrast, the regime contemplated by Part VIIIA sees parties having the freedom to enter binding agreements without reference to what might be “just and equitable” within the meaning of s 79 of the Act. That is, binding agreements might be informed by the parties idiosyncratic notions or perceptions of what is, or is not, just and equitable or otherwise appropriate for them. Vitiating elements aside, the parties are perfectly free to make “a bad bargain” (in s 79 terms). Importantly, any such agreement can be “binding” within the meaning of s 90G and, by reason of so being, can exclude Part VIII of the Act without reference to a court and without reference to what a court might consider is a “just and equitable” settlement within the meaning of s 79.

These matters must, in my view, be important in the determination of whether it is “unjust and inequitable” to hold parties to an agreement that is otherwise not binding within the meaning of s 90G. That is, the underlying intention of the parliament, evident in Part VIIIA is an important aspect of the s 90G(1A)(c) discretion.

Murphy J then discussed whether ‘unjust and inequitable’ in s 90C(1A)(c) has the same meaning as ‘just and equitable’ in s 79. It was concluded that the terms are related at [37]: I accept that the expression used in s 90G(1A) ought be distinguished from the expression used in s 79. It should also be accepted, as it seems to me, that because parties can, in a financial agreement, agree to determine their future rights by reference to their own criteria and principles, distinct from the s 79 criteria and principles, that has a bearing on what might be perceived as “unjust and inequitable” within the meaning of the section. Yet, it nevertheless seems to me that in the exercise of the s 90G(1A) discretion, the “justice and equity” of the bargain,

or, perhaps, its inherent “fairness” referenced to ordinary notions of that term, cannot be wholly irrelevant to the exercise of the s 90G(1A) discretion. Murphy J outlined the ultimate question under s 90G(1A)(c) at [52]: … the question inherent in the exercise of the s 90G(1A)(c) discretion is whether, in the particular facts and circumstances of this case, it is unjust or inequitable for the parties to have their Part VIII rights excluded to the extent dealt with in the agreement by being held to what they bargained for.

Murphy J further outlines the relevant factors to be taken into account when considering s 90G(1A)(c) at [57]: The facts and circumstances surrounding the particular s 90G requirement not being met; What the parties themselves said and did, if anything, so as to render the agreement not binding; The circumstances within which the parties bargain was concluded; The length of time between the signing of the agreement and the decision as to whether the parties are to be held to it;

What the parties said and did in reliance upon the agreement being binding subsequent to the signing of the agreement; and Whether the terms of the bargain itself offend ordinary notions of fairness or plainly fall markedly outside any reasonable broad assessment of the s 79 discretion.

The court found that it would be unjust and inequitable if the agreement between the parties was not binding at [62]-[63]: Neither the husband nor his solicitor contributed to, or was complicit in, any failure to comply with the requirements of s 90G. Indeed, my findings in the first case are redolent of him seeking to ensure that the wife received advice of the type required by the section. There is nothing on the face of the agreement, nor is there any suggestion by the wife or any solicitor acting for her prior to 2008, that should have suggested to the husband either that the agreement was not binding or that he should not act upon it in accordance with its terms. He did in fact act upon it according to its terms (whether or not that was to his “detriment”).

I have sought to carefully consider and weigh each and all of those matters. On balance, it seems to me that the court should find that it is unjust and inequitable if the financial agreement between the parties was not binding on the spouse parties to the agreement.

Section 90G(1)(b) and evidence of legal advice
Parker v Parker (2012) 47 Fam LR 122 This appeal related to a challenge by the finding at first instance that a financial agreement was not a binding financial agreement within the meaning of the FLA. The parties began living together in They married in November They separated for the first time on 16 April On 12 October 2004 the husband’s solicitors forwarded to the wife’s solicitors a proposed financial agreement.

On 5 November 2004 the wife attended upon her solicitors. On that occasion paragraphs 1 and 11 of the agreement previously provided by the husband’s solicitors were amended by hand and a Schedule C to the agreement was included. The wife then signed the agreement, witnessed by her solicitor. The solicitor then signed the lawyer’s certificate and the wife signed the acknowledgment. This document was sent to the husband’s solicitors on 8 November 2004.

On 11 November 2004 the husband attended upon his solicitors and a further handwritten amendment was made to cl 15 of the agreement. On 12 November 2004 the wife called upon her solicitor. The amendments made to cl 15 by the husband were initialled by both the wife and her solicitor. No amendment was made to the certificate. The document was returned to H’s solicitors.

It was relevant to consider whether either party received the necessary legal advice before they signed the amended agreement. Neither the terms of the agreement nor the lawyer’s certificates positively indicated this had occurred. The certificate signed by the wife’s lawyer was not amended when the wife initialled the change. The decision does not outline the details of the agreement entered into between the parties.

The original trial decision regarded two issues, namely: Whether each party was provided with independent legal advice in accordance with s90G(1)(b) FLA; and Whether it would be unjust and inequitable if the agreement were not binding on the parties under s 90G(1A) FLA.

The trial judge found that the wife was not provided with the requisite advice relating to amendments made to the financial agreement; rendering it unjust and inequitable if the wife were to be bound by the financial agreement in the circumstances where she did not understand its implications.

Coleman J rejected the findings of the trial judge, allowing the appeal, on the following grounds at [20]-[21]: The conclusion reached by his Honour was, on the findings of fact he made, the same as would have been reached prior to the introduction of s 90G(1A), (1B) and (1C), and appears the kind of outcome which those provisions were intended to remedy. With respect to the trial judge, the conclusions reached by him involved a narrow interpretation of s 90G(1A)(c) of the Act which did not promote the objectives of the legislation.

In the circumstances revealed by the evidence before the trial judge, to refuse a declaration pursuant to s 90G(1B) on the basis the trial judge did was, in my opinion, and with the greatest of respect to his Honour, only sustainable by adopting an erroneously narrow interpretation of s 90G(1A)(c) in relation to the provision of legal advice to the wife when she executed the financial agreement(s). A permissibly generous interpretation of s 90G(1A) would not, in the circumstances of this case, have led to the conclusion reached by the trial judge, albeit other factors may have.

May J considered the following issues individually: Was each party provided with independent legal advice under s 90G(1)(b? May J considered a lengthy body of evidence including communications between the wife and her solicitors before coming to the ultimate conclusion that the solicitor for the wife did not directly give the wife advice about the advantages and disadvantages of the amended agreement and consequently the agreement was not binding; at [67]-[68].

Was it unjust and inequitable if the agreement was not binding on the parties under s 90G(1A)? May J made a number of findings of fact and concluded that the trial judge made a number of errors in construing s 90G namely: [128] The correct course for his Honour was to consider whether the agreement was binding by reference to s 90G. In view of the wife’s application his Honour correctly considered s 90K, circumstances in which a court may set aside a financial agreement, and rejected that argument.

