9.1
While the majority of matters raised with the committee have focused on the arrangements for children when parties separate, the committee has also heard many stories regarding problems with property settlements. Some of these issues have been highlighted in Chapter 3, and Chapter 5 contains an in-depth discussion on the evidence provided to the committee regarding the disparity between the legal costs incurred and the property pool in a number of cases. This chapter will review the evidence provided to the committee more generally concerning the resolution of property disputes, including:
the difficulties in obtaining disclosure of financial interests;
how family violence is considered in property matters;
the relevance of the care arrangements of the children;
the lack of legal assistance for property matters;
the complexity of the current legislation around property settlement; and
online dispute resolution tools.
9.2
This chapter will also consider the evidence provided to the committee regarding binding financial agreements, current initiatives in family law property matters and recommendations from recent reports.
Property settlement
9.3
The Family Law Act 1975 (Family Law Act) confers on the Family Court of Australia (Family Court) the ability to declare the title or rights that a party has in respect to property and power to alter the interests of a party to a marriage or a de facto relationship in the property. In the 2018 High Court case of The Commissioner of Taxation v Tomarus, Justice Gordon provided the following summary of the property settlement provisions in relation to parties to a marriage in the Family Law Act:
In property settlement proceedings, s 79 in Pt VIII provides that a court may make such order as it considers appropriate altering the interests of the parties to the marriage in the property. However, the court must not make an order under s 79 unless it is satisfied that in all the circumstances it is just and equitable to make the order and, in considering what order (if any) should be made in property settlement proceedings, the court must take into account certain matters. Those matters include the financial and non-financial contributions, both direct and indirect, by the parties to the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage; the effect of any proposed order on the earning capacity of either party to the marriage; any other order made under the Family Law Act affecting a party to the marriage; and the matters referred to in s 75(2), so far as they are relevant.
9.4
The term 'property' is interpreted broadly to include all the property of the parties, including both legal and equitable interests, and tangible property, as well as intangible property such as shares. With regards to superannuation, Part VIIIB of the Family Law Act specifically allows for certain payments in respect of a superannuation interest to be allocated between the parties to a marriage or de facto relationship.
9.5
As with the case of parenting orders, the majority of separating couples (around 60 per cent) agree to a property settlement without the use of mediation, lawyers or the courts. Of the remainder, approximately 29 per cent used a lawyer, 7 per cent of matters went to court and 4 per cent used mediation.
9.6
The 2019 Australian Law Reform Commission (ALRC) report, Family Law for the Future–An Inquiry into the Family Law System (ALRC 2019 Report) notes that, on average, mothers receive 57 per cent of the property pool:
However, there was significant variation among couples, with analysis showing the variables affecting the share of property received being:
the size of the asset pool;
who initiated the separation, and who left the house—with the person who initiated the separation receiving a smaller share of the property;
a history of family violence—with experiencing family violence being associated with receiving a lower share of property division; and
care-time arrangements—with parents who had majority care of a child receiving a higher share of the property pool.
Financial disclosure
Non-compliance with mandatory disclosure requirement
9.7
The committee heard significant evidence about the difficulties in ensuring one party to the proceedings complies with their legal requirement to make full and frank disclosure of their financial holdings and the consequent delays this can cause in finalising a property settlement. For example, Mrs Susan Price, Director of the Men's Rights Agency, stated:
There's a fair amount of procrastination that takes place and an unwillingness to get valuations or to disclose various bank accounts, shares and all the rest of it, and it can be a difficult process to get everything together into the one bucket to say, 'Well, this is the family pool.' This needs to be speeded up. There's no reason for a delay on it, absolutely no reason. If people are being honest and straightforward then the information is given out and the decisions can be made as to where the split develops.
9.8
Similarly, Victoria Legal Aid noted that 'identifying the value of the asset pool represents a significant hurdle in many family law property disputes' and that failure to make proper disclosure often occurs in property disputes.
9.9
As the Lone Fathers Association of Australia (Lone Fathers) recognised, '[t]he intricate nature of finances within families and such things as family home loans and potential for default require some urgency in finalisation and property settlement is problematic'.
