Blended families and second marriages can be challenging; and statistically second marriages are more likely to end in divorce than first marriages.[i] For many people in this situation, often middle aged or later in life[ii], one concern is how can assets be best protected moving towards retirement and/or preserved for the children of the first marriage in the event of separation or death?

The potential claims

The potential claims that might arise from a second spouse/partner are typically those pursuant to the Family Law Act 1975 (“FLA”) with respect to property adjustment/spousal maintenance in the event of relationship breakdown[iii]; or a family provision claim.

A family provision claim is made pursuant to the Succession Act 1981 (“Succession Act”) in the event of death. This might be an issue where there are children from a first marriage who benefit under the will. A family provision claim is against the estate and arises if the deceased spouse does not make adequate provision in the will for the surviving spouse.

The difficulty for clients with respect to the above is:

High costs of family law litigation in the event of dispute; or high legal costs for the estate in family provision litigation;
These types of claims involve discretionary remedies which creates a degree of uncertainty as to the outcome;
Acrimonious dispute between spouses/partners; or between the children of the first marriage and spouse/partner.

What protection can the law offer?

Methods of asset protection such as via corporate or trust structures are of little assistance in the family law arena.-It is well settled that the real issue for the court in determining whether the matrimonial property pool ought to be expanded by trust or corporate assets is control.[iv]

Thus the court can look behind the veil and determine whether the facts and circumstances support a conclusion that assets ought to be included as “matrimonial property”.

Since 2000 (and 2009 for defacto couples) changes to the FLA make it possible for persons contemplating a relationship/marriage; or in a relationship/marriage; to contract out of the property adjustment/spousal maintenance provisions by entering into a Binding Financial Agreement.

What is a Binding Financial Agreement?

A Binding Financial Agreement is a Financial Agreement that is binding because it has met the formal requirements of the FLA necessary to make it binding.[v]-Where a Financial Agreement is binding, it removes the jurisdiction of a court to make a property adjustment or spousal maintenance order.[vi]

Thus the Binding Financial Agreement can specify matters such as how property is to be distributed, whether property brought to a relationship is to be retained or quarantined out of the property pool available for distribution, whether spousal maintenance is payable and the extinguishment of future spousal maintenance claims.

Third parties can be parties to Binding Financial Agreements and thus inter entity transfer of property is possible as well as making allowances for loans from family members etc.

What happens to a Binding Financial Agreement when a party to the agreement passes away?

A Binding Financial Agreement operates despite the death of a party and is binding on the personal representative of a party.[vii]

Opinions are divided however as to whether a Binding Financial Agreement for married couples becomes operative upon the death of a party. The significance of this would be to allow the Binding Financial Agreement to be used as a succession planning tool i.e. the Binding Financial Agreement would specify what joint property (or even property in the name of the surviving spouse) would fall into the deceased estate upon the death of a party pursuant to the Binding Financial Agreement.

The arguments for and against concern the wording of a number of sections[viii] (see endnote for explanation and why I think Binding Financial Agreements have force and effect on death) however there may be other provisions included in a Binding Financial Agreement that make a Binding Financial Agreement useful as a succession planning tool and protect against a family maintenance provision claim.

Binding Financial Agreements and family provision claims

Apart from the Binding Financial Agreement potentially being used to include or exclude assets from an estate, there is also potential to use the Binding Financial Agreement to “contract out of” the family maintenance provisions of the Succession Act.

In this respect the Binding Financial Agreement cannot remove the jurisdiction of the court to make an order because the Succession Act is Queensland legislation while the FLA is Federal legislation. Nevertheless a provision in the Binding Financial Agreement to the effect that neither party shall make a claim on the estate of the other, while not binding on a State Court, may represent important evidence of the intention of the parties and with respect to what “family provision” was considered adequate by the parties. This was the case in Queensland in Hills v Chalk & Ors (as executors of the estate of Chalk (deceased)) [2008] QCA 159–where the court said at 46:

“In this case, the voluntary statement of the parties of their mutual intentions and expectations in a form intended to be binding affords a reliable conspectus of the totality of the relationship of the parties and of their respective relationships with others who have a claim on their bounty. In my opinion, the court should have regard to such a voluntary statement by the parties of their intentions and expectations…”

Further, in other jurisdictions the succession laws have been amended to permit parties to contract out of family maintenance provisions. For example, section 95 of the NSW Succession Act 2006 provides a person may contract out of/release their rights to a family provision order[ix]. A clause can be inserted into the Binding Financial Agreement in contemplation of the succession law in Queensland being amended to allow for a similar provision.

Getting a Binding Financial Agreement?

Some people may argue that a Binding Financial Agreement in contemplation of marriage or “pre nuptial agreement” is unromantic or demonstrates a lack of commitment. Maybe…but having this discussion at a time when both parties are in love and looking to the future could also be said to be a preferable time to negotiate what is fair as opposed to during the period of emotional turmoil at the end of a relationship.

For people with children to another relationship and assets hard earned it makes sense to obtain the best protection the law can offer.

For people wanting to leave behind a legacy to children and others, rather than leaving behind court battles and an estate ravaged by legal costs, a Binding Financial Agreement can offer more certainty and protection for loved ones. Many lawyers will understand that often claims such as family provision claims may be settled and paid out even if they are without merit simply to avoid the legal costs of defending them.