[130] In view of the findings made by the judge in relation to the solicitor he was entitled to conclude that the agreement was not binding within the meaning of s 90G(1). However, in my opinion the finding in relation to the advice (or absence of it) given by the solicitor does not conclude the matter. His Honour should have then considered the provisions of s 90G(1A). May J allowed the appeal due to the erroneous approach of the trial judge in relation to s 90G(1A).

Murphy J disagreed with the decisions of Coleman and May JJ, although finding that the trial judge made some errors. He concluded that the appeal should be dismissed. Murphy J made a number of finding of facts which were consistent with the trial judge, at [215]-[216]: I am not persuaded that in determining, as required, the nature and extent of advice actually given (as distinct from the fact of giving advice), particular weight should have attached to the certificate of the legal practitioner required by s 90G or, specifically, that his Honour erred in attaching to that evidence the weight that he did. First, nothing in the section (or otherwise in

Pt VIIIA) suggests that this should be so. Indeed, the necessity for a certificate from the solicitor being annexed to an agreement was removed by the amendments to s 90G. Second, the issue joined before the trial judge was not whether advice was given or whether advice was given that fits a particular description; in issue was whether the advice that was actually given was compliant with s 90G. The trial judge found, in my respectful view correctly, that there was an insufficiency of evidence about the very matter that his Honour was required to determine on this issue. So, too, for the same reasons no error is in my view demonstrated in respect of the weight that his Honour attached to the evidence that an advising/certifying solicitor had “done all that was required to fulfil her obligations to the wife in respect of the agreement, including the altered cl 15”.

Further, Murphy J supported the trial judge’s approach to the interpretation of s 90G(1A) at [247]-[249]: In that regard, I reiterate that I consider that his Honour’s factual findings are, with respect, correct. As is, in my view, his Honour’s specific finding in respect of the giving of advice after 5 November and before 12 November. Coleman J (at [19]) refers to the evidence of the wife as to the advice that she received. But, it is important to record that, as the evidence of the wife’s solicitor makes clear, the advice the wife there refers to is advice given to her on 12 October 2004 — that is, advice given over 3 weeks before she signed the agreement on the first occasion and a month prior to the formation of the agreement on 12 November.

No such evidence is given either by the wife or the solicitor in respect of events after 12 October. The conclusion thus reached does not exclude a role for s 90G(1A). Rather, it demands for the operation of the subsection and, in particular, subpara (c) of that subsection, that there be evidence of all such matters as might be necessary for the exercise of the discretion inherent in it. A challenge on appeal to the exercise of the s 90G(1A) discretion faces the same difficulties inherent in challenging any other discretionary judgment. The principles pertaining are well-known and have often been repeated in this court. I am not persuaded that his Honour took account of any irrelevant considerations or failed to take account of relevant considerations. I consider that, on the evidence before him, his Honour’s decision was plainly right.

When the marriage is intact – Stanford
Stanford v Stanford (2012) ALR 70 The decision at first instance Facts The parties are an elderly couple who have been married for 40 years. The wife resided in a high care nursing home because of her frailty. The husband wishes to remain in the matrimonial home. The wife, through her daughter as case guardian, applied for orders dividing the matrimonial property.

Although physical separation was forced upon them by virtue of the wife’s ill health, the husband submits that they are still in a marital relationship. The husband continues to provide financially for the wife and he visits her three times a week at the care facility.

Issue: The course undertaken by the Magistrate was to deal with the case in two discrete parts, the first being to determine: Whether the Court had jurisdiction under the definition of matrimonial cause in s4(1)(ca)(i) of the Family Law Act 1975 (Cth) to hear and determine the matter. The main issue being that the parties had not intended to separate; and Whether the Court should exercise the jurisdiction having regard to the fact that apart from any forced separation the marriage was still intact.

Judgment: Magistrate Duncanson held that she had jurisdiction under s4(1)(ca)(i) of the Act because the proceedings arise out of a ‘marital relationship’. Additionally, the magistrate followed the decision of Sterling and Sterling [1999] FamCA 1676 and concluded that jurisdiction ought to be exercised. In that case, Moss J stated: The evidence is clear that a complete and final physical separation has been forced upon the parties by the tragic circumstances of the Applicant’s illness. The marriage subsists, but the only contact between the parties comes about when the Respondent visits the Applicant in the nursing home for short periods of time.

Thus, almost every attribute of a normal married life and a normal married relationship between married persons has ceased to exist. Although their separation has been brought about by circumstances other than the intention of either party, nevertheless such a separation seems to me to be a highly relevant matter. In the circumstances of this case I conclude it would be just and equitable to make an order. Magistrate Duncanson concluded that the Court has jurisdiction to make a property order under s79 of the Act any time after marriage and the fact that the parties have not separated or intended to separate or end their marriage is not a bar to doing so.

The Court must not make a property order unless it is satisfied that in all the circumstances it is just and equitable to do so and the fact that the marriage is intact is a matter to be taken into account. The Court does not have to be satisfied that benefit of any kind would flow to a party as a consequence of an order under s79. In relation to the process required where an application for property settlement pursuant to s79 of the Act has been made, the Magistrate detailed the four step process: To make findings as to the identity and value of the assets and liabilities of the parties;

To identify and assess the contributions made by the parties within s79(4)(a),(b) and (c); To identify and assess the s75(2) factors, together with any matters relevant pursuant to s79(4)(d)-(g); and Consider whether the proposed orders are just and equitable. Duncanson M ordered that the wife receive 42.5% of the assets and the husband receive 57.5% of the assets.

Husband appeals to the Full Court of the Family Court of Australia Facts The husband appealed to the Full Court of the Family Court of Australia. After the appeal had been heard, but before judgment was delivered, the wife died. The Full Court allowed the appeal and set aside the Magistrate’s decision. Issue: Question of whether and if so in what circumstances, the Court should make an order for property settlement pursuant to s79 of the Family Law Act (the Act) where a marriage is still intact but where a physical separation has

been forced upon the parties by reason of one of the parties’ health. Judgment Bryant CJ, May and Moncrieff JJ held that the Magistrate had not sufficiently considered the effect of her orders on the husband 'and the fact that this was an intact marriage' in considering what was 'just and equitable'. In particular, the Full Court said that it was 'difficult to ascertain the reason why the Magistrate came to her conclusion given the wife did not have a need for a property settlement as such and that her reasonable needs could be met in other ways particularly by maintenance.’

