australian family law
TRANSCRIPT
Family Law Overview &
Case Studies
Robertson Hyetts Solicitors presents
Disclaimer
The contents of this
presentation are for information
purposes only and do not
constitute legal advice.
If you have any particular
concerns or queries, please
contact our office for specific
advice.
• Family Law Process
• Flowcharts
• Role of Accountant
• Relevance to clients
Presentation Overview Family Law
Negotiation Flowchart
Litigation Flowchart
Ways of coming to a property settlement
Litigation
• Federal Circuit Court of Australia
• Family Court of Australia
Agreement
• Application for Consent Orders submitted to either
Family Court of Australia or Magistrates Court of
Victoria
• Magistrates Court of Victoria has jurisdiction to
determine Applications for Consent Orders,
however the Federal Circuit Court of Australia does
not
Ways of coming to a property settlement
What are pre-nups?
• Binding Financial Agreements made under the Family
Law Act 1976 prior to a marriage (generally)
• Binding Financial Agreements can be made
Before a relationship
During a relationship
After a relationship has ended
Effect of Divorce
• Divorce is more of an administrative process now.
• A divorce does not have to occur for a property settlement to be undertaken.
• Many parties now only divorce for their own personal reasons or if they wish to re-marry.
• If a divorce has occurs and the parties have not affected a property settlement, then they have 1 year from the date of the Divorce Order becoming final to file proceedings seeking a property settlement.
Assets and Liabilities
• Many things are assets for the purposes of family law
matters including companies, trust entities,
superannuation and employment entitlements.
Common Issues: • Trusts
• Real property
• Bank Accounts/share trading accounts/mortgages/credit cards
• Leave entitlements
• Family Debts
• Waste
• Add-Backs
• Spousal Maintenance
• Future needs or section 75(2) factors
Other Issues:
• Parents loaning money to children
• Treatment of leave entitlements
• Forgotten Superannuation Split
Case Study Overview Family Law
Parents loaning money to children Summary of facts:
• Parents advanced large sums of money to their son and his wife over several years which were used on a house deposit but largely to prop up the husband & wife’s businesses.
• The businesses ultimately were initially successful but some poor decisions lead to the eventual sale of the businesses at a discounted rate.
• The Husband & Wife then separated and their remaining asset was the family home which was sold.
• The Husband wanted to repay his parents with proceeds of the sale of the family home on the basis that the parents had loaned them those monies and they should be repaid.
• The Parents wanted their monies returned.
• The Wife objected to the repayment of the monies to the parents, and denied that there was ever any loan.
• There was no formal loan agreement.
• There was evidence of the Husband & Wife making repayments to the parents which were fairly regular in timing and amount, with occasional large sums at times. So it appeared that the conduct of the Husband & Wife was such that there was a recognition and repayment of a loan.
• The Husband during the marriage had effectively unfettered access to the parent’s account, which they had set up in the joint names of the parents, the Husband and their Daughter.
Parents loaning money to children Summary of facts continued:
• The Husband used a cheque book issued for the account to draw funds from the parent’s account
• It was alleged that the Wife had forged the Husband’s signature at times in order to draw funds out of the account for the business.
• The Wife denied that she had forged the Husband’s signature, and denied that she had she had any knowledge of the monies advanced by the parents flowing into the business.
• The amount that the parents was seeking be repaid to them was just about the same as what the Husband & Wife had left in proceeds from the sale of their home.
Parents loaning money to children Summary of facts continued:
• There was evidence that the parents had attempted to
have the Husband & Wife sign a loan agreement after
several years of them utilizing their account (after the
fact), the Husband had signed it, however the Wife had
not.
Parents loaning money to children Summary of facts continued:
Parents loaning money to children Issues:
1. There was no formal loan agreement
2. Without a formal loan agreement, the relationship the parents to the Husband gives rise at law to a presumption of advancement. At law there is a presumption that if a parent provides something to a child, that it is presumed to be a gift, unless proven otherwise.
3. There was evidence from the conduct of the parties that suggested a loan, but it was not conclusive.
4. There monies advanced either where a loan or a gift. If they were a gift, then it could said that the gift was one to the Husband, which benefited the Husband’s case but not the parents.
5. The proposition that the entire remainder of the Husband & Wife’s assets (from the sale of the house) should be paid to the parents entirely was a difficult case to run, because it meant effectively that the Wife (who had primary care of the Husband & Wife’s children) would receive nothing to reestablish herself.
Parents loaning money to children What happened:
• The matter was settled at mediation during the
proceedings and prior to trial.
• The parents, Husband and Wife split the proceeds of
sale 3 ways. The Husband paid his share to the
parents afterwards.
• The parents were about $80,000 out of pocket (plus
legal costs) from the experience.