9.10
The committee heard that non-compliance with mandatory financial disclosure is a prevalent issue in cases involving family violence. For example, the Association of Family and Conciliation Courts, Australian Chapter (AFCC) submitted that:
... there is currently insufficient emphasis placed on compliance with the requirement to make full, frank and timely disclosure. It is quite often to the strategic advantage of one of the parties to delay making full and early disclosure, which can result in overly prolonged proceedings and increased costs. It is further submitted that the implications of such behaviour in circumstances where family violence is a feature of the matter can be even greater.
9.11
In the final report by the Women's Legal Service Victoria, Small Claims, Large Battles, it was found that over two-thirds of clients who received legal assistance through this project from 2017–18 experienced delay caused by difficulties obtaining full financial disclosure from their former partner. This resulted in many clients being forced to initiate court proceedings where they otherwise might have negotiated a property settlement:
The report findings also demonstrated that there were few effective disincentives for perpetrators refusing to comply with mandatory financial disclosure. Alternative information finding processes, such as issuing subpoenas, were too costly and did not guarantee a return of the required information. The report recommended strengthening mandatory disclosure, through more intensive case management, greater use of registrar powers, or by permitting courts to obtain information about parties' assets from sources such as the Australian Taxation Office (ATO).
9.12
The AFCC advised the committee that they would:
… welcome measures taken to impose stricter compliance requirements with Rules and directions. Greater use of costs orders would also be appropriate as well as taking into account any non-disclosure when determining a final division of property.
Current powers under the Family Law Act
9.13
There are a number of existing actions available under the Family Law Act and the Family Law Rules 2004 [Family Law Rules] to deal with the issue of non‑compliance with the requirement for financial disclosure. For example:
… there are examples of orders that have been made where it's almost like a default hearing takes place: if somebody does not comply with directions about providing full and frank financial disclosure, the judge can determine the matter without further reference to them.
9.14
Similarly, the Law Council of Australia (Law Council) noted that '[u]ltimately, if there is non-disclosure at the point of the hearing then the fact of that non-disclosure can weigh heavily against the non-disclosing party'.
9.15
The courts also have the power to impose punishment for contempt of court, or to take the non-disclosure into account when considering costs.
9.16
While these powers exist at the point of hearing, a number of commentators have called for the mandatory financial disclosure requirement to be strengthened to ensure that all parties have the relevant information necessary to resolve claims efficiently and fairly. The Women's Legal Service Victoria suggested that consideration be given to:
broadening the role of registrars to increase interim case oversight to check compliance with disclosure and encourage greater use of registrar powers to make orders for disclosure;
encouraging banks and government agencies, such as land titles offices, to reduce fees associated with processing family law subpoenas or title searches consistent with existing fee reduction regimes in the family law courts;
providing a mechanism for family law courts to be provided with information by the Australian Taxation Office for the purposes of determining if full financial disclosure is being made;
amending the Family Law Act to enable courts to order forfeiture of assets by one party and redistribution to the other for failure to comply with financial disclosure obligations;
amending the Family Law Act to encourage greater exercise of courts' discretion to make adverse adjustments to property divisions for parties who do not make full and frank disclosure.
9.17
At present the requirement for full and frank disclosure of a party's financial circumstances is contained in the Family Law Rules. A number of commentators support locating these disclosure duties in the Family Law Act. For example, Relationships Australia suggested that:
The Family Law Act 1975 (Cth) should set out the duties of parties involved in family dispute resolution or court proceedings for property and financial matters to provide early, full and continuing disclosure of all information relevant to the case. It is our experience (and we note that is the experience of various other submitters to the ALRC inquiry) that non‑disclosure, or tactical protracted non-disclosure, are associated with financial abuse and misuse of systems and processes. Relationships Australia further supports locating disclosure duties in the Act, as suggested by other submitters to the ALRC inquiry.
9.18
The disclosure duties and remedies for non-compliance only apply and are enforceable where the matter is before the court. Where parties are looking to settle matters by agreement or through mediation, there is no obligation to state the assets each party holds. Better Place Australia stated that:
This can create a power imbalance where the nonfinancial party may not have any understanding about the overall financial situation, but the financial party does, and uses their knowledge to manipulate evidence about the true financial situation.
9.19
As such, Better Place Australia proposed a property/financial disclosure requirement, such as a financial statement, be applied at the Family Dispute Resolution stage.