Regardless, the Full Court ordered that, on the husband's death, the sum which had been fixed by the Magistrate be paid to the wife's legal personal representatives. The Full Court did not otherwise expressly deal with why, if the wife had not died, it would have been just and equitable to make the orders, as the Full Court itself had said that the wife ‘did not have a need for a property settlement.‘

Husband appeals to the High Court of Australia Issues This appeal concerned s 79 of the Family Law Act 1975 (Cth) (the Act), which provided for a court exercising jurisdiction under the Act to make an order altering the interests of parties to a marriage in property to which one or both of those parties is or are entitled. Under s 79(2), a court shall not make a property settlement order unless satisfied that it is 'just and equitable' to do so

Judgment: French CJ, Hayne, Kiefel and Bell JJ held that it was not shown that, had the wife not died, it would have been just and equitable to make an order with respect to property. It followed that, after her death, it could not be found to be ‘’till appropriate to make an order with respect to property’.

Of relevance was s 79(8)(b) of the Act, which required a court considering an application for a property settlement order which was continued by or against the legal personal representative of a deceased party to determine first, whether it would have made an order with respect to property if the deceased party had not died and second, whether, despite the death, it was still appropriate to make an order.

The husband submitted that s79, when read with s43(1), did not permit the making of a property settlement order when, as here, the marriage between the parties was 'intact'. Section 43(1) stated the principles that a court exercising jurisdiction under the Act must apply. This included 'the need to preserve and protect the institution of marriage as the union of a man and a woman to the exclusion of all others voluntarily entered into for life. ‘It followed that s 79 should not be read 'to extend beyond alteration of the interest in the property of one of the parties to the marriage in the context of the breakdown of the relationship.’

The court rejected this argument. Section 43(1) merely identified a number of principles that a court shall ‘have regard to’. The statement of one among several guiding principles for the exercise of jurisdiction was not apt to limit the conferral of jurisdiction in the way that the husband urged.

Judgment continued: Further, in any property settlement order under s 79, it was necessary to satisfy the court that, in all the circumstances, it was just and equitable to make the order. This expression is a qualitative description of a conclusion reached after examination of a range of potentially competing consideration. Primarily, when assessing whether an order is 'just and equitable':

Firstly, consideration must be had to the existing legal and equitable interests of the parties in the property. Secondly, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it was not a power that was to be exercised according to an unguided judicial discretion.

Thirdly, the question was not based on the assumption that one party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters set out in s 79(4). To conclude that making an order was lust and equitable' only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.

It was not shown that, had the wife not died, it would have been just and equitable to make a property settlement order. It follows that it was not open to the Full Court to find that it was still appropriate to make an order with respect to property. The appeal was allowed with costs. Two main reasons why it would not have been just and equitable:

First, the wife's needs were met. The provision of care funded by her pension and by the trust fund that the husband had created was sufficient to meet the wife's needs. If her needs ceased to be met in those ways, maintenance orders against the husband could be applied for and made. Second, other than the forced separation of the parties by virtue of the wife being in a nursing home, the husband wished to remain in the home which had been the parties' home for in excess of 35 years, until such time as he could not reasonably remain there.

Application of Stanford
Young v Young (No 2) [2013] NSWSC 330 The wife commenced two proceedings, which were heard together. In the first, the Family Court proceedings, claiming a property settlement against her former husband. In the second, the Common Law proceedings, she claims damages against the husband and his company, Jetobee Pty Ltd (Jetobee) for malicious procurement of a warrant, malicious procurement of arrest and detention and malicious prosecution

Jetobee filed a cross-claim in the Common Law proceedings in which it claimed damages in the order of $1.18m from the plaintiff for alleged conversion of cash from the Wiley Park Hotel. No evidence was adduced in support of the cross-claim, despite numerous directions that such evidence be filed. The cross-claim was struck out by reason of Jetobee’s non-compliance with directions

The husband and wife married in 1992, the husband owned a number of properties including the Wiley Park Hotel in which the wife operated. The parties separated in 1999; however the wife continued to operate the Wiley Park Hotel. The husband had not paid the wife a salary or shared profits for her work at the hotel for the previous 10 years; he offered to pay her between $1000 and $1100 per week post separation.

A number of complicated criminal issues arose, relevantly the plaintiff made a claim under s 79 FLA. The court applied Stanford at [84]-[86] In Stanford v Stanford [2012] HCA 52 ; 87 ALJR 74 (Stanford), French CJ, Hayne, Kiefel and Bell JJ said at [35]–[40] that it is necessary to begin consideration whether an order should be made under s 79 by identifying the existing legal and equitable interests of the parties and to consider the question whether an order is just and equitable under s 79(2) separately to a consideration of the mandatory relevant considerations in s 79(4)

The identification and value of the existing legal and equitable interests of the parties was determined by Harrison AsJ. In light of the order I made on 7 March 2013 referred to above, I find that Mr Young presently has $9,628,843 worth of net assets and the plaintiff has no assets of any value The threshold question is whether I am satisfied, in all the circumstances, that it is just and equitable to make an order under s 79(1). In deciding this question I am required to disregard moral considerations. As the plurality said in Stanford at [52] this question is not to be answered by reference to moral obligations since such a reference is “at the very least apt to mislead”

The court considered the following matters in reaching their conclusion: The wife had use of a car provided by the husband, her expenses were met and she was financially secure After separation, the plaintiff was destitute as she had no income or assets whereas the husband had the benefit of property of a substantial net value Consequently the court found it just and equitable to make an order under s79

The court went on to take into account matters arising under s 79(4) and s 75 The court reached a conclusion at [114]: The relationship between the plaintiff and Mr Young lasted for 17 years, although for the last six of that period it was principally a continuation of the professional relationship between them that had started from the time of their co-habitation in The evidence does not enable me to quantify the extent to which the plaintiff’s labour and skills contributed to the value of Mr Young’s assets. However, her contribution was, in qualitative terms, a very substantial one… In all the circumstances, I propose to make an order pursuant to s 79(1) that Mr Young pay the plaintiff $3m, with credit to be given for payments already made pursuant to the spouse maintenance and interim property orders

Property settlement and short marriages
When the marriage has been short It is well settled that the shorter the relationship the more scrutiny will be applied to the parties’ financial contributions – including initial contributions, receipt of capital by way of inheritance or other means , in some cases earnings, financial benefits during the marriage and increase in value of pre-existing assets The Court may take either of 2 approaches to the assessment of the parties’ contributions under s 79. The global approach is most commonly used In short marriages however the court is generally invited by the wealthier spouse to adopt the “asset-by-asset” approach; fixing entitlements by reference to individual items of property

In the Marriage of McMahon (1995) 19 Fam LR 99; FLC 92–606, the court applied an asset by asset approach regarding the treatment of the pool, referring to the short and unhappy nature of the marriage, coupled with the parties' strict separation of assets, and where the fluctuation in the values of those assets was not influenced by the other party. The Full Court found that the parties should each keep their separate assets and share in the joint assets equally following a 6 year relationship. The trial judge had given the wife just over 55% of the total pool

