SEPARATION: PROPERTY & FINANCIAL DIVISION BETWEEN COUPLES
Form 11 Consent Orders
It is stressful enough to go through relationship breakdown, but the experience could become much more traumatic if there are disputes about how assets and finances are to be divided. The good news is that majority of couples are able to reach an out of Court settlement.
Often, the key to avoid expensive and lengthy legal proceedings is to attend to the disputes and obtain sound legal advice at the earliest possible opportunity. Having a good understanding of your rights and responsibilities under the Family Law Act early will go a long way in your negotiations with your ex-partner, both in protecting your rights and enhancing the chance of a speedy resolution.
If you and your ex-partner are able to reach an agreement in relation to the division of property, you should document the agreement by way of a Form 11 Consent Orders Application which will need to be approved by the Family Court. Once approved, the consent orders will be sealed by the Family Court and they become binding on the parties in the same way as orders made in Court proceedings.
You do not have to wait until you are formally divorced before you can make a Form 11 Consent Orders Application. In fact, you can (and probably should) start negotiation with your ex-partner immediately after separation.
It comes as a surprise to many people that the Family Court may not approve a Form 11 Consent Orders Application even if parties have agreed to the terms voluntarily. This is because the Court has an overriding duty to ensure that the financial effect of any orders it pronounces by way of property settlement is just and equitable (fair) and if the Court is not satisfied, it may decline to make the orders despite the parties’ agreement.
When determining whether the proposed orders are fair, the Court takes into account a variety of matters which are discussed in MARRIAGE/Disputes on financial matters Spousal maintenance.
An alternative to Form 11 Consent Orders Application is to document your settlement by a binding financial agreement which is discussed in SEPARATION: PROPERTY/Binding Financial Agreement.
Binding Financial Agreement
A binding financial agreement can be made after breakdown of a marriage or de facto relationship.
For financial agreements to be legally binding, the agreement must comply with all legal requirements set out under the Family Law Act or the Family Court Act including both parties must obtain independent legal advice (evidenced by a solicitor’s certificate) before signing the agreement. Once the financial agreement is made, it is binding on the parties and it can only be altered or terminated by making a new agreement or with orders from the Court.
A transfer of property pursuant to a valid binding financial agreement is free of stamp/transfer duty.
However, validity or enforceability of a financial agreement can be challenged by a person in the Family Court.
It may come as a surprise to many people that it is not uncommon for the Court to set aside a financial agreement. Broadly, the situations where a financial agreement can be challenged in Court include:
- the financial agreement is not binding because it was not drafted in accordance with the Family Law Act or it contain terms that contravene the Family Law Act;
- even if the financial agreement is binding, it is unenforceable because it contravenes the general law governing enforceability of contracts (e.g. it was entered into as a result of fraud, duress, undue influence, unconscionable conduct or misrepresentation); or
there are material changes in circumstances relating to the care, welfare and development of a child of the relationship which would result in hardship if the financial agreement remain in force.
The fact that there are a number of situations in which a financial agreement can be challenged in Court means the preparation of a financial agreement requires the solicitor to have sufficient experience and knowledge about the Family Law Act and received comprehensive instructions from the client with respect to financial and personal circumstances. As a practical advice, having a signed financial agreement which was not prepared properly may cause more chaos and cost you more money in the future than not having one at all in the first place.
It is because of the uncertainties (some of which may be unavoidable) surrounding the enforceability of a financial agreement, when it comes to a relationship breakdown, generally you should opt to document your settlement by Consent Orders instead of by a financial agreement.
Disputes on financial matters
If you and your ex-partner are unable to reach an agreement in relation to the division of property, you may have little other option but to commence proceedings relating to property matters in the Family Court.
Unfortunately, Court proceedings are inherently costly and lengthy but the good news is that most cases started in the Family Court (over some 95%) are settled during the proceedings and do not require a trial.
When determining how assets are to be divided between the parties, the Court adopts a four steps process:
- identifying the assets;
- determining the parties’ contributions;
- identifying the parties’ respective needs; and
- considering the effect of the above findings and resolving what orders are “just and equitable”.
As the first step, the Court will identify all the assets & liabilities of the parties and determine its value. In some situations, this could be a difficult process when there are assets located overseas or when some of the assets are “hidden” by a party.
Determining the parties’ contributions is arguably the most important step and the outcome of which is likely to have significant impact on the final orders to be made by the Court. In assessing contributions, the Court takes into account financial contribution (e.g. wages, savings and inheritance brought into the relationship), non-financial contribution (e.g. physically carrying out building work on a property) and contribution to the welfare of the family (e.g. looking after children or performing home duties).
The third step involves considering the future needs of each party. Generally, this requires looking at the parties’ age, health, education, earning capacity, income and responsibility for children. Once the needs of each party are considered, the Court may make adjustments to the property entitlements of each party based upon their respective needs.
The final step requires the Court to consider whether the final division of property is “just and equitable” and consider the orders that need to be made in order to carry out the finial division. In this process, the Court is often require to determine which party is to keep a particular property (e.g. the matrimonial home) or whether a particular property is to be sold.
An application for property division must be made within 1 year after the divorce orders become final.
Spousal maintenance is financial support paid by a party to a marriage to their former spouse in circumstances where they are unable to adequately support themselves. De facto partners may also seek orders for spousal maintenance after a breakdown of the de facto relationship.