9.20
Victoria Legal Aid also noted that their Family Dispute Resolution Service sees a lack of financial disclosure prior to mediation, which pushes parties to litigation where otherwise they may have been able to resolve the dispute without court proceedings. Victoria Legal Aid noted that:
While the court has the ability to deal with parties who fail to properly disclose, such as dismissing a non‑compliant party's application or making costs orders at the conclusion of the matter, this is not helpful for parties who are unable to progress to final hearing, especially in small property disputes where finances are constrained.
9.21
The location and extent of the financial disclosure obligation was also considered in the ALRC 2019 Report:
Consistent with the principles that the law should be clear, coherent and enforceable, and drafted in manner that is accessible to the parties, the ALRC recommends that the disclosure obligations, and the consequences for breach of those obligations, should be set out transparently and accessibly in the Family Law Act. The provisions should make it clear that the obligations apply to FDR, arbitration and other facilitative dispute resolution processes, as well as court proceedings. They should also set out the corresponding duty of legal practitioners or family dispute resolution practitioners to advise parties of their duties.
9.22
The ALRC also recommended that the Family Law Act include express reference to the costs consequences for failure to disclose and to reflect that non-disclosure of financial information may be taken into account in apportioning the property pool.
Current reforms
9.23
Support was expressed for the Australian Government's measure aimed at improving the visibility of superannuation assets in family law proceedings. This measure provides $3.3 million over three years to the ATO to develop an electronic information sharing mechanism with the family courts to allow the superannuation assets held by parties to family law proceedings to be identified swiftly, more accurately and at a lower cost to parties. For example, the National Foundation of Australian Women stated:
We are aware that a party to a property settlement may fail to disclose substantial superannuation assets, and it can be difficult for the other party to obtain access to that information. To this extent we welcome the announcement in the 2018 Women's Economic Security Package that the Family Court will be allowed to request information from the Australian Tax Office to facilitate the full disclosure of superannuation holdings in proceedings before the Court.
9.24
Some commentators have suggested that, once established, it should be expanded to include all financial information held by the ATO. For example, Mallee Family Care suggested that:
Once the aforementioned information sharing scheme is established … it should be extended to cover all other financial information within the ambit of the ATO that may be of relevance in these matters.
9.25
The ALRC also recommended that 'the costs consequences for failure to disclose be referred to expressly in the legislation'.
Family violence
9.26
As discussed in Chapter 7, the provisions dealing with the alteration of property interests between parties do not specifically refer to family violence as being a relevant consideration. However, due to the case of Marriage of Kennon, family violence will be taken into account in property proceedings where a party can establish that the family violence occurred and that the family violence made that party's contributions more onerous. As the Law Council noted, '[m]any consider this too high a hurdle to overcome, but that is the state of the law'.
9.27
Many submitters suggested that there needs to be better recognition of family violence in property matters, for example, as a specific requirement when assessing a party's future earning capacity. The Women's Legal Service Victoria highlighted research by the Australian Institute of Family Studies which has demonstrated that family violence has a negative impact on property settlement outcomes, noting that '[i]n one study, women who reported experiencing severe abuse were approximately three times more likely to receive less than 40 per cent of the property pool'.
9.28
The ALRC agreed, stating:
The economic impact of family violence is not adequately addressed under the Family Law Act. Empirical evidence indicates less favourable property outcomes for parties who have experienced family violence and infrequent adjustments for family violence under the Kennon principle.
In light of this, the ALRC recommends that the Family Law Act be amended to acknowledge the relevance of family violence to the economic circumstances of the party who has suffered violence.
9.29
The ALRC therefore recommended that the Family Law Act be amended to include a statutory tort of family violence that would provide remedies consistent with existing common law remedies.
9.30
The Law Council set out the pros and cons of this recommendation in its submission, concluding it was:
… concerned that adopting a statutory tort pathway will not achieve the stated goal of the reform, in that it will be more costly for litigants, increase the time that hearings take and thus further impact judicial resources, and not adequately address the financial consequences of family violence.
9.31
Instead, the Law Council proposed:
… that the matter is best addressed by a legislative amendment to what is presently subsection 75(2) and subsection 90SF(3) by the insertion of an additional factor namely 'the effect of family violence on a party to [the marriage/the relationship] or a child [of the marriage/the relationship/the household]'. By including the amendment in subsection 75(2) and subsection 90SF(3) it applies in respect of both property and maintenance cases, it is not a contributions factor, and there will not be an additional requirement in the statute that requires a causal link between a contribution being made more arduous and the conduct in question.