Goodwin and Goodwin Alpe (1191) FLC ½ years, no children of the marriage but husband supported children of wife. At the trial the wife had $117,000 and the husband $3M. Whilst highlighting that the trial judge should not have taken into account the disparity in financial resources between parties when assessing contributions, The Full Court did not disturb the award of 10% of the husband’s assets to the wife ($300K) J and S [2005] FamCA years, no children, separate accounts, global approach

GBT and BJT {2005} FamCA years, no children, $3M pool, wife had re-partnered by time of trial, Full Court reduced wife’s entitlements from 17.5% to 10% Figgins and Figgins (2002) FLC years, 1 small child with wife, husband inherited $22.5M early in the marriage. On appeal the wife’s share was increased from $1.1M to $2.5M – just over 10% Ashforth & Ashforth [2012] FAMCA Parties were married for 18 months, in which time they had one child. The parties applied to the court seeking parenting and property orders in 2009

The court then considered whether the division of property should be considered on an asset by asset basis rather than a global approach, concluding that the asset by asset approach was appropriate at [359]: The court proposes to use the asset by asset approach as this was a short marriage of approximately 18 months, and the pre-existing assets and liabilities of the parties were kept in basic form as to the father during the marriage.

Kardos v Sarbutt (2006) 34 Fam LR 550 The parties began a relationship in May 1999 and cohabitated as de facto partners for just less than 3 years. They had no children. The wife introduced to the relationship property worth $289,000 and H introduced property worth $241,000. The value of these assets had increased to $683,000 and $405,000 respectively at the date of separation, mainly by appreciation of the real property introduced by each party at cohabitation, and to a lesser extent by reduction of the mortgage debts secured on them

The parties cohabited in one of wife’s properties and let the other properties (two belonging to wife and one to the husband) for rent. Both parties were employed during the period of cohabitation and they pooled their incomes and the rents in a joint account, and applied them to living expenses and mortgage payments. Over the 3 years, the wife contributed personal exertion earnings and rents from her properties to a total of about $190,000. The husband contributed personal exertion earnings and rents from his property to a total of about $110,000 The effect of the orders made at first instance was to divide the pool of property in the proportions of 53.5% to the wife and 46.5% to the husband

On appeal it was submitted that having regard to the short length of the relationship and the initial contributions, the trial judge erred in failing to adopt an asset-by-asset approach or, at the least, to quarantine certain assets from the process of adjustment The court stated at [51]: The legislation does not dictate the employment of any particular method in the formulation of an appropriate order for the adjustment under s 20 of property interests (NSW de facto matter), and it is not desirable to attempt to formulate principles or guidelines designed to constrain judicial discretion within a predetermined framework

Although, in the majority of cases, the global approach is likely to be more convenient than an asset-by-asset approach, the application of the asset-by-asset approach does not of itself amount to an error of law (Mason and Deane JJ). In Norbis, Mason and Deane JJ cited with approval observations of Nygh J in G & G (1984) 9 Fam LR 969 ; (1984) FLC , to the effect that (at 79,697) it cannot be required of the Family Court that it assesses contributions with mathematical precision with respect to each item, and (at 79,697) that while the Family Court was divided between those who favoured the so-called global approach and those who seek to achieve some degree of precision, both approaches were legitimate provided that those who take the global approach heed the warning that the origin and nature of the different assets ought to be considered, and that those who favour the more precise approach do not mistake the trees for the forest and add up their individual items without standing back at the end to review the overall result

The principal indicator for an asset-by-asset analysis is discrepant identifiable contributions of the parties to different assets. Such an approach will often be contra-indicated where, as in this case, there has been a pooling of income. An asset-by-asset approach almost always carries the risk of undervaluing domestic contributions which are not reflected in any particular asset The matters advanced in this respect by counsel for the appellant as supporting the adoption of an asset-by-asset approach including that the relationship was a short one and each party substantially retained the property which they had introduced, are not themselves indicia which necessarily favour an asset-by-asset approach

While it was open to the trial judge to adopt such an approach, whether as the primary approach or as a check method, it was not mandatory and they did not err in failing to do so.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions Smith & Fields [2012] FAMCA 510 The parties married in 1979 and separated in 2008 after 29 years of marriage. The parties could not come to agreement about the contributions of each of the parties throughout the relationship. The wife asserted her special contribution to be her role as home-maker and parent and the husband asserted his special skill to be the growth and ultimate success of the family business.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The background of the marriage was that the parties married and had little money. The husband worked a number of jobs until the parties moved to the Gold Coast in order to set up a business. At this time the parties had three young children, during this time the wife looked after the children and the husband ‘had little time at home to do other than sleep’ whilst running the business.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The court discussed the notions of ‘special contributions’ at [19]-[20]: Thus, while expressions such as “special skills” or “special contributions” might be convenient enough as descriptors designed to compare the contributions in one case with those in another, s79 makes no such reference, nor embraces any such concept, save that it mandatorily requires an evaluation of the matters set out in s 79 in arriving at a settlement of property between the particular parties to the particular marriage in all of its particular circumstances.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions Axiomatically, then — and contrary to the manner in which many cases of this type are frequently prepared and conducted — the court’s task is not to assess the evidence with a view to arriving at a finding as to whether a party is possessed of, or has exercised, “special skill” or “special talents” with the result that such a finding is productive of a particular finding, or range of findings in respect of contribution. To approach the matter in that way is to fetter the “extraordinarily wide” discretion inherent in the section.

This was further explained at [26]-[27]:
When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions This was further explained at [26]-[27]: Whilst some assistance may be rendered by the use of expressions such as “special skills” or “special” or “extraordinary” contribution, in my view, the use of such expressions is apt to mislead and to obscure, rather than illuminate, the task at hand. The real danger lies in the promulgation of a notion that, by establishing “special contribution” or “special skills” — whatever the expression, or the indicia comprising any such expression might be said to be — a result of a particular type, or a particular range, should follow. That is an improper fetter on an “extraordinarily wide” discretion. It smacks of a presumption antithetical to what the section requires.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions However unsatisfactory or uncomfortable an “extraordinarily wide” discretion may feel for a trial judge, it is the exercise of precisely that which the section requires and it is precisely that which confronts a trial court — albeit informed by the mandatory considerations inherent in s 79. O’Ryan J held in D & D [2005] FamCA 1462 at [271] that “ … the notion of special contribution has all been a terrible mistake … ” and his Honour went on to hold that “ … what I have to do is identify and assess the contributions made by each of the parties without any presumption of entitlement.” The very wide discretion inherent in s 79 requires the court “ … to do justice according to the needs of the individual case, whatever its complications might be.” 13. That necessarily involves an acknowledgement that the circumstances of each marriage are different and that it is to those particular circumstances to which the discretion must be applied.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions Consequently the court exercised their discretion by reference to the identification and comparison of contributions towards a particular result. The husband sought to limit the contributions made by the wife to the family business; however the court considered it important that the wife was at all times an equal shareholder and director of the business. The husband was the driving force behind the business; however it was the contribution of the wife as the home maker that made the generation of income and capital possible. The court discussed if these contributions were equally valuable at [80]:

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions I reject the notion that justice and equity requires a distinction to be drawn between the contributions of the parties by reason of the husband being possessed of “special skills” or because his contributions can or should be described as “special” (whatever that might mean or be intended to connote). Following this, it was concluded that the husband made a larger contribution in light of the ‘ingenuity and stewardship the husband has brought to the business outside of the other contributions made to the business by each of the parties’ at [81]. This was

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions particularly important due to the extreme success of the business, where the husband designed the buildings sold by the business. Accordingly, a disparity of 20% between the parties’ contributions was appropriate quantitative reflection of differences in contributions between parties.