In deciding an application for maintenance, the Court focuses on a party’s needs for maintenance and the other party’s capacity to pay. Generally, this requires looking at the parties’ age, health, education, earning capacity, income and responsibility for children. The Court will also look at whether the person applying for maintenance has any “ability to earn” which they are not exercising.
Once an order is made for payment of spousal maintenance, it can be either paid on a periodic basis or in a lump sum basis.
In the event that the financial circumstances of the parties change, either party can apply to vary or discharge a maintenance order.
An application for spousal maintenance must be made within 1 year after the divorce orders are made.
Alternative dispute resolution
It is a requirement that every person in family law cases must make a genuine effort to resolve the disputes with the other party by participating in some sort of dispute resolutions, unless there is a risk of family violence or the matter is very urgent (e.g. seeking an injunction).
Dispute resolution can come in many forms including:
- family counselling;
- conciliation; or
If you and your spouse can reach an agreement during dispute resolution, you should record the agreement by filing of a Form 11 application for consent order.
If an agreement cannot be reached, you may have to consider commencing an application relating to property in the Family Court.
If you believe your ex-partner is taking steps to dispose family assets or otherwise siphoning money off with the aim to prevent you from receiving your entitlements in the family assets, you may need to apply for an injunction. An injunction is a court order to stop someone from doing something or, in some situations, to make someone doing something.
For property cases, you can obtain an injunction to stop your ex-partner from selling, mortgaging or otherwise dealing with a property. If the property has already been sold or the asset in question is cash, it is possible to obtain an order to ‘freeze’ bank accounts or an order to seize the cash.
In appropriate situations, the Family Court can also make orders and injunctions that affect third parties including for example an order to stop a trustee to deal with superannuation entitlements or an order to prevent a bank from selling a house.
An injunction under the Family Law Act is available to both married and divorced people, as well as to parties in a de facto relationship, including same-sex relationship.
Typically, an injunction application is made on an urgent and ex-parte basis (meaning it is made in the absence of your ex-partner). If the application is ex parte, your ex-partner will not know anything about it until after the orders are made by the Family Court, which is designed to prevent the ex-partner from doing anything that may frustrate your claims while you are waiting for the court to hear your application.
For information about other types of injunctions, please see SEPARATION: CHILDREN/Injunction.
In Family Court proceedings, each party to a case has a duty to give full and frank disclosure of all information relevant to the case. In some cases, however, a party may decide to conceal, alter or destroy information that is not favourable to that party.
In situation like this, you may have to consider applying for a search order (also known as Anton Piller Orders) which will allow you or your representatives to enter into the other party’s premises to inspect, remove or make copies of documents or other items which might be relevant to the case.
The Court is generally reluctant to grant a search order because it’s intrusive and sometimes disruptive nature. At the minimum, you will need to satisfy the Court that there are strong reasons your ex-partner will remove, destroy or alter the information and that you will suffer damages if orders are not made.
For obvious reasons, an application for search order is almost always required to be made secretly (by way of ex parte application) and promptly.
When the Court makes orders (including orders made by consent), they must be followed by the parties. If your ex-partner refuses or fails to follow Court orders without reasonable excuse, it is a contravention of the orders and you may make an application for contravention. An application for contravention informs the Court that the orders are not being followed and upon satisfying of the contraventions, the Court may:
- put the other person on notice about the contravention;
- make further orders or change existing orders to ensure they will be followed;
- impose a fine on the other person;
- imprison the other person.
Further, you may also seek to enforce the court orders if the obligations are “enforceable”. Enforceable obligations include:
- an obligation to pay money;
- an obligation to sign a document;
- an order entitling a person to the possession of real property;
- an order entitling a person to the transfer or delivery of personal property.
For an obligation to pay money, the Court may enforce the obligation by making:
- an order for seizure and sale of real or personal property;
- an order for the attachment of earnings and debts;
- an order for sequestration of property; or
- an order appointing a receiver.
It is to be noted that the Court has the power to imprison a person for failure to comply with an order.
An application for contravention or enforcement may have serious consequences to the other person and legal advice should be sought before an application is made.
The Family Court can make orders that deal with superannuation interests in the event of a breakdown in a marriage or a de facto relationship.
A superannuation split can be achieved in 3 ways:
where no agreement can be reached, by determination of the Family Court.
While the superannuation splitting law treats superannuation as a different type of property, the general principles about property division apply when the Court determines how superannuation interests are to be split between the parties. In fact, in most cases superannuation can be considered to be an asset just like any other asset and that it is taken into account as part of the asset pool of the family.
Third party actions
In property cases, usually only the spouses (or the de facto spouses) are parties to the proceedings. However, it is possible to join a third party to the court proceedings if, for example, the Court is satisfied that:
- an order should be made declaring that an asset legally owned by a third party is in fact owned by one of the spouse;
- a third party transaction is a sham;
- a transaction that is likely to defeat an order or an anticipated order should be set aside;
- the third party is in fact the alter ego or a puppet of one of the parties;
- an injunction is needed to restrain a third party from taking steps to affect or defeat a spouse’s entitlements;
- an order is required to direct a third party to assist in carrying out property settlement;
- the rights of a third party creditor need to be adjusted.
Sometimes a third party may seek to be joined to the proceedings in order to ensure their interests in an asset to the marriage are not defeated. A common example is that a parent of one of the couples may wish to be joined to the proceedings because the parent has an interest in the matrimonial home which is not reflected in the certificate of title.