The Binding Financial Agreement doesn’t have to be entered into at the start of the relationship; it can be made during and even after the relationship has broken down.

Binding Financial Agreements are very helpful provided they are created by a skilled lawyer. Strict legislative requirements are necessary to make them binding and in some circumstances they can be set aside.

Two idioms best capture the essence of Binding Financial Agreements, they are: a stitch in time save nine but a chain is only as strong as its weakest link.

[i] Australian Institute of Family Studies

[ii] 2011 Census data show that in 2011 the median age in Australia for males to become separated was 40.8 with divorce occurring at 44.4 while for females the median age for separation was 38.1 and 41.5 for divorce.

[iii] Since 1 March 2009 most de facto couples in Queensland separating after that date are able to seek remedies pursuant the Family Law Act 1975 which are in most respect the same as those available to married couples.

[iv] Deputy Commissioner of Taxation v Austin (1998) 16 ACLC 1,555; and Coventry, Coventry and Smith (2004) FLC 93-184.

[v] See sections 90G and 90UJ FLA.

[vi] See sections 71A and 90SA FLA.

[vii] See sections 90H and 90UK FLA.

[viii] Section 90H and 90UK are mirror provisions for married and defacto Binding Financial Agreements (“BFA”) except that the s.90UK provision contains a note which reads, “If the parties are still in the defacto relationship when one of them dies the de facto relationship is not taken to have broken down for the purposes of enforcing the matters mentioned in the financial agreement. Because section 90H doesn’t have a similar note it could be argued it is intended to mean death constitutes relationship breakdown for the purposes of the BFA. The difficulty with this is sections 90B(2) and 90C(2) refer to marriage “breakdown” which the definition in section 4 provides “in relation to a marriage, does not include a breakdown of the marriage by reason of death”.

The above would seem to put the matter beyond issue except for sections 90DA(1) and 90DA(1A). Section 90DA(1) requires that upon marriage breakdown, a BFA has no force or effect until a party signs a separation declaration. Section 90DA(1A) provides that section 90DA(1) does not need to be complied with if either or both spouses die. The note to section 90DA(1A) goes on to say:-“This means the financial agreement will be of force and effect in relation to the matters mentioned in subsection (1) from the time of the divorce or death(s)” (my emphasis). Thus the section clearly indicates a BFA has force and effect from the time of death.

In further support of this idea is section 90B(3)(b) and 90C(3)(b). This section provides that the BFA may contain “other matters” i.e. other matters in addition to how in the event of breakdown the property, financial resources and spousal maintenance is dealt with. It is submitted “other matters” might refer to how in the event of death the property, financial resources and spousal maintenance is dealt with.

A BFA is not terminated by death. Section 90J provides a BFA can “only” be terminated by including a terminating clause in a subsequent BFA (as referred to in sections 90B, 90C and 90D) or by making a “terminating agreement”. Therefore if the BFA is still operative, the surviving spouse could choose whether to sign the separation declaration in section 90DA(1) and give the BFA “force and effect”. Presumably this is why section 90DA(1A) was inserted and in my view gives further weight to the argument that BFA’s have force and effect on death of a party.

[ix] The release of rights to a family provision order in NSW requires the courts approval and other findings with respect to advantage to the releasing party; that it was prudent, fair and reasonable; and the releasing party had independent advice.

Peter Hooper – Hooper Mill Family Lawyers – We are family lawyers in Brisbane. Find us searching family lawyers Brisbane; divorce lawyers Brisbane; family lawyer Brisbane; Brisbane family lawyers; family law solicitors Brisbane; divorce lawyer Brisbane; family law lawyers Brisbane; divorce solicitors Brisbane; divorce lawyers in Brisbane; best divorce lawyer Brisbane.

Articles written by Peter Hooper, Featured Articles, Property

The Full Court of the Family Court sheds more light on Stanford and the 4 step process

PDF – The Full Court of the Family Court sheds more light on Stanford and the 4 step process

Some recent developments in the law with respect to matrimonial property adjustment orders have the potential to cause a significant rethink as to how lawyers have approached advising clients with respect to entitlement pursuant to section 79 Family Law Act 1975.

The High Court decision in Stanford[i] makes it clear the requirement for the court to determine whether it is “just and equitable”[ii] to make a matrimonial property adjustment order is a “precondition” to exercising the power conferred by section 79(4).[iii]

Arguably this should be obvious from a perusal of the section. Section 79(2) reads:

“The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order” (my emphasis)

As was pointed out by Professor Parkinson in his article “Family Property Law and the Three Fundamental Propositions in Stanford and Stanford”, the notion of Section 79(2) being a positive requirement rather than a restraint on the power is not new, and similar comments had been made in high profile decisions over the years including in Mallet v Mallet.[iv]

The difficulty for lawyers with the idea of the “justice and equity” requirement being considered first is that a long line of decisions notably set out in Hickey and Hickey[v] made it clear the preferred approach to exercise of the discretion in section 79 followed 4 steps, the last step of which was the “justice and equity” step:

“The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties … Secondly, the Court should identify and assess the contributions of the parties …Thirdly, the Court should identify and assess the relevant matters referred to in… s.75(2)…Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case.”[vi] (My emphasis)

To add to the confusion, Stanford sets out how the justice and equity statutory precondition ought to be satisfied by having regard to “3 fundamental propositions” which in some respects resemble the 4 step process. The three fundamental propositions are:

Begin by considering whether it is just and equitable by identifying according to common law and equitable principles the existing interests of the parties;
The exercise of discretionary power pursuant to section 79 must be exercised according to legal principles and not in an unguided manner. The judge exercising the power is not entitled to do “palm tree justice”;
The court can not begin from the starting point of assuming any adjustment of proprietary interests is necessary. A determination that a party has a right to a property adjustment only fixed by reference to the matters in section 79(4) and without separate consideration of section 79(2) would erroneously conflate what are distinct statutory requirements.[vii]

So what of Hickey and the 4 step process?

Fortunately for those of us in the trenches wondering whether we still ought to be explaining the four step process to our clients, the Full Court of the Family Court has come to the rescue with Bevan & Bevan [2013] FamCAFC 116 delivered 8 August 2013.

This decision examines Stanford and provides guidance as to how treating section 79(2) as a precondition may be reconciled with the 4 step process.

In Bevan the Full Court noted the High Court in Stanford had not disavowed (nor approved) the 4 step process[viii].

In examining the post Stanford approach to the preliminary justice and equity question, Bevan makes a number of important points. The Full Court said:

It would be a “fundamental misunderstanding to read Stanford as suggesting the matters referred to in section 79(4) should be ignored” in determining the preliminary justice and equity question. While the Court recognised the warning in Stanford not to conflate the section 79(2) and section 79(4) issues, it was recognised in the majority of cases the justice and equity preliminary issue will be readily satisfied.[ix]

The second and third fundamental principles seem to invite an examination of section 79(4) with respect to the preliminary question, and add further resemblance to steps 2 and 3 of the 4 step process. It is submitted the reference to “legal principles” and not doing “palm tree justice” as well as not “beginning from the starting point of assuming any adjustment of proprietary interests is necessary” seem to be most appropriately grounded in section 79(4) i.e. an examination of contribution and section 75(2) matters.

The Full Court referred at 88 to a paper by Martin Bartfeld QC where he opined there was scope for considering section 79(4) matters in section 79(2).

Mr Bartfield QC says the contribution and section 75(2) factors must be treated as having 2 characteristics. Firstly, a discretionary characteristic used to identify those matters relevant to enliven the exercise of the discretion i.e. contributions over a long period may provide a basis for a finding it is just and equitable to make an order in accordance with the statutory precondition in Stanford. Secondly, an evaluative characteristic to measure, weigh or quantify the effect of the contribution or future factor (i.e. steps 2 and 3 of the 4 step process – assessment of contributions and future factors).

At 87 the Court referred to the decision of Strauss J in Ferguson and Ferguson where His Honour said that section 79(2) “is directed to both the questions of whether an order should be made at all, and what order should be made, if one is made at all.”[x] Thus the Stanford precondition to determine whether an order should be made is not inconsistent with the fourth step in Hickey.

The Full Court said:

“We do not consider it helpful, and indeed it is misleading, to describe this separate enquiry as a threshold issue…the justice and equity requirement is therefore not a threshold issue, but rather one permeating the entire process.”[xi]

So what is the process?

It is submitted two separate exercises are required:

Firstly to determine the justice and equity preliminary question in accordance with the 3 fundamental principles from Stanford (which requires an examination of section 79(4) from the perspective of whether it is just and equitable to make an order);
Secondly, if the first question is answered in the affirmative, to follow the 4 steps referred to in Hickey culminating in again considering whether the orders proposed to be made are just and equitable. This is because the requirement to do justice and equity is not a threshold issue but rather one permeating the entire process.

In practice the first exercise will often rarely need to be conducted on other than a cursory level. The Court in Bevan[xii] referred to paragraph 42 of Stanford where it was acknowledged:

In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife…Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).

Thus in practice it is submitted unless the preliminary justice and equity question can be flagged by unusual factual circumstance (such as those in Stanford and Bevan) the preliminary question can be swiftly resolved in the mind of the lawyer; before moving on to provide the client with advice, usually following the 4 steps in Hickey as to a range of outcomes that would be just and equitable.

Most importantly it is submitted these decisions highlight the practice of not overlooking the importance of section 79(2) in favour of moving directly towards assessing a client’s case under section 79(4). Of this the Court said in Bevan:

“It appears to have been routinely assumed by litigants, certainly in recent times, that justice and equity requires the court to assess their claims by reference to section 79(4)…”[xiii]

It is also submitted this practice may have come about by only regarding justice and equity as the final step in the four step process, after a “result” had been determined.

In practice for the future the consequences of Stanford may be more far reaching than simply being alert to justice and equity issues in some matters. One consequence may be greater scrutiny of circumstances such as short marriages with no children, or where finances are kept separate, where previously some entitlement may have been assumed.