The court reached a conclusion at [104]:
When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The court reached a conclusion at [104]: I am satisfied that the respective entitlements of the parties effected by a division of the property of the parties or either of them assessed by me to be in the overall proportion 60 per cent to the husband and 40 per cent to the wife is just and equitable and the manner of achieving that result by the adjustment of the parties’ joint 84 per cent shareholding, the sale of the former matrimonial home and the division of chattels to be just and equitable.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions TFV v JRG [2012] QSC 726 The parties were never married but had a five year relationship bearing four children. The parties separated, proceedings arise after the sale of the father’s business two and a half years after separation where the business was developed during and after the party’s relationship.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions In August 2009 the father’s business D Pty Ltd was sold to the R Group for $28 million. The father received a total of $6,088,706, made up of cash in an amount of $4,006,362 and shares in R Group then valued at $2,082,344. They are currently valued at $3.5million. A number of assets owned by D Pty Ltd were not part of the R Group sale and were subsequently distributed between the father, the mother and his business partner.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions Following the sale of the business the father provided financial support to the mother by purchasing a house for the mother, renovating the house, paying large cash amounts to the mother, paying continuing child support, purchasing a car, boat and motor bike for the mother. The mother also had access to the father’s credit card.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The mother sought 60% of the asset pool; whilst the father argued that the sale of D Pty Ltd had a significant impact on the divisible pool and the sale proceeds were a special contribution by him should receive 65% division in his favour. The court was required to resolve the dispute by reference to the requirements of Part 19 of the PLA which provides for the resolution of financial matters at the end of a de facto relationship and to ensure a just and equitable property distribution.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions In assessing special contribution by the father, the court referred to the decisions of Ferraro and Ferraro, McLay, Mallet and JEL v DDF, at [58]: It is clear that special contributions have been found in a number of cases and indeed the court has found on a number of occasions that particular commercial acumen and novel business ideas does amount to a special contribution. The decision in McLay involved a property developer; JEL v DDF involved a geologist’s developing a gold prospect; and Cumpton v Cumpton involved the development of intellectual property. All were held to be cases involving a special contribution.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The court found that the father had made a special contribution at [62]: Ultimately, therefore, I accept the argument of counsel for the respondent that the respondent’s business acumen led to the sale of D Pty Ltd for many millions of dollars and that such acumen should be considered a special contribution. It would seem to me that the respondent’s knowledge of the market and his entrepreneurial skill was such that it led to a particular business strategy being undertaken, which was clearly risky given the level of debt he incurred, but ultimately successful. Furthermore, the applicant had no real role in the business and did not contribute any expertise to it. Significantly, the sale of D Pty Ltd occurred two and a half years post separation.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The court assessed that the father’s contribution should be assessed at 70% at [65]: Because of this factor, I consider that a figure of 70% should be assessed in favour of the respondent. In this regard, I am conscious of the analysis of some of the large money cases undertaken in JEL v DDF which considered the proportions awarded in cases such as Ferraro and Phillips v Phillips. It is clear, however, that the asset pools in those cases were significantly larger, the marriages longer and the homemaker contributions by the wives were more substantial. This case, however, has some unique features which must however be taken into account.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The contribution of the father was reduced by 10% in order to take into account the situation of the mother whereby she earned little money and had little prospects for long term future employment (compared with the fathers significant foreseeable future income). Consequently the mother’s contribution was assessed at 40% at [69]: Clearly, every case turns on its own unique facts. As the court recognised in JEL v DDF the discretion is indeed wide. In my view the applicant’s future prospects, when compared to those of the respondent, call for an adjustment in her

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions favour. In addition, it would seem uncontroversial that the respondent was the beneficiary of significant expenditure in the period since the sale of D Pty Ltd Such expenditure needs to be acknowledged in some way. Accordingly I would adjust the respondent’s share down by a further ten per cent. In my view, balancing all of those factors, I consider that the applicant should receive 40% of the asset pool and the respondent 60%.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions Smith v Gould [2012] VSC 461 This case concerned the same sex de facto relationship of 2 men. The court heard an application made under Part IX of the PLA (Vic) by one partner in a failed domestic relationship to adjust the interests of the domestic partners in the property of one or both of them as appears to be just and equitable. The parties had a 14 year de facto relationship in which the parties owned two properties- one in Sydney and one in Melbourne. Significantly the parties had a large number of art works as well as some interests in investment properties. There were other assets identified, being, in the main, cash in bank accounts, cars, household contents (other than artwork), superannuation accounts, gifts, and some liabilities.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The court was required to consider a wide range of issues; relevantly Mr Smith contended special skills were applied in the accumulation of assets. Mr Smith contended that his contributions as an eminent art expert in twentieth century Australian art led to a “special contribution” that his relationship with Mr Gould brought to his contribution to Gould Galleries. The ‘special skill’ was asserted in the determination of the art sub-pool of assets whereby Mr Smith contended to contribute the purchase of stock, the operation, exhibition and sale of the Gould Galleries as well as a private Smith-Gould collection of works.

