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Posted by Kate Freshwater, Solicitor

Binding Financial Agreements (“BFA”) are agreements between parties to a relationship concerning how the ‘asset pool’ is to be divided in the event of a breakdown of the relationship. BFA’s can also provide for superannuation and any entitlement to spousal maintenance. BFA’s can be entered into by married or de facto couples and can be entered into before, during or after the end of the relationship. By entering into a BFA, parties contract out of the provisions of the Family Law Act 1975 (‘the Act’) that would otherwise determine these issues.

In order for the agreements to be binding on the parties, the requirements of section 90G(1) (for agreements made before, during or after marriage) and section 90UJ(1) (for agreements made before, during or after de facto relationships) of the Act must be met:

a)      that there be a signed agreement;

b)      that before signing the agreement the parties receive the legal advice required by the Act;

c)       that either before or after the signing of the Agreement each party’s legal practitioner provide a statement to that party that the requisite advice has been given;

ca)    that each party’s legal practitioner provide to the other party a copy of the statement referred to above;

d)      that the agreement has not been terminated or set aside by the Court.

When drafting BFA’s it is important that these requirements are met, or the parties risk being unable to enforce the agreement, having it set aside by the Court and then having the ordinary provisions of the Family Law Act 1975 apply in dividing the property.

The following is a selection of recent cases that highlight the importance of ensuring the requirements for BFA’s are met, and of getting sound legal advice about the nature and effect of the BFA.

Hoult v Hoult [2011] FamCA 1023

In this case, Murphy J granted the wife’s application for a declaration that a section 90B financial agreement, that is, an agreement made before marriage, made in 2004 was not binding on the basis that she had not been provided with the requisite legal advice. While the provisions of the Act which applied at that time differ slightly to now, legal advice was still required to be given and this case highlights the importance of making a record of the advice provided. Murphy J found that the wife’s solicitor’s recall of the advice given was ‘significantly impaired in respect of important aspects of the matter’.

While not prescribing what record of advice should be made, Murphy J did suggest that a comprehensive file note or contemporaneous letter of advice would be prudent. The wife further claimed that the fact that she had not been provided with a comprehensive list of assets and liabilities was evidence of the lack of advice, however His Honour was not persuaded by this and did not consider this was indicative of the advice having not been given. The husband argued that the wife’s solicitor’s certificate of advice could be relied upon as evidence that the requirements had been met, however, His Honour said that that presumption was no more than a rebuttable presumption of fact. His Honour held the agreement was not binding.

Sullivan v Sullivan [2011] Fam CA 752

The husband applied for the rectification of an error in a financial agreement. The agreement stated that it was an agreement pursuant to section 90B (pre marriage) when in fact it should have been section 90C (during marriage). The wife opposed the application. She had signed the agreement two days before the wedding, while the husband signed it three days after the wedding. This case highlights the importance of the fact that the parties must be in agreement. Both certificates of independent legal advice referred to “the agreement proposed to be entered into” by the parties. Ultimately, Young J found that it was not apparent that there was a common intention to enter into an agreement under section 90C. Furthermore, the equitable remedy of rectification was not available to parties who had not reach a concluded agreement, nor was there a ‘common mistake’ and therefore no common intention which could give rise to rectification. His Honour held that the agreement could not be rectified to be an ‘agreement’ or ‘financial agreement’ under either section 90C or section 90B.

Omar v Bilal [2011] FMCAfam 143

A wife brought an application to set aside a section 90C financial agreement essentially on the basis that she had not been provided with the requisite advice that she was able to understand. The solicitor had referred the wife to an Arabic translator with a view to that translator explaining the Agreement. The Court held that in circumstances where the solicitor was not present when the interpreter explained the effect of the Agreement and that there was no statement or certification to say that the Agreement had been explained to the wife in a language she could understand, the requirements of section 90G could be said to have been satisfied. The Agreement was set aside.

Sanger [2011] FamCAFC 210

Pursuant to a financial agreement, the husband was to pay the wife $350,000. The husband didn’t pay so the wife sought to enforce the agreement. The husband sought an order setting aside the agreement on the grounds that a subsequent sale of properties (intended to fund the payment) at below their value resulted in the husband not receiving a 40% share of the net assets as agreed.