[i] [2012] HCA 52 (15 November 2012)

[ii] Section 79(2) Family Law Act 1975

[iii] Stanford[2012] HCA 52 (15 November 2012) at 24

[iv] Parkinson “Family Property Law and the Three Fundamental Propositions in Stanford and Stanford” in Aust Family Lawyer Autumn 2013, Vol 23 No2 at page 6

[v] (2003) FLC 93-143

[vi] Hickey and Hickey (2003) FLC 93-143 at 39

[vii] Stanford[2012] HCA 52 (15 November 2012) at 37 to 40

[viii] Bevan & Bevan [2013] FamCAFC 116 at 65

[ix] Bevan & Bevan [2013] FamCAFC 116 at 84 and 85

[x] Bevan & Bevan [2013] FamCAFC 116 at 87

[xi] Bevan & Bevan [2013] FamCAFC 116 at 86

[xii] Bevan & Bevan [2013] FamCAFC 116 at 69

[xiii] Bevan & Bevan [2013] FamCAFC 116 at 68

Articles written by Peter Hooper, Featured Articles

Recordings as evidence in courts exercising jurisdiction under Family Law Act 1975

In the “he said, she said” world of family law, making a recording of the other party (usually conducted surreptitiously) is in the author’s experience often regarded by litigants as best evidence to establish a particular version of events.

Sometimes this is true.

Before deciding to record however it is prudent to consider the legality of the recording, whether the recording may be admitted as evidence, how the recording may be perceived by the judicial officer hearing the matter, and what of the obligation to disclose the recording if it doesn’t achieve what the person behind the recording device was hoping it would.

The issue of the legality of the recording and its admissibility usually goes hand in hand; and there are both State and Commonwealth statutes relevant to the issue.

In Queensland it is lawful to record a conversation without the knowledge of other parties provided the person making the recording is a party to the conversation.[1] Therefore A can record a conversation between A, B and C but cannot record the private conversation[2] between B and C when A is not a party to the private conversation.

Commonwealth legislation applies to the interception of telephone calls, commonly called “wire tapping” back when telephones needed to have wires.

With improvements in technology (such as the iphone) and new applications (“apps”); recordings often encountered in the family law arena are conversations between parties over the telephone, utilising technology built into the phone or device.

The Commonwealth Telecommunications (Interception and Access) Act 1979 makes it an offence to “intercept” a communication passing over a telecommunication system.[3] Before devices had in built recording functions, in the author’s opinion, the safest way to record a telephone conversation was to have the conversation on speaker, and record the conversation on a separate recording device. Thus the communication had been received, was not intercepted, and was not passing over the telecommunications system.

But what of modern devices with inbuilt recording functions? When does an “intercept” take place? Is the communication passing over the system, and can recording made this way offend the Telecommunications (Interception and Access) Act?

An interception passing over a telecommunications system is defined as:

“Listening to or recording, by any means, such a communication in its passage over that telecommunications system without the knowledge of the person making the communication.”[4]

Having regard to the above, the relevant question would seem to be: when is the communication “passing over that telecommunications system”?

For the purposes of the act:

“a telecommunications is taken to start passing over a telecommunications system when it is sent or transmitted by the person sending the communication; and is taken to continue to pass over the system until it becomes accessible to the intended recipient of the communication.”[5]

Thus it would seem with modern devices such as an iphone with built in recording capability, the communication would be “accessible” at the time of recording, and therefore not “passing over” or intercepted.

In the event that the recording was unlawfully obtained, can it still be relied upon?

Leaving aside specific provisions of the Commonwealth and Queensland legislation in relation to admissibility of illegally obtained recordings[6], the Commonwealth Evidence Act section 138 provides illegally or improperly obtained evidence may be excluded.

A recent decision where recorded evidence was not admitted is Badger & Ors [2013] FMCAfam 124 (14 February 2013). In this case a police officer litigation guardian made an admission that he had “tapped” a phone without the knowledge of the other party to the call. The police officer was a party to the conversation and it is not clear from the judgment what “tapping” the phone meant in this context. It should also be noted throughout the judgment reference is made to the Telecommunications Act 1997 which it would seem is not the relevant act.

Having found that the recording was illegal, His Honour said[7]:

“The statutory provisions relating to the admission of improperly or illegally obtained evidence is found at section 138 of the Evidence Act 1995. That section makes it clear that such evidence is not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting such evidence. Without prescriptive limitation the court is required to take into account eight separate matters. Those matters are explored below.

The court must consider the probative value of the evidence. That is, is the evidence sufficiently useful to prove something important in the case. The court must also consider the importance of the evidence in the proceedings and the nature of the relevant offence, cause of action or defence and the nature of the subject matter of the proceedings.”

It is also important to note that section 138 Evidence Act (Cth) 1995, prima facie, applies to child related proceedings, and is not excluded by section 69ZT Family Law Act 1975 as are several other evidentiary provisions.

What if the recordings are admissible? Will they help or hinder?

It depends on what they reveal.

The court is savvy to the fact that he or she who records is on their best behaviour; while the other party is unguarded. Litigants can expect the weight to be attributed to the recording shall reflect this idea.

At their highest, if the recording catches the other party making a false deposition they may be a very important piece of evidence.