The court considered the nature of special contribution at [258]:
When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The court considered the nature of special contribution at [258]: As the authorities to which I have just referred make clear, the concept of a “special contribution” is no more than an aspect of the broad discretion to achieve the just and equitable adjustment that s 285 of the Act requires. It is not a principle of law, it directs the factual inquiry. The practical adjustment for “special skills” effectively adjusts interests in favour of the party with the special skills to a greater degree than might be done on an objective, or usual, assessment of their contribution whether based in financial or welfare considerations. What is required is a qualitative assessment of the actual contribution said to be a special contribution, and that assessment is made having regard to all of the relevant circumstances, including both the outcome for the other party and the nature of the skills brought to the accumulation of financial resources. Such an approach is required by the Act and is made clear by reference to family law cases.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions Further at [328]-[329] the court considered whether Mr Smith had made a special contribution: Mr Smith contended that the issue of a “special” or “extra” contribution by the domestic partner is a question of fact. I have discussed above the principles emerging from the Act and from the cases that found my approach to this issue. The determination of such a contribution is not dependent upon the size of the pool achieved by the parties, a proposition I would not be disposed to dispute 89 if it arose in the present circumstances. Rather, the proper focus of the inquiry is not as Mr Smith contends. It may be sacrilege to equate practising in art as a public curator of the nation’s artistic heritage with practising in art commercially for profit, perhaps a comparison sufficiently odious to force a sharp intake of breath and a

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions whispered “tut tut” in the corridors of the great museums and public galleries. Counsel for Mr Smith contended that any attempt to equate the role and status of a curator of art at the NGV with that of a gallery operator who has no formal training in art ignores the significance and prestige of the position of curator and the erudition of the position holder. However, this case is about making money selling art. It is not about collecting or curating the nation’s artistic heritage. This distinction was not always maintained, particularly by Mr Smith. I was not persuaded that Mr Smith has attained the recognition, respect, or distinction as an expert in twentieth century Australian art that warranted the epithets “eminent” or “distinguished”.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions That is a particularly high standard and I decline his counsel’s invitation to so find. Mr Smith called witnesses, including Mr Ron Wilson and Mrs Isobel Rogers, described as prominent private art collectors, who gave Mr Smith glowing references as a curator of Australian art. However, because it is in the commercial pursuits, improving the profitability of a commercial gallery, that Mr Smith principally seeks recognition in this proceeding, and it is with that issue in mind that I have examined the evidence of Mr Smith’s expertise and whether he has made a “special or extra” contribution. There is little point in attempting to more particularly evaluate Mr Smith’s academic standing and expertise in public art.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The court considered a significant body of evidence in concluding that Mr Smith did not make a special contribution at [400]-[402]: Taking all of the above matters into account and considering Mr Smith’s whole contribution to Gould Galleries, I am not persuaded to accept Mr Gould’s submission that Mr Smith’s contribution is limited to a “back-room effort” of casual conversations with his personal partner in the evenings that does not warrant recognition in Mr Smith’s favour of an interest in Dukville. Equally I have not been persuaded by Mr Smith that he made either a special or a substantial contribution to the business of Gould Galleries, and thus to the value of the shares of Dukville, warranting recognition of a half interest in Mr Smith’s favour in Dukville.

When the marriage has been long and produced significant wealth – the treatment of special or entrepreneurial contributions The court’s evaluation is holistic and broad based, drawing on the context of the relationship between the parties and my assessment of the respective contributions both financial and non-financial that are directly or indirectly made by or on behalf of each partner and directed to determining what adjustment is ultimately just and equitable. On the basis of my assessment of the various aspects in which contribution was asserted, set out above and following, I have determined that Mr Smith’s contribution to the value of the art sub-pool was modest, but not minimal, and I assess his contribution to the growth in value of the art sub-pool over the course of the relationship at 10%.

When there are allegations of illegality
Pisani & Pisani [2012] FAMCA 532 In this case, the wife alleged that the husband had engaged in fraudulent tax evasion during the course of their marriage. She reported to the Court that the husband regularly brought home boxes filled with cash and hid them around the home. She also claimed to have evidence of fraudulent book entries for employees who did not exist. She sought an order that her evidence be provided to the Deputy Commissioner of Taxation for review.

The husband denied the wife’s allegations. The Court found that it did not need to find that a party was guilty of fraud, tax evasion or some other criminal offence prior to making the referral to the Deputy Commissioner of Taxation. The Court was satisfied that there was prima facie evidence of the fraud and held that where tax fraud or evasion is disclosed in evidence, the Court has a duty to notify the tax department of their findings.

An order was made to provide copies of the wife’s affidavits and a transcript of her oral evidence to the Deputy Commissioner of Taxation, along with a copy of the reasons for judgment. The Court then adjourned the Family Law proceedings until the Deputy Commissioner of Taxation informed the parties whether an investigation into the business’s accounting practices would be needed. The court made reference to Page v Vanker and Anor, Malpass & Mayson, Prince & Prince, and Biltoft & Biltoft.

In Pisani, at [9]-[11], the court stated: Nothing said by their Honours in Page v Vanker and Anor or Malpass & Mayson establishes that a referral should only be made after the evidence of fraudulent tax evasion has been tested or following admission. …as the various cases considered by their Honours in Malpass & Mayson demonstrate, the court’s ability to make final property orders which are just and equitable is compromised if the court is unable to determine the extent of the parties’ (or a party’s) liabilities. In Prince & Prince (1984) FLC and re: Bailey (1990) FLC where the potential liability would have a considerable impact on the asset pool, the court held that it was appropriate to adjourn the s 79 proceedings until that issue was resolved.

A different approach would be appropriate where the court is able to make an allowance for a particular liability or the liability may be appropriately disregarded (Biltoft & Biltoft (1995) FLC ). In opposing an early referral, it had been argued that the matter should only be referred after the evidence had been tested so as to avoid prejudice to the trial (delay), expense and practical mischief occasioned by unmeritorious or malicious allegations.

When the parties are long divorced – leave to proceed out of time
Ordway v Ordway [2012] FMCAfam 624 Wife sought an order for leave to proceed 26 years after the divorce. The wife remained in the former matrimonial home after their divorce in 1986. In 1988, the husband began residing with his current wife. The husband is the sole registered proprietor of the home. Section 44(4) of the FLA provides the requirements for leave being granted, the relevant one in this case being that hardship would be caused if leave were not granted (s44(4)(a)). It was conceded that the wife would suffer hardship if denied the ability to bring proceedings of property settlement because she would be left with nominal assets.

The court accepted that the reason for the delay was due to neither party wanting to disrupt the status quo, particularly because there was an agreement between the husband and wife and therefore the wife felt that she didn’t need to seek legal advice when the divorce first occurred. The court concluded that no prejudice would be caused to the husband by granting leave to the wife because the husband was aware that there was unfinished business in this regard. Therefore leave to proceed was granted.

The court referred to the judgment of Whitford (1979) FLC , Oxenham [2009] FamCAFC 167 and Gallo v Dawson (1990) 93 ALR In Whitford, the Full Court stated at [78]: … on an application for leave under section 44(3), two broad questions may arise for determination. The first of these is whether the court is satisfied that hardship would be caused to the applicant or a child of the marriage if leave were not granted. If the court is not so satisfied, that is the end of the matter. If the court is satisfied, the second question arises. That is whether in the exercise of its discretion the court should grant or refuse leave to institute proceedings.