9.32
Unlike the Notices of Risk required to be filed in parenting proceedings, there is currently no formal system to identify family violence in property only disputes. In Touch Multicultural Centre Against Family Violence therefore recommended that:
… [a] risk assessment framework should be developed and systematically employed to identify family violence in all applications before courts exercising jurisdiction under the Family Law Act, which includes parenting, property only, divorce and other applications.
Children
9.33
In considering what order a court should make in relation to a property settlement, the court is required to take into account the following considerations to which the ongoing care of the children may be relevant:
(a)
the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)
the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)
the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)
the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e)
the matters referred to in subsection 75(2) so far as they are relevant; and
(f)
any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)
any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
9.34
The committee heard from a number of submitters that this intersection between parenting orders, child support and the division of property often meant that the parenting arrangement was used as a tool in the property proceedings to maximise one's settlement:
… what happens now is that, with regard to custody of the children, if one parent has custody, which is normally the mother, there is a much higher financial windfall for that particular parent. For example, a rough rule of thumb is that in a property settlement each child is worth about 10 per cent. You start with 50 per cent and each child is worth 10 per cent, so if you have three children in custody you end up with 80 per cent of the assets of the property and the superannuation. So that's an incentive to try and win custody for that particular parent. That's the cause of all of our problems—the financial implications after the divorce or separation.
9.35
The committee was advised that this has led to one party seeking greater time with their children to either maximise or minimise (depending on the party) both the amount of the property settlement and the child support payable. Both mothers and fathers have been alleged to have sought additional time with their children solely for the reason of maximising their individual property settlement and influencing the amount of child support to be paid.
9.36
For example, one grandmother stated with regard to her son's property matter:
… she also tried to change the parenting, which at that stage was fifty – fifty. She was trying to change it so that he only got to see the children three days each fortnight.
I'm convinced that, once this is all sorted and she's got as much as she can possibly get, the children are going to hamper her; they're not going to be as needed anymore. At the moment, they're used as a tool to try and manipulate and get more.
9.37
The Feminist Legal Clinic also noted that:
Too often parenting claims are being made by fathers with the purpose of reducing liability for child support and gaining an advantage in respect to the division of property. This nexus between contact with children and financial matters must be broken to enable women to escape mercenary and abusive men.
9.38
Many submitters stated that requests for access to their child were responded to by financial demands:
Every letter that I sent to her solicitor about visitation was met with financial demands. I proposed a sum of $30,000 if we could settle before court. The other party waiting until when both legal representatives met in the foyers before court to agree after I had already paid the substantial fees for a barrister.
9.39
A number of submitters and witnesses recommended that, to address this issue, the parenting arrangements should be finally determined in advance of the property to minimise these issues. One submitter suggested that this 'should happen in every single case. Children should be sorted first, before there is any mention of money'.
9.40
Similarly, another witness informed the committee that:
… it felt that, in some ways, with one being dependent on the other – that is, you couldn't finalise property until you resolved parenting, and you needed to understand the care percentages before you could finalise property – the ability to resolve parenting and have access to the children settled was delayed. So I would be strongly for a position where you just resolved the parenting as quickly as possible so that you can continue to maintain a relationship with your children and have a meaningful relationship with your children. My preference would be to resolve parenting first and then resolve property.
9.41
Lone Fathers noted that:
Too often property is settled before the children matters are finalised. This is not ideal. We are aware of a parent losing the family home superannuation and cash assets and then having to bring up the children with little or no financial assistance from the other parent who was given 80 percent of the pool. We are aware of a father who lost his work tools, work vehicle and left unemployed. The children ended up back in care with this father without recourse to having assets redistributed.
9.42
In a specific example, one father advised the committee that he had finalised the financial agreement prior to the parenting agreement and now he has not seen his children for over seven years. He submitted the following recommendation for reform:
I would recommend the family law system mandate that a binding child‑support agreement cannot be lodged with the Family Court- cannot be lodged- unless accompanied by a binding parenting agreement. As I said in my submission, all the financial stuff was worked out, and was very generous, according to my family lawyer, the financial agreement, but there was no parenting agreement. Once the financial stuff was done, the parenting stuff just disappeared, and it wasn't on the front burner at all, to be honest, throughout the process.