In fact, the terms of the agreement reflected a different agreement. In the event that the husband was unable to pay the $350,000, the husband personally covenanted to pay the wife the shortfall. If the fund exceeded $350,000, the husband was to keep the excess. The Court found that it was clear from the agreement that the parties had each accepted the risks of the agreement. In respect of whether or not the personal covenant by the husband to pay the wife gave rise to an impracticable agreement, the Court said that the BFA created, and the wife accepted, an unsecured contingent entitlement for which she had to sue to husband and that this was not fatal to the agreement. The Court affirmed that the provisions of section 90K, which set out in what circumstances a Court may set aside an agreement, do not allow a party to escape a ‘bad bargain’.

If you require any assistance in relation to a division of property and have questions concerning whether or not a Binding Financial Agreement is appropriate in your circumstances, our firm can assist.

Posted by Kate Freshwater, Solicitor

There is little denying the fact that legislative measures have historically failed to deal appropriately with the issue of family violence. In an attempt to provide better protection for children and families at risk of abuse, the Federal Government has now completed drafting The Family Law Legislation Amendment (Family Violence and Other Measures) Act 2011 which will amend some key provisions of the Family Law Act 1975. The Act will apply to all proceedings issued under the Family Law Act 1975 on or after 7 June 2011.

The Parliament, in its Explanatory Memorandum, states that the key amendments propose to:

 prioritise the safety of children in parenting matters;
 change the definitions of 'abuse' and 'family violence' to better capture harmful behaviour;
 strengthen advisers obligations by requiring family consultants, family counsellors, family dispute resolution practitioners and legal practitioners to prioritise the safety of children;
 ensure the courts have better access to evidence of abuse and family violence by improving reporting requirements; and
 make it easier for state and territory child protection authorities to participate in family law proceedings where appropriate.

Importantly, the amending Act broadens the definition of ‘family violence’ to include the notions of coercion and control and removes the test of whether or not it was reasonable for the family member to be fearful. All that need be proven now is that the behaviour caused the family member to be fearful. Further amendments also provide for definitions of when a child is ‘exposed to family violence’ and the definition of abuse in relation to a child has been expanded to include causing the child to suffer serious psychological harm and serious neglect.

One of the purposes of the amending legislation is to ensure that all appropriate information is before the Courts when they are faced with making orders concerning parenting arrangements. The Courts will now have an obligation to enquire of the parties whether there are any concerns regarding family violence and child abuse to ensure that these cases are properly managed. Also, the broadened definition of abuse will ensure that a greater range of abuse cases will be reported to the relevant welfare authorities pursuant to the mandatory reporting requirements already contained in the Family Law Act 1975.

Currently, prior to making applications to the Courts for parenting orders, parties are required to participate in Family Dispute Resolution. Family Dispute Resolution Practitioners carry out comprehensive assessments of the parties prior to them engaging in the dispute resolution process to ensure they are suitable. A history of family violence and the welfare of children are relevant factors in determining whether or not particular cases are appropriate for dispute resolution or whether the parties should be permitted to go straight to Court. It may be the case that as a consequence of these amendments, a greater number of cases will be deemed unsuitable for dispute resolution and more applications for parenting orders issued in Court.

Lastly, and importantly, the amendments also now direct the Courts, when determining what is in the child’s best interest in any particular case, to give greater weight to ‘the need to protect the child from physical or psychological harm from being subject to, or exposed to, abuse, neglect or family violence’ in preference to the benefit to the child of having a meaningful relationship with both parents.

The overall effect of these amendments really is to provide a better framework in which to ensure that any information about family violence and child abuse is before the Courts when they are determining disputes concerning parenting arrangements.

The Family Violence provisions in the Family Law Act are in addition to the other protective provisions in State legislation, and do not affect the ability of parties or State welfare agencies to apply to the State courts for protective orders (eg. Intervention Orders or Child Protection Orders).

If you would like to discuss your options in relation to formalising parenting arrangements, our firm can assist you both with the family dispute resolution process and if necessary, Court proceedings to obtain parenting orders.

Posted by Kate Freshwater, Solicitor

Children experience a considerable developmental stage between birth and 4 years of age, and importantly, it is during this time that their attachments are established. In the context of parenting disputes, this then raises the question, what is appropriate when you have two parents each seeking to spend substantial time with a child, in particular overnight time, and how do you strike a balance between facilitating relationships with both parents while being careful not to disrupt the development of the child’s attachments.