In Oxenham [2009] FamCAFC 167 [99] it was noted that: The applicant may establish hardship although the applicant is not in poor or necessitous circumstances. The applicant for leave bears the onus on the balance of probabilities (Tamaniego [2010] FamCAFC 254). The fundamental issue in any application for extension of time is whether this will enable the court to do justice between the parties (Gallo v Dawson (1990) 93 ALR 479). In that case, McHugh J referred to the need to have regard to the: history of the proceedings;

conduct of the parties; nature of the litigation; and the consequences to the parties of the grant or the refusal of the extension of time. Justice McHugh stated that the court may have regard to other factors including whether the applicant has an adequate explanation for the delay in bringing the proceedings. Counsel for the husband submitted that the wife does not have the advantage of s 44(4)(b) of the Act that would enable leave to be granted in circumstances where the wife would have been unable to support herself without an income tested pension or benefit.

The court concluded that no prejudice would be caused to the husband by granting leave to the wife because the husband was aware that there was unfinished business in this regard.

Grant of interim and partial property settlement orders
Keeping the clients going and paying their bills: The court has power to make an interim order dealing with part of the property of the parties pending the final hearing; In the Marriage of Harris (1993) 16 Fam LR 579. Orders may be made by consent but the power is not limited to making consent orders. The interests of the parties and the court are generally better served by there being one final hearing. The court should be satisfied that the remaining property will be sufficient to meet the legitimate expectations of the parties at the final hearing or the order is capable of being reversed or adjusted if necessary.

It is doubtful whether it is necessary or desirable to distinguish between “partial” and “interim” orders; In the Marriage of Burridge (1980) 6 Fam LR 513. Compelling circumstances are not required before the court can make an interim or partial property settlement order; Gabel v Yardley (2008) 40 Fam LR 66. There are two stages to the hearing of an application for interim property orders pursuant to s 79 and s 80(1)(h) of the FLA.

First question: whether the court should exercise its discretion to entertain the application. Applicant does not have to establish compelling circumstances but they need to establish that it would be appropriate for the court to exercise the power and the, “overarching consideration” as to appropriateness is the interests of justice. Examples of circumstances where it may be appropriate include: where both parties agree to the disposal of assets pending trial, urgent situations to avoid injustice and where one party requires funds to assist in payment of litigation costs where without such funds an injustice may be caused.

In making their submission the applicant needs to recognise: the importance of the interests of justice normally being served by a single and final determination of s 79 orders; and that establishing that the applicant’s ultimate entitlement would cover or exceed the interim claim was not sufficient, on its own, to establish that the application ought be entertained.

Second question: if the answer to the first question is yes the jurisdiction under s 79 will be exercised. Therefore, the court must then consider and apply the provisions of s 79(4) and 75(2) but with limitations given that it is not the final hearing. Consideration of such matters may be brief. If it is established that it is likely that the applicant would only be receiving what they are entitled to receive when the final order is made, that would be sufficient to enable the order sought to be made: Wenz v Archer (2008) 40 Fam LR 212; Zschokke and Zschokke (1996) FLC ; The discretion conferred by s 79 is to make such order as the court considers appropriate, provided it is just and equitable to make the order in circumstances where the power will not be exhausted by the interim order;

The interim order must be capable of variation or reversal without resort to s 79A of the Act or appeal, and must be capable of alteration at any time prior to, or as part of, a final exercise of the s 79 power: Gabel v Yardley (2008) 40 Fam LR 66.

Marchant v Marchant [2012] FAMCAFC 181 Interim property orders awarded to the wife namely, that the wife receive the proceeds from several bank accounts totalling the sum of $1,296, The property pool was valued at approximately $15 million. The parties were married for approximately 16 yrs. Two children of the marriage aged 15 and 13 both resided primarily with the wife. The husband would probably never work again due to a medical condition that required constant dialysis. During the marriage the wife was responsible for the parties’ finances including business finances, bookkeeping, management of rental properties etc. The wife wanted to retain her role as a primary parent.

Strahan and Strahan [2009] FamCAFC 166 Husband was ordered to pay the wife the sum of $5 million interim property settlement to be applied towards the wife’s legal expenses. The Court was satisfied that: the wife needed funds to meet ongoing legal costs and she was unable to pay them; the husband was able to pay his legal costs and expenses; the husband was in a position of considerable financial strength and that the remaining property would be sufficient to meet the claims of the parties when a final order was made.

The parties were married for approximately 11 yrs. The wife had care of the parties’ 13 year old son, who was autistic. The husband’s financial statement showed that he had a weekly income of $282,030, weekly expenditure of $60,570, liabilities of $852,800 and financial resources of $21,205,711. The wife had savings of $6,723,695 at separation. By trial she had spent approximately $10.5 million in legal fees.

Sudono v Sudono [2010] FamCA 54 Applied Strahan and Strahan [2009] FamCAFC 166. Wife was awarded interim property settlement in amount of $500,000 to purchase a suitable home or alternatively an investment to produce income. At trial the wife was unemployed and living with relatives in Adelaide. The husband resided in Indonesia and had access to property and financial resources. The duration of relationship was approximately 21 years. No children. Property pool valued at approximately $ million.

Hogan Orders Orders that the other party pay a lump sum in advance of legal costs (Hogan or sometimes called Barro orders) or dollar for dollar cost orders In the Marriage of Hogan (1986) 10 Fam LR 681 at 686; FLC 91–704 at 75,096, the Full Court held that the court cannot make what is called an “open ended” order for costs and that an order for costs, whether interim or final, must be either certain and/or ascertainable. This is consistent, it is submitted, with the court making an order for a specific amount intended to enable a financially weaker party to properly prepare and present his or her case to the court, even where the precise amount that will be needed cannot yet be known.

Hogan Orders In the Marriage of Hogan (1986) 10 Fam LR 681
This was an appeal in respect of an interim order for costs. The husband and wife were married in April 1952 and there were six children of the marriage. The parties separated in 1968 and the husband formed another relationship of which three children were born. At the time of separation agreement was made as to the wife’s maintenance and ongoing support for the partner whereby the wife continued to occupy the matrimonial home visited regularly by the husband.

Hogan Orders There was evidence that the wife could not obtain legal aid and was refused an advance from the bank in order to fund the action. The appeal proceeded before on the basis of an exercise of power pursuant to s 117, whereby the trial judge required the husband to pay any amount incurred in the course of the preparation of the wife’s case and that he was deprived of any right to dispute the amount which must be paid. The husband submitted that the “open-ended” order made was not within the power of s 117, whereby upon proper construction the power conferred only confers discretion after a proper consideration of an estimate of commitment. The court rejected the ‘open ended’ nature of costs, concluding at 686:

Hogan Orders Whilst recognizing that the court has unlimited discretion in relation to costs, in our view, the whole tenor of the legislative provisions and the history of costs orders whether interim or final requires them to be either certain and/or ascertainable and any order must be just… In our opinion in making the “open-ended” order, his Honour was in error and to that extent the appeal should be allowed. Having regard to the submissions of counsel on an alternate order, we consider a proper course is to order that the husband pay the sum of $25,000 to cover the matters encompassed in his Honour's orders.