Lack of legal assistance
9.43
The issue of lack of legal assistance has been raised with the committee in various contexts, including with regard to for property proceedings. Australia's National Research Organisation for Women's Safety submitted that there:
… is inadequate availability of free or low cost legal advice on financial and property matters after separation, as low cost alternatives, like Women's Legal Services and Family Violence Prevention Legal Services (the latter targeted to Aboriginal and Torres Strait Islander women) provide little support in property matters.
9.44
In 2014, the Productivity Commission found that there were more people living in poverty (14 per cent) than eligible for legal aid (8 per cent), and estimated that an additional $57 million per annum ($60.8 million with inflation) was required to relax the means tests of Legal Aid Commissions (LACs).
9.45
The Attorney-General's Department (AGD) informed the committee that Commonwealth-funded legal assistance services relating to family law matters are prioritised for:
matters where the safety or welfare of children are at risk
matters involving complex issues about the living arrangements, relationships and financial support of children
assisting people with property settlement matters if they are experiencing financial disadvantage or are at risk of homelessness, and
the representation of children in family law proceedings.
9.46
The AGD further advised that these services are prioritised towards 11 national priority client groups, which includes people experiencing, or at risk of, family violence, single parents, children and young people, Aboriginal and Torres Strait Islander people and people who are culturally and linguistically diverse.
9.47
Taken all together, this means there is limited Commonwealth-funded legal services for property-only matters available to parties. This is supported by the submission made by Victoria Legal Aid, which stated that, prior to the new mediation trial discussed below, they could only provide legal assistance for family law property matters in very limited circumstances. Victoria Legal Aid noted that in their experience, 'being able to quickly and affordably reach a fair property settlement can mean the difference between financially recovering from separation or the beginning of poverty'.
Pilot programs
9.48
The Australian Government has a number of reforms currently being trialled directed towards simplifying the process for separating families to resolve their small property disputes. With respect to legal assistance, the Government is funding LACs in each state and territory to conduct a two year trial of lawyer-assisted property mediation for matters with a property pool of up to $500 000, excluding debt. This trial will support separating families who require legal advice to mediate and reach agreement on a property settlement without going to court, and will run from January 2020–December 2021.
9.49
This trial has received significant support. Victoria Legal Aid stated that, in announcing this pilot, the Government also recognised:
… that women are more likely than men to face economic hardship following separation and that women affected by family violence may be especially vulnerable to financial stress. For VLA clients in particular, a property settlement can be crucial to preventing entrenched poverty following the end of a relationship, particularly where there has been family violence.
9.50
Victoria Legal Aid anticipated that this pilot:
… will help to demonstrate the need to give people legal help to fairly and safely reach an agreement about property without always needing to go to court. In some cases, for example where there is a recalcitrant party, going to court may be the only remaining option and it is important, given the complexity of litigation, that vulnerable people have access to ongoing legal representation in such cases.
9.51
In its submission, Victoria Legal Aid discussed the Government's funding support for a two year trial of lawyer-assisted mediation in family law small property disputes and for a one year small property claims court pilot. Victoria Legal Aid noted that prior to this funding it 'could only provide legal assistance for family law property matters in very limited circumstances'. It recommended ongoing funding for lawyer assisted mediation in family law small property disputes, noting that 'being able to quickly and affordably reach a fair property settlement can mean the difference between financially recovering from separation or the beginning of poverty'.
Dispute resolution
9.52
Alternative dispute resolution will be discussed in detail in Chapter 12, however, it is notable in respect of the resolution of property disputes that the committee was advised that property mediation is not as heavily utilised as mediation in relation to parenting agreements. One reason for this may be that the section 60I requirement to attend family dispute resolution prior to making an application to the court only applies in relation to parenting orders. As stated in Chapter 12, there is broad support for extending the application of family dispute resolution to property matters.
Court reforms
9.53
There will be circumstances were mediation is not appropriate or effective and parties will have no option but to apply to the court for a decision on the settlement of their property. However, where the property pool is small, taking court action can be very expensive. To address this, the Government has funded a two year small claims property pilot at four Registries at the Federal Circuit Court of Australia (Federal Circuit Court), which commenced in January 2020 and will run until December 2021. The pilot will provide a simpler and quicker process for distributing property of less than $500 000 between parties, with the aim of reducing the cost to families of resolving small property disputes, leaving more in the asset pool to be distributed.