At their lowest, recordings may indicate a propensity on the part of one of the litigants to attempt to try and trap the other party, or engage in conflict causing, litigious conduct in an attempt to provoke the other party to perform on tape.

Bearing in mind that recordings are likely to occur in the context of a parenting matter; the likelihood surreptitious recordings leading to increased conflict, social science research supporting that conflict between parent’s causes emotional harm to children, and the perception of lack of insight or regard for children by recording, the risks are obvious.

In the decision of Simmons & Simmons [2013] FCCA 304 (24 May 2013) a mother planted the recording device on the children before sending the child off to spend supervised time with the father. The recorded evidence was admitted however both parties were criticised. Judge McGuire said at paragraph 109:

On the material before me and, in particular, the tape recordings, I am satisfied on the balance of probabilities that the father did act in this way. This is insightful and selfish behaviour. It fails to recognise the potential effect on a young child of being embroiled in such a way in parental dispute. Similarly, however, the mother’s actions in sending the child for supervised visits with recording equipment secreted on her is similarly appalling behaviour. The actions of both these parents are at best naïve and at worst a form of child abuse. In this sense they are equally culpable.

What if the recording is harmful to the case of the person recording?

Section 3 Evidence Act 1995 also refers to Acts Interpretation Act 1901 for definitions of terms including “document”. A document includes “any record of information, and includes anything from which sounds, images or writings can be reproduced”.[8] i.e. recordings.

Both the Family Law Rules 2004 and the Federal Circuit Court Rules 2001 provide for general obligations to make disclosure, including relevant documents. Thus even if the recording is harmful to the case of the person recording it must be disclosed which creates yet another element of risk prior to making a decision to record.

For the solicitors acting for the person making the recording, the solicitor cannot accept instructions not to disclose relevant evidence[9]. If the client decided the recording was not helpful (or was harmful to their case) the solicitor acting for them would be required to cease acting if the client refused to make disclosure.

Before considering secretly recording, obtain advice from a family lawyer.

[1]Invasion of Privacy Act (Qld) 1971 section 43(2)(a)

[2] Invasion of Privacy Act (Qld) 1971 section 4 at “private conversation is defined as “any words spoken by one person to another person in circumstances that indicate that those persons desire the words to be heard or listened to only by themselves or that indicate that either of those persons desires the words to be heard or listened to only by themselves and by some other person, but does not include words spoken by one person to another person in circumstances in which either of those persons ought reasonably to expect the words may be overheard, recorded, monitored or listened to by some other person, not being a person who has the consent, express or implied, of either of those persons to do so.

[3] Telecommunications (Interception and Access) Act 1979 section 7

[4] Telecommunications (Interception and Access) Act 1979 section 6

[5] Telecommunications (Interception and Access) Act 1979 section 5F

[6] Telecommunications (Interception and Access) Act 1979 part 3.4 division 3 and section 46 Invasion of Privacy Act (Qld) 1971

[7] Badger & Ors [2013] FMCAfam 124 (14 February 2013) at 26 to 27

[8] Acts Interpretation Act 1901section 2B

[9] A solicitor has a fundamental duty to the court and administration of justice (Rules 3 of the Australian Solicitor Conduct Rules 2012).

Article – Recordings

Articles written by Peter Hooper, Featured Articles

Applications for Litigation Expenses aka “Hogan Orders”

“A highly relevant matter which distinguishes litigation under the Family Law Act 1975 from ordinary civil litigation…is the fact that very often the wealth of the parties is controlled by one rather than both of them” – per Nicholson CJ, Lindenmayer and O’Ryan JJ in Blueseas Investments Pty Ltd v Mitchell (1999) FLC 92-856.

Due to injustice that can arise when one party to a marriage controls the wealth of the marriage, Courts exercising jurisdiction pursuant to the Family Law Act 1975 (“FLA”) have developed guidelines to create a means by which a party not in control of funds, can apply to have the other party meet their litigation expenses. These types of orders have been referred to by several names but are commonly known to Family Lawyers as “Hogan Orders”[i].

Although it is more technically correct to refer to these types of orders simply as “orders for litigation expenses”, for the sake of brevity and consistency hereafter they will be referred to as “Hogan Orders”.

Jurisdiction

Hogan Orders are not specifically provided for in the FLA however, it has been established that there are a number of sources of jurisdiction for the Court to make such orders. These are:

Interim or “partial” property settlement[ii] (section 79 FLA);
Interim costs order[iii] (section 117 FLA);
Interim spousal maintenance order[iv] (section 72 and 74 FLA);
Injunction[v] (section 114 FLA).

The Full Court in Strahan & Strahan (Interim Property Orders) [2009] FamCA 116, recently confirmed that the while the Court can make a Hogan Order utilising any of the above sources of power, it is necessary to identify the source of the power, because it is the source of the power that determines the necessary preconditions and relevant considerations for making the Hogan Order.[vi] Thus for example, seeking a Hogan Order as an interim property order will have different requirements, and implications, than seeking litigation expenses as interim costs, spousal maintenance or as an injunction.

Matters of common relevance

While the requirements will differ depending on the source of power, there are some matters relevant to all such Applications. Three such matters were identified in Zschokke and Zschokke (1996) FLC 92-693 and confirmed in Strahan. These are:

A position of relative financial strength on the part of the Respondent;
A capacity on the part of the Respondent to meet his or her own litigation costs;
An inability on the part of the Applicant to meet his or her litigation costs.

In Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 578, in addition to the three matters described above, the following were also identified as being relevant regardless of the basis upon which the order is sought:

The Applicant has an arguable case for substantive relief which deserves to be heard;[vii]
Evidence of the Applicant’s likely costs of the litigation;[viii]
It is not an essential precondition that the Applicant’s legal representatives will not continue to act unless the costs are paid or secured on an ongoing basis;[ix]
The order may make a provision for litigation expenses at a rate that appears reasonable in all the circumstances;
An order can be made in respect of costs already incurred as well as for future costs;
Whether the order is to be in respect of costs already incurred, or costs to be incurred, and whether the applicant’s lawyers will continue to act in the absence of provision for costs to be incurred, may be relevant to the discretion to make an order and its quantum;
Any such order should be framed to protect the parties from any risk of injustice arising from the manner in which the funds are expended. This may be done by requiring that the funds be administered solely by the applicant’s solicitors and applied only to meet the expenses referred to in the order, with detailed records being maintained to permit review by the Court at the time of the exercise of its discretion in the substantive property proceedings or on the final determination of the issue of costs;[x]

The above matters need to be specifically addressed in the Applicant’s Affidavit material and/or the Affidavit of the Applicant’s legal representative. Any relevant documents should be exhibited i.e. documents such as:

Letters evidencing litigation funding has been applied for and rejected;
Letters evidencing that Legal Aid has been applied for and rejected or alternatively, evidence such as material from the Grants Handbook showing that the Applicant would not qualify for Legal Aid;
Identify the assets and income of the Respondent from the disclosure documents which establish the capacity of the Respondent to meet his or her own litigation costs. If necessary, documents from the Respondent’s solicitor can be requested or subpoenaed to show what the Respondent has paid his or her solicitor and the Respondent’s liability to meet litigation costs;
Identify from the disclosure documents or by other means a source from which the litigation expenses can be paid.

Matters specifically relevant to different sources of jurisdiction

As stated above, with each potential source of jurisdiction there are also differing considerations that are required to be addressed.

Section 79 FLA – Interim Property Settlement

The Court is generally reluctant to make an interim property order, preferring to exercise the jurisdiction once at a final hearing. The source of the power is contained within section 79 while section 80(1)(h) is the “enabling provision” by which the order is made.

Applying for an interim property order is a two step process requiring:

An adjectival or procedural step to determine whether it is appropriate that the interim order be made;
A substantive step i.e. regard must be had to the matters contained with section 79 before the power conferred by section 79 can be exercised.

It was indicated prior to Strahan that the first step required the applicant to show that there were “compelling circumstances” why the interim order should be made[xi]. However, the Full Court in Strahan, had regard to comments made by Federal Magistrate Reithmuller in Wenz v Archer (2008) 40 Fam LR 212, and determined that the Applicant need not establish compelling circumstances but rather “whether in all the circumstances it is appropriate” to make the interim order. It is submitted that where the three relevant matters from Zschokke are established, the “test” for step 1will be satisfied.

Having established step 1, the considerations for the Court are the same as those involved in making a “final property adjustment order”, that is, the Court must consider the matters in sections 79(4) relating to contributions, the relevant matters in 75(2) by virtue of 79(4)(e), relating to any further adjustment for “future” factors and the requirement in 79(2) that any order be “just and equitable”.

Therefore in seeking litigation expenses as an interim property settlement, the Applicants Affidavit should contain evidence with respect to the 4 step process[xii] used to determine the range of entitlement pursuant to section 79, that is:

The nature and extent of the matrimonial property pool;
That the Applicant has an entitlement to property on the basis of contributions;
Any adjustments for relevant section 75(2) factors;
That it is just and equitable to make the order.

With regard to what is just and equitable, it is important to show that, prima facie, the Applicant is not receiving an interim settlement in excess of his or her likely entitlement at the final hearing.

Any exercise of power pursuant to s.79 is on a “final basis” although the Court does not have to exercise the power at only one time. The power can be exercised by a succession of orders until the power is exhausted i.e. there is no matrimonial property not dealt with.[xiii] Thus provided there is property remaining, the Court has jurisdiction to make further orders regarding all the property of the parties or either of them, and can reallocate property previously allocated by the interim order. Further, any property/funds allocated for the payment of legal fees and spent, will likely be “added back” as notional property which is consistent with the Courts approach to the treatment of legal fees paid from matrimonial property[xiv] and the general rule in section 117(1) that each party bears their own costs.

Section 117(2) – Interim Costs

The general rule in matrimonial proceedings is that each party bears their own costs[xv]. However, the court may make an order for costs on a final or interim basis pursuant to section 117(2) if:

The circumstances justify the order being made;
The order is just; and,
Subject to the maters in sections 117(2A), (4) and (5).

In Zschokke the Court held that if the source of jurisdiction for the Hogan Order is section 117(2), then the matters in section 117(2A) must be addressed in so far as they are relevant[xvi]. It is submitted the following could or will be relevant in an Application for a Hogan order:

The financial circumstances of each of the parties to the proceedings;
Whether any party to the proceedings is in receipt of Legal Aid;
The conduct of the parties i.e. refusal to make funds available;
Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
Such other matters as the court considers relevant.