Hogan Orders The court will require sworn evidence of the following:-
a prima facie entitlement to property orders at least equal to the amount of the costs claimed; evidence of the respondent’s capacity to pay the amount sought; evidence of the applicant’s inability to fund their own costs; evidence of the likely professional cost and disbursements.

Hogan Orders Rakete & Rakete [2012] FAMCA 267
In this case Ms Rakete separated from Mr Rakete after 20 years of marriage and having two children together; L and C, aged 18 and 15 years at the time of the hearing. The substantive proceedings concern a binding financial agreement that was made between the parties on 22 June The wife contested the validity of that agreement on the grounds that it was vitiated by duress, it is void or voidable on the ground of non est factum and that the Husband’s conduct in entering the agreement was unconscionable.

Hogan Orders The Wife requested a ‘Hogan’ order for either $28, if the parties were ordered to attend mediation, or $52,000,00 if the parties were given leave to have the validity of the subject binding financial agreement heard and determined as a discrete issue prior to attending mediation. The Husband disputed the Wife’s application on two bases: That the order requested by the wife is already covered by the binding financial agreement which is the subject of the dispute. Furthermore, if the Wife is applying for an order solely under the power of the court to order costs expressed in section 117(2), that the court does not have jurisdiction as that provision is ancillary to the power of the court to make orders under Part VIII of the Act, the operation of which is suspended by section 71A of the Act when a binding financial agreement exists.

Hogan Orders In the alternative, the Husband argued that no order should be made under section 117 of the Act as such an order would not be ‘just’ within the meaning of that section, given the Wife does not provide evidence of a capacity to repay the amount sought to the Husband in the event she is unsuccessful on her substantive application. In relation to the first argument put forward by the Husband, the court was able to find it had jurisdiction under section 117(2) to make an order for the interim provision of litigation expenses as requested by the Wife.

Hogan Orders The court stated that section 71A of the Act did not prevent orders under section 117(2) before a binding financial agreement has been set aside. To do so would be to deprive the successful party the opportunity to seek costs should the other party’s jurisdictional application ultimately fail. The court declared that although Johnston J found that section 117(2) was ‘ancillary’ in the case of Wall v Mitchell [2010] FamCA 1194, that was only in the context of the fact that ‘proceedings’ must be on foot, not that the provision is ancillary to the provisions in the Act governing the substantive proceedings and is affected by any provisions relating to the substantive proceedings.

Hogan Orders The court declared section 117(2) of the Act was a source of power for the court to make a Hogan Order for the interim provision for litigation expenses. In regards to the second argument put forward by the Husband, the court said there must be justifying circumstances as a prerequisite to the making of an Order under section 117(2). This involves consideration of the potential outcomes of the claims advanced, and comparison of the competing considerations so far as the effect of that upon the parties.

Hogan Orders The court stated that the justice of the case, in respect of an Order for costs being ‘just’ devolves into a balance between the competing considerations of the Wife and those of the Husband. The balance was outlined by the court as: between the potential injustice to the Husband of being unable to recover up to $52, if he were to ultimately succeed in the substantive proceedings, and the potential injustice to the Wife of being unable to secure her proper entitlements under s 79 or to remedy the result (the binding financial agreement) brought about by, on her case, the fraud of the Husband.

Hogan Orders The court was satisfied that there are justifying circumstances that the justice of the case favours the Wife being able to prosecute the pending proceedings and to have funds to enable her to do so. Furthermore, the potential injustice to the Wife of being unable to prosecute her case outweighs the potential injustice to the Husband of being unable to recover the amount now ordered on account of costs.

Hogan Orders The court found it relevant to consider section 90K of the Act, which specifies ‘the circumstances in which a financial agreement may be set aside by the court.’ The court used this section in reaching the conclusion that: The capacity to repay, whilst a relevant consideration, cannot be elevated to the status of an essential pre-condition to the making of an Order in cases involving s 90K. To do so would place a fetter on the discretion that is in conflict with the mischief s 90K is designed to address. The Wife was granted the Hogan order.

Hogan Order or dollar for dollar order?
G v T and Others (2004) 32 Fam LR 101 In this case the Wife had filed an application for orders that consent orders made on 18 January 2000 dealing with the division of the parties’ assets be set aside on various grounds under section 79A. This was an interlocutory application by the Wife for injunctions restraining her Husband, and the second and third respondents (Mother-in-law and a company controlled by the Mother-in-law) from dealing with the assets of a discretionary trust, pending the resolution of her application for relief pursuant to section 79A.

The Wife and Husband met in 1993 and married in early 1995, with two children of the marriage. The Wife asserted that a few days prior to their separation in 2000, the Husband brought consent property orders to her house and required her to sign them. On 18 January 2000 the parties obtained consent orders from Southport Magistrates Court, by which the Wife received the sum of $15,000 inclusive of $5,000 for spousal maintenance. The wife asserts that she believed, at the time, that was all to which she was entitled.

On 11 September 1998 the V discretionary Trust had been established with the trustee being V Pty Ltd (a company controlled by the Husband’s Mother). The trust owned 6 properties, three of which were held during the marriage, including the former matrimonial home. The Wife’s application for relief pursuant to section 79 was based on a number of grounds including: her consent to the order made in the Southport Magistrates Court was given under duress;

the Husband had failed to make full and proper disclosure of his income and assets and existence of the Trust controlled by him. The Wife sought interim orders that within 30 days the husband pay the Wife the sum of $25,000 such sum to be used by the wife in the payment of her legal and other costs of and incidental to these proceedings; and the question whether such payment be regarded as part property settlement and/or spousal maintenance or otherwise be left for the determination of the Trial Judge.

Counsel for the Husband emphasised that: the Wife’s solicitors have failed to provide a breakdown of the amount sought, which counsel stated was fatal; and This was not a case where there is identified property of the parties likely to be the subject of a property order in the Wife’s favour, so that, as in other cases the ‘advance’ for legal fees can be offset or regarded ultimately as an interim property settlement.

O’Reilly J was of the view that a dollar for dollar order is appropriate in this case. Reasons included: There is some evidence that the Husband may not have been frank with the court as to his financial affairs. It is desirable that there should be at least a ‘level playing field’ between wife and husband in the litigation.

The Husband has engaged a specialist law firm who in turn has engaged counsel who was very experienced in this jurisdiction. In order to level the playing field, if the Husband is paying money to his solicitors and to engage counsel on his behalf there is no reason why he ought not pay the same sums to the wife’s solicitors on the dollar for dollar basis. In this case, Her Honour found that the Wife had made out a sufficient case for the making of a dollar for dollar costs order, to ensure there was a ‘level playing field’ in the litigation.

Justine Woods Partner

Property Case Law Update NQLA 25 May 2013

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Property Case Law Update NQLA 25 May 2013

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