9.54
The pilot has received broad support from organisations. For example, Mallee Family Care noted that it:
… commend[s] the Federal Government for acknowledging the need to reduce the length and costs associated with property matters that, in the majority of cases, are not complex and have small asset pools of less than $500,000. The Small Claims Property Pilot was announced under the Women's Economic Security Package and commenced this month. Of particular note is the adoption of the 'Registrar-led resolution' whereby a Registrar can assist a couple to prepare and lodge enforceable consent orders with the court, reflecting the agreement reached between them.
9.55
Subject to the outcomes for the pilot, a number of submitters have called for the Federal Circuit Court to be adequately resourced to operate small property court services at all Federal Circuit Court locations, including at regional circuit court locations.
Simplification of the property provisions
9.56
According to Professor Patrick Parkinson AM, Australia has the most discretionary system of property division that he is aware of anywhere in the world. Professor Parkinson submitted that the law of property division needs to be simplified so that it is fit for purpose for ordinary Australians, stating:
One reason for the disproportionately high cost of property disputes is that the law is so vague and unclear, which invites litigation and makes the resolution of disputes unnecessarily expensive.
9.57
Professor Parkinson further stated:
The difficulties in relation to family property are well-known. In simple cases, experienced legal practitioners can readily predict the outcome that would be achieved in court within a range of 10% of the asset pool. This usually allows for compromises to be reached after negotiation.
However, there is uncertainty at the heart of the law when it comes to dealing with substantial pre-relationship property, inheritances, and assets acquired after separation, as well as working out shares of superannuation and how to deal with substantial debts to third parties. Full Court decisions on these issues can be extraordinarily inconsistent, demonstrating fundamental differences of approach that are, ultimately, differences concerning the interpretation of the intentions of Parliament …
This jurisprudential confusion makes it harder for people to sort out the division of property for themselves. Even very experienced family lawyers can differ markedly in their assessment of what the outcome should be on the same set of facts.
9.58
Professor Parkinson made the following recommendation to the committee:
Request the ALRC, or an ad hoc expert committee, to review comprehensively the law concerning the division of property after separation, building upon the recommendations made in the ALRC's 2019 Report, with a view to simplification, the reduction in the width of judicial discretion, and greater predictability of outcomes.
9.59
Victoria Legal Aid agreed that greater legislative guidance on what to expect from a property settlement and how contributions are assessed would help to guide parties and reduce costs in property disputes:
The current highly discretionary approach to property settlements is not affordable or useful for many Victorians, especially those who do not meet legal aid eligibility criteria and cannot afford the cost of private legal representation. Additional legislative guidance would help to clarify the decision-making process and provide parties with more confidence to negotiate in the shadow of the law.
9.60
As noted by Professor Parkinson, the ALRC 2019 Report also supported the simplification of the framework for property settlements, so as to create a framework that would:
… assist parties to negotiate a division of their assets that is just to both parties and in the best interests of any children of the parties, without resort to formal dispute resolution processes.
9.61
The ALRC Report made 10 recommendations with regard to property division, key among them that:
The Family Law Act 1975 (Cth) should be amended to:
specify the steps that a court will take when considering whether to make an order to alter the interests of the parties to the relationship in any property; and
simplify the list of matters that a court may take into account when considering whether to make an order to alter the interests of the parties to the relationship in any property.
9.62
The ALRC set out the following recommended approach to property division:
1. ascertain the existing legal and equitable rights and interests, and liabilities, of the parties in their property;
2. presume equality of contributions unless a statutory exception applies; and
3. determine what adjustment should be made in favour of either party having regard to any matter that is relevant to the particular circumstances of the parties, including:
a. the caring responsibilities for any children of the relationship;
b. the income earning capacity of each of the parties;
c. the age and state of health of the parties; and
d. the effect of any adjustment on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant.
9.63
The ALRC also concluded that the Family Law Act should be amended to provide that the relevant date to ascertain the value of the parties property is the date of separation, unless the interests of justice require otherwise, (Recommendation 13) and to include a presumption of equality of contributions during the relationship (Recommendation 12). The ALRC stated that 'such a presumption would reduce conflict and focus the parties' attention on the adjustment necessary to take account of each party's future economic circumstances.'
9.64
In terms of when the presumption of equality of contributions could be displaced, the ALRC has suggested when there is evidence that a party has:
deliberately or unreasonably damaged property;
accumulated liabilities for his or her own benefit;
received compensation awards for pain and suffering or economic loss which have not been dissipated during the relationship and are otherwise traceable; or
received inheritances and gifts.