If an interim costs order is made, the funds provided to the Applicant are not automatically added back as notional property. However, it is common for the Court to make an order that the trial Judge retains a discretion as to how the funds are treated at trial.

Section 74 – Interim Spousal Maintenance

With regard to spousal maintenance, section 74 empowers the Court to, “make such Orders as it considers proper” for spousal maintenance. What is proper is that “which is not insufficient or excessive in the circumstances”.[xvii] The type of spousal maintenance order here is an interim, as opposed to final, spousal maintenance order but this is of little consequence as the requirements for interim and final spousal maintenance orders are the same. Like an interim property order, section 80(1)(h) is the section by which the order is made. This is because both spousal maintenance and interim property orders are contained within Part VIII FLA and section 80(1) applies to, “the court in exercising its powers under this Part”.

Before the Court can order spousal maintenance, a “threshold test” for determining eligibility must be met. The threshold test is contained within section 72(1) and provides that a party to a marriage is liable to maintain the other party, if that party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:

By reason of care of children under 18;
By reason of incapacity for gainful employment;
Any adequate reason;
Having regard to any relevant matter referred to in s.75(2).

Thus the Applicant’s Affidavit material should specifically address the threshold issues and relevant section 75(2) matters.

It is submitted that an advantage to the Hogan Order being paid as spousal maintenance is that it would be unusual for the Court to add back spousal maintenance.

Section 114 – Injunction

Section 114 is the least utilised section for Hogan Orders and, to the best of the authors knowledge, most of the authorities have simply commented that the question is open that section 114 is available, without taking the issue any further.[xviii]

The relevant provisions are:

Section 114(1)(e) The Court may make such order or grant such injunction as it considers proper, including “an injunction in relation to the property of a party to the marriage“; or
Section 114(3) “a court exercising jurisdiction under [the FLA] in proceedings other than proceedings to which subsection (1) applies may grant an injunction, by interlocutory order or otherwise…in any case in which it appears to the court to be just or convenient to do so and either unconditionally or upon such terms and conditions as the court considers appropriate.

Injunctions may be granted if there is a serious question to be tried, and the balance of justice and convenience favours an injunction (Stowe and Stowe (1980) 6 Fam LR 75). Affidavit material should address the above considerations.

Conclusion

Applications for Hogan Orders ought to be fairly uncommon as they are Applications of last resort. As stated above, it will be necessary to establish in Affidavits that all avenues of obtaining funds have been exhausted. This obviously includes asking the other party for funds as interim spousal maintenance or as an interim property settlement by consent.

In summary, if the Application for expenses is necessary, it is important to consider the source of jurisdiction to be relied upon, identify it in your Application, ensure that any matters particular to that type of order are addressed and ensure the general considerations relevant to all such Applications are addressed as well.

[i] Hogan and Hogan (1986) FLC 91-704

[ii] Zschokke and Zschokke (1996) FLC 92-693

[iii] Breen v Breen (1990) 65 ALJR 195

[iv] ibid

[v] Poletti and Poletti (Unreported, Family Court of Australia, Nygh J, 2 March 1990)

[vi] Strahan & Strahan (Interim Property Orders) [2009] FamCA 116 at 84

[vii] Chester v Chester (1995) FLC 92-612

[viii] ibid

[ix] Columb and Columb (unreported, Family Court of Australia, Fogarty J, 27 November 1987); see however Coomes and Coomes [1995] FamCA 103; (1995) FLC 92-558 per Cohen J

[x] Breen v Breen (1990) 65 ALJR 195

[xi] Harris and Harris (1993) FLC 92-378

[xii] Hickey & Attorney-General for the Commonwealth of Australia [2003] FamCA 395

[xiii] Gabel v Yardley (2008) 40 Fam LR 66 at 57

[xiv] Chorn v Hopkins (2004) FLC 93-204

[xv] S.117(1) Family Law Act 1975

[xvi] Because s.117(2) requires the judicial officer to consider the matters in s.117(2A) before making a costs order

[xvii] Robinson and Willis (1982) FLC 91-215

[xviii] Poletti and Poletti (Unreported, Family Court of Australia, Nygh J, 2 March 1990); Zschokke and Zschokke (1996) FLC 92-693; Strahan & Strahan (Interim Property Orders) [2009] FamCA 116 at 84

Article – Hogan Orders

Articles written by Peter Hooper, Featured Articles

Liar Liar Pants on Fire

Most people would be familiar with the idea that adverse consequences can flow from lying to courts in sworn evidence under cross examination or in affidavits.

Equally most people would understand that lying to government departments such as Centrelink in statutory declarations or other official documents may result in criminal charges being laid, including fraud.

What happens though when for one reason or another a person desires to “set the record straight” in a family law proceeding and give evidence contrary to what they might have previously told a department?

It happens quite a bit.

This situation arose in Benedict v Peake [2013] FCCA 332 (23 May 2013) when a de facto wife (“the wife”) who had previously asserted to Centrelink and the ATO she was not in a de facto relationship; now sought to lead evidence before the Federal Circuit Court that a de facto relationship had in fact existed for 17 years.