Parents loaning money to children What would have been better:
• Formal loan agreement between the parents, Husband
& Wife
• Not giving the Husband unfettered access to their
funds
• Securing the loan against the Husband & Wife’s family
home with a mortgage.
Treatment of leave entitlements Summary of facts:
• Husband and Wife property settlement matter involving the usual assets/liabilities.
• They had been married 8 years, so the average.
• They had negotiated and agreed what was about a 50/50 division, so it was favourable to our client (the Husband).
• Before the parties had signed the documentation, but after we had agreed in-principle by correspondence, the Husband was made redundant from his employment. He found new employment promptly but received a payment of $60,000 mostly comprised of leave entitlements he was owed.
• Suddenly the leave entitlements which are typically do not form part of a property settlement negotiation were realized and an asset available for division.
• Typically leave entitlements are not available for division. The Court broadly say that if a person has significant leave entitlements, that they are entitled to take that leave if they wish and it is not available for division.
• However the leave entitlements suddenly becoming cash should arguably have been divided with the Wife. The Court in the Marriage of Burke (1992) 16 Fam LR 324 reasoned that redundancy entitlements were a financial resource that accrued during the marriage, therefore the Wife in that case notionally contributed to half of that redundancy, and the redundancy entitlement were available for division under s 79 of the Family Law Act.
Treatment of leave entitlements The issue:
• The Wife did not seek to change the agreement reached
and the Husband retained his $60,000 redundancy
payment. We calculated the division taking in account
the redundancy payment to be around 63% in the
Husband’s favour.
Treatment of leave entitlements What happened:
• We would have advised the Husband to provide the Wife
with some of the redundancy payment if she had sought
it.
Treatment of leave entitlements What could have happened:
• The Husband (our client) and Wife separated in 2003 and did an “Interim Property Settlement” in 2004 by Court Orders under the Family Law Act.
• The Interim Property Settlement provided for division of the non-superannuation assets, but also provided that there would be further hearing of the parties’ application for consent orders on the issue of the superannuation for final settlement of the property issues and adjourned matter until 4 April 2006.
• Pursuant to the Interim Property Orders the Husband was restrained for claiming any of his entitlements or doing anything to cause his entitlements to vest in any fashion other than a lump sum. Further the Husband was to notify the Wife of his “resigning, retiring or becoming redundant from his employment or otherwise becoming entitled to claim a benefit under his superannuation scheme”. The Wife was similarly restrained but had much lesser entitlements.
• The Husband had a defined benefit/accumulated entitlement in a very good Commonwealth superannuation scheme of significant value
• The parties did not deal finalise their property affairs in 2006, and waited until 2012 before raising the issue again. The Husband wanted to be able to access his entitlements and wanted it finalized so he could retire.
Forgotten superannuation split Summary of facts:
• The situation was exceptionally unusual in the sense that the parties
had done a partial property settlement by an application for consent
orders with the Court, the notion of doing a partial property
settlement is unusual and to date we are not sure whether that in
itself was within the power of the Court.
• A significant period of time had passed and the Husband’s
entitlements had more than doubled in value. A superannuation
valuation put the valued of his entitlements at just under $500,000,
whereas the Wife had $61,000 in 2012.
• Typically the Courts divide assets/entitlements at the time it comes
before the Court, obviously in this case that would produce an unfair
outcome, so the more difficult question became how much of the
Husband’s entitlements should pass to the Wife?
Forgotten superannuation split The issues:
• The Wife initially demanded that their entitlements be equalized, so
that she receive a superannuation split of just over $180,000.
• The Husband proposed a split to the Wife of almost $125,000,
based on an assessment that the Wife would have been entitlement
to about $90,000 in 2004, and applying 5% interest to that figure to
2012.
• We negotiated a settlement whereby she received a split of
$145,000, which entirely came from the accumulated portion of his
entitlements. This was based on the offer we made of $125, 000
plus another $20,000 (which was what we advised our client it would
cost to take the matter through the Courts, so he may as well offer it
to the Wife instead).
Forgotten superannuation split What happened:
• We were on the cusp of initiating proceedings, and it would have
been interesting to discover what the Court made of it. We could at
the time find no case similar to it.
• We believe that a proposal to the Court that they base the Wife’s
entitlement on what she would have received in 2004 and apply
moderate interest to that figure, was a fair and equitable way of
dealing with the matter.
• We do not believe that the Wife’s proposal that they equalize the
parties entitlements as at 2012 was one that the Court could fairly
arrive at, however we shall never know.
Forgotten superannuation split What could have happen:
Ideal Scenario
Robertson Hyetts Solicitors based in Bendigo,
Castlemaine & Melbourne
www.robertsonhyetts.com.au
Contact us on 5434 6666 or email our Family Law team Peter Cutting, Solicitor
Amy Hando, Solicitor
Andrew Pickles, Director
Our Family Law Team