9.65
The National Foundation of Australian Women expressed its support for a presumption of equality of contributions:
We support this recommendation as a presumption that can be contested where this results in an unjust outcome. It is increasingly rare to find families where one party is considered the sole breadwinner throughout the relationship, with part time work and sharing of parental duties becoming normalised work patterns. It is appropriate for this to be recognised through the presumption of equal contribution, and an equal sharing of property of the relationship.
9.66
The Women's Legal Service Victoria, however, urged the committee to reject presumptions in family law, noting their position:
… that presumptions in family law can lead to unsafe and unfair outcomes. Women's Legal Service Victoria supports the discretionary nature of decision making in family law which places a greater emphasis on what is in the best interests of a child or children in parenting matters and fair financial outcomes in property matters.
9.67
There were a number of other suggested changes to the legislation made by submitters, which have already been discussed earlier in this chapter. In addition, the Non-Custodial Parents Party (Equal Parenting) suggested that the value of the assets brought into a relationship by the parties need to be better protected:
In court proceedings, it is found that the value of the assets owned by the person or persons prior to the marriage or the relationship often becomes 'vague' and the original asset value is then often diluted. This is because of the issue of 'future needs'.
Section 79 [of the Family Law Act] needs to be amended to reinforce the fact that the value of property owned and/or superannuation acquired prior to the marriage or relationship will remain in the possession of the individual that had ownership of the assets at the time of the marriage or the commencement of the relationship. This would include all assets such as shares and/or liquid assets.
Online Dispute Resolution Systems
9.68
The AGD advised that the Australian Government is also supporting the development of an Online Dispute Resolution System (ODRS), describing it as:
… an innovative approach to family law dispute resolution which will provide separating couples with the option of using an app to resolve property and parenting matters rather than going to court. The app draws on information put into the app by the separating couple alongside machine learning (using legal precedents) to suggest an equitable property division arrangement and to mutually agree parenting arrangements. The ODRS has the potential to enable families to resolve their property and parenting matters out of court by assisting and empowering them to determine their arrangements between themselves.
9.69
One submitter, in expressing support for the development of this app, stated:
This sort of innovative approach has the potential to make a greater difference to Australian families than any tinkering with the wording of the Family Law Act or Court restructure. It is to be commended.
9.70
At the end of June 2020, ODRS, renamed as amica, was launched nationally. At the time of the launch, Attorney-General the Hon. Christian Porter stated his expectation 'that the tool will help reduce the legal bills of separating couples and reduce pressure on family law courts'. While currently free to use, from 1 January 2021 a nominal fee (between $165 and $440 per couple) will be charged to fund ongoing maintenance and development of the service.
9.71
The committee also heard from other submitters about their proposals for online services to resolve financial disputes.
Binding Financial Agreements
9.72
As the Law Council noted, the Family Law Act:
… makes provision for ‘Financial Agreements’ (more often called Binding Financial Agreements or BFAs) and subject to various technical requirements they can be entered into by parties in a variety of different circumstances and not just prior to marriage.
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As set out in Black v Black:
The Act permits parties to make an agreement which provides an amicable resolution to their financial matters in the event of separation. In providing a regime for parties to do so the Act removes the jurisdiction of the court to determine the division of those matters covered by the agreement as the court would otherwise be called upon to do so in the event of a disagreement. Care must be taken in interpreting any provision of the Act that has the effect of ousting the jurisdiction of the court ...
The compromise reached by the legislature was to permit the parties to oust the court's jurisdiction to make adjustive orders but only if certain stringent requirements were met.
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The Law Council also noted that BFAs are also known by the colloquial term 'pre-nuptial agreements'.
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The AFCC highlighted that:
Financial Agreements (particularly pre-nuptial style agreements) have been the subject of significant judicial scrutiny in recent years and several iterations of the legislation governing them with the result that they are complex and difficult documents to draw correctly and effectively. Currently to be enforceable both parties to any financial agreement must obtain legal advice and their solicitor must sign a certificate to the effect that such advice was given.
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Submissions put forward a range of views regarding BFAs. The Family Law Practitioners Association (WA) (FLPAWA) stated that:
Binding Financial Agreements are already effectively used. Anecdotally, parties are becoming increasingly aware of the option of the pre-nuptial agreements and are utilising the mechanism more often particularly when it comes to second marriages.