Solicitors for the de facto husband (“the husband”) raised as an objection to the wife’s evidence the “Elias principle”, a notion that “when a party has made representations of fact to third parties and has gained advantage from so doing, it is open for the court in subsequent proceedings under section 79 of the Family Law Act to decline to accept from that party evidence which contradicts those representations.[1]

The court in Benedict and Peake considered numerous authorities (including Chisholm J in Jordan & Jordan [1996] Fam CA 15) and found as follows with respect to the “principle”[2]:

In considering whether to apply the principle the court must take the wife’s case at it’s highest;
The wife’s case taken at its highest was that the husband had full knowledge of the false statements made to Centrelink and the ATO and that the wife’s evidence would show the existence of a de facto relationship of some 17 years;
While the wife received financial gain, taking her case at its highest, the husband also was aware of, and gained financially from the wife’s deception over 17 years;
It was not appropriate to draw any distinction between de facto and married couples in applying the principle because:
1. A broad range of factors needed to be considered in both de facto property and matrimonial property adjustment proceedings;
2. Findings of fact are inherent in the exercise of discretion in both applications under the Act;
3. The findings of fact required for de facto property adjustment matter are no more broad or limited than matrimonial property adjustment proceedings (with one exception)
“Findings of fact are finding of fact” the court did not accept a “Briginshaw[3]” like approach should be taken to differentiate between finding of fact or applications of rules in different contexts or for different purposes;
Whilst accepting that the “Elias principle” may well represent a rule of law to be applied within and specific to the operation of proceedings under the Family Law Act 1975, it must, as with all rules of law, be applied with discretion to the facts and circumstance of each individual case;
The Court must be particularly conscious to ensure that both the determination and the process of arriving at the determination is, and is perceived as, “just and equitable”. To apply the rule arbitrarily would be to equate law to justice and to treat them as equal and synonymous or one and the same. They are not. The law is a means by which justice is attained or sought to be attained not justice itself.
Whilst there is much force in reliance upon the equitable principle that “those whom come to equity must come with clean hands” in support of the rule, one must also be conscious of the general principle that “justice must not only be done but must be seen to be done”.
The principle or rule of law is not founded in and does not equate to the expression of a form of estoppel. If the principle or rule were to be applied arbitrarily and so as to exclude evidence in each case in which a false representation (or series of false representations) were found, then the rule would, in the absence of discretionary application by reference to the facts and circumstance of each case and the justice and equity of each case, be elevated to beyond, estoppel.
In circumstances whereby the wife suggests knowledge of the statements at the time they are being made and were by the parties jointly (again taking the wife’s evidence at its highest) the exclusion of that evidence would have far greater potential for injustice, inequity and offence of public policy than its admission.

In terms of the above, most importantly his Honour identified the rule did not act as an estopple; and the court always retained a discretion whether to apply the rule.

Judge Harman in Benedict v Peake examined High Court authority on the Elias point however His Honour failed to turn up the decision of Nelson v Nelson [1995] HCA 25.

In Nelson, McHugh J said courts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless:

The statute discloses an intention that those rights should be unenforceable in all circumstances; or
The sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct;
The imposition of the sanction is necessary, having regard to the terms of the statute, to protect its objects or policies; and
The statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies.

Having regard to Nelson it is likely courts exercising jurisdiction under the Family Law Act 1975 would allow a party to lead evidence notwithstanding prior representations.

Of course, in the event that a party who has made false representations is successful in having findings to the contrary made, that may not be the end of the matter.

In Mariani and Mariani [2012] FamCA 518 Cronin J had the following to say:

“In P & P [Tax Evasion] (1985) FLC 91-605 Lindenmeyer J said that in his opinion, as a court exercising the judicial power of the Commonwealth, it had a duty to protect the revenue of the Crown and that duty extended to requiring the court to take steps as it was able to take to ensure the revenue laws of the Commonwealth were not defrauded or evaded by litigants or others who came before it. It is not sensible for the court to simply turn a blind eye to findings of fact which might assert or might find that breaches of the Commonwealth laws have occurred.[4]

By Peter Hooper (29 July 2013)

Peter Hooper and Hooper Mill Family Lawyers Brisbane are divorce lawyers in Brisbane advising in all areas of family law, matrimonial and relationship law.

[1] Elias and Elias (1977) FLC 90-267

[2] Benedict v Peake [2013] FCCA 332 (23 May 2013) at 32 to 38.

[3] The “Briginshaw test” is the strength of the evidence necessary to establish a fact in issue on the balance of probabilities will vary according to the nature of what is sought to be proved and the circumstances in which it is sought to be proved. A similar principle is encapsulated in section 140 Evidence Act 1975 (Cth).

[4] Mariani and Mariani [2012] FamCA 518 per Cronin J at 6 and 7.

Article – Elias principle

Asset Protection, Family Law and Succession Planning

The Full Court of the Family Court sheds more light on Stanford and the 4 step process

Recordings as evidence in courts exercising jurisdiction under Family Law Act 1975

Applications for Litigation Expenses aka “Hogan Orders”

Liar Liar Pants on Fire

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