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However, the FLPAWA advised that
1. pre-nuptial Binding Financial Agreements are generally negotiated in circumstances where one party is in a significantly disadvantaged bargaining position;
2. they present significant difficulties in that they effectively need to anticipate future changes in circumstances and financial position which often results in disputes which require determination; and
3. it is not uncommon that cases which involve questions as in respect of the validity and interpretation of pre-nuptial agreements are more complicated and lengthy than an average case.
As such, whilst Binding Financial Agreements are a useful tool, they should not be seen as a solution to the delays in property settlements in the Court system.
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Professor Belinda Fehlberg, Associate Professor Lisa Sarmas and Professor Jenny Morgan, researchers at Melbourne Law School, expressed the view that:
If binding financial agreement provisions of the [Family Law Act] are to be retained, we suggest no further amendment to them. Our preferred position would be that the current provisions are repealed, returning us to the pre-2000 position that such agreements are a relevant factor that courts may consider when determining property disputes.
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Many submitters expressed caution about using these agreements, as there are too many future unknowns that could potentially leave one party significantly financially disadvantaged. For example, Engender Equality stated that while BFAs may have benefits in providing for what happens to matrimonial property in the event of a separation, they run the risk of forcing parties to sign away future rights and entitlements, unaware of what the future holds. Further: '[a] BFA cannot predict future contributions, health, care of children or other factors which would be taken into account during standard property division negotiations'.
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Concerns were also expressed regarding their use where there are significant power imbalances between the parties. The Women's Legal Centre (ACT) provided the following illustration:
For example, this may be in relationships where one party does not speak English, where one party is the carer of the other party, and in violent relationships, as clients can be coerced into signing these documents. Whilst there are provisions to set aside agreements when there has been duress, this requires lengthy litigation and often there is little corroborative evidence. The [Women's Legal Centre] recommends the limited use of pre‑nuptial agreements, and rather, a greater focus on transparency of decision making and greater education about the property settlement process so people can make informed decisions at the commencement of a relationship.
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National Legal Aid (NLA) and the AFCC are similarly not convinced that increased use would minimise future property disputes, given that the terms of these agreements are usually more favourable for one party. However, NLA recognised that BFAs do play a role in:
providing an alternative approach to settling property settlement disputes without engaging in family court litigation;
promoting individual liberties and the freedom to contract (with appropriate safeguards),
enabling parties to reach a property settlement in circumstances where the limitation periods under the [Family Law] Act may have expired; and
family, estate and business planning.
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The AFCC identified that typically such agreements are more suited to parties where:
there is a large disparity in financial positions as between the parties at the commencement of the relationship;
either or both parties have had previous relationships (i.e. have had 2nd or 3rd marriages) and/or with children from such relationships; or
there is high net wealth.
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A number of organisations have recommended specific changes to the Family Law Act to make it easier to have these set aside where there is family violence. For example, Embolden recommended that the Family Law Act be amended:
… to specifically set aside provision for circumstances in which family violence (including coercion and financial abuse) has occurred, to help prevent Binding Financial Agreements from being used to perpetrate further violence and abuse.
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The Law Council noted that the Australian Government had previously introduced the Family Law Amendment (Financial Agreements and Other Measures) Bill 2015 but that it had lapsed at the end of the 45th Parliament and not been re-introduced:
The intention of the Bill was inter alia to try and address a series of problems with Financial Agreements that have rendered them liable to challenge, made them less certain, and made them less capable of enforcement.
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The Law Council expressed its support for the re-introduction of the relevant Financial Agreement provisions, subject to some modifications.
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However, the ALRC made no recommendations in relation to BFA's in its 2019 Report, concluding that:
BFAs cannot be considered separately from the property division provisions of the Family Law Act. Uncertainty and lack of clarity in those provisions encourages many parties, particularly those with significant wealth, to consider BFAs as a way of avoiding uncertainty as to how the court would divide their property upon separation. At the same time, the lack of clarity in Pt VIII also makes it difficult for any party who is asked to sign a BFA to assess how the financial terms compare to their entitlements under the Act and a likely award from the courts on separation. Accordingly, the ALRC considers that the primary attention of reform efforts should be on providing certainty and clarity to Pt VIII of the Act …