Federal Magistrate Robyn Sexton recently published an article in Australian Family Lawyer (Vol 22 No 2) in which she draws together the various views on what is appropriate when considering parenting arrangements for the 0-4 age group. Some of the research in this area suggests that by about the age of four, children are better able to move between two households and so striking the balance from this age onwards is a less delicate task. The research suggests that children under the age of two years who spent one overnight per week with the non-resident parent were adversely affected; while children aged 2-3 years spending five or more overnights per fortnight with the non-resident parent similarly suffered adverse effects.

Despite the research, the circumstances of every case must be carefully considered as there may be circumstances in which overnight time with the non-resident parent is appropriate. In Cooke & Aiken [2011] FMCAfam 1465 it was considered appropriate that a 23 month old child spend one overnight per week with the father, being the non-resident parent. In that case, it was submitted by the father that the child had developed an attachment to both parents. Some of the relevant considerations were that this child had been attending day care from the age of eight months, there was a common parenting approach and common routine for the child and there were no concerns about safety. 

While some overnight time may be appropriate in some cases, the frequency of that time will require careful consideration. Of course, this is not to say that frequent daytime contact should not take place. On the contrary, the non-resident parent should be encouraged to spend regular time with the child during the daytime, but children seem to be susceptible to stress and anxiety when it comes to being separated from their primary carer overnight.

It is only natural for a parent to want to spend as much time with their child as possible. As difficult as it may be, it is important to ensure that the arrangements entered into for the care of children are made with the child’s best interests and developmental needs in mind, and not on the basis of the parents’ preferences, particularly when the child concerned is aged 0-4.

If you require any legal assistance in relation to parenting arrangements for children, please contact our office.

An important time to consider tax liability is following a relationship breakdown. A tax effective way to provide financial support for your children is by establishing a Child Maintenance Trust ("CMT").

The payment of child support is generally made from a person's after tax income. Unlike payments to children under 18 from discretionary family trusts, payments to children from a CMT are taxed at ordinary adult rates. Child Maintenance Trusts therefore provide a very tax effective mechanism of paying child support.

Requirements for establishing a CMT are set out in the Income Tax Assessment Act 1936. Essentially a transfer of income producing property is required, which can include real property, cash, shares or even a flock of sheep.

Other requirements for a CMT are:
• A family breakdown has occurred.
• An Order, determination or assessment has been made, by the Child Support Agency or the Court requiring the payment of child support.
• The assets of the CMT must be beneficially owned by the child, therefore the child ultimately receives the trust capital.
• The CMT must generate investment income, which is used primarily for the maintenance, education and advancement of the child.
• The transfer of assets must be at arms length, meaning they have their true value.

There is currently no capital gains tax relief on the transfer of assets to the CMT, stamp duty may also be payable on the transfer.

CMT are not for everyone, but when used correctly can provide significant financial benefits. At Cosgriff Orchard Legal we can advise whether a CMT is suitable for your circumstances and guide you through the process of establishing a CMT.

What is relocation?

Following separation, parents are increasingly relocating from the town or city in which they lived during their relationship. The children may live with one or both of the parents and one parent subsequently proposes to relocate with the children. The Family Law Act 1975 (Cth) ("the Act") does not expressly address relocation and accordingly the issue has increasingly become the subject of dispute in Court proceedings.

How have the Family Law Courts historically dealt with these disputes?

As the Act does not specifically address relocation, the Family Law Courts (the Family Court and Federal Magistrates Court) apply general parenting order principles under Part VII of the Act.

Firstly, the Court in deciding whether to make a parenting order (including whether a parent should relocate) in relation to the child must regard the best interests of a child as the paramount consideration . This will always be considered along with the presumption that it is in a child's best interest for both parents to have equal shared parental responsibility for the child . This presumption will be rebutted if there are reasonable grounds to believe that a parent (or a person who lives with the parent) has engaged in abuse of the child (or another child in the family) or family violence .

A Court will therefore consider the child's best interest in deciding whether one parent is permitted (or restrained) to relocate.

How does the Court determine what is in a child's best interest?

In deciding what is in the best interests of the child, the Court will take into account two tiers of considerations:

a) Primary considerations:
• the benefit to the children of a meaningful relationship with both parents; and
• the need to protect children from physical or psychological harm (from being subjected or exposed to abuse, neglect or family violence) .

b) Additional considerations:
• the child’s views and factors that might affect those views, such as the child’s maturity and level of understanding;
• the child’s relationship with each parent and other people, including grandparents and other relatives;
• the willingness and ability of each parent to facilitate and encourage a close and continuing relationship between the child and the other parent;
• the likely effect on the child of changed circumstances, including separation from a parent or person with whom the child has been living, including a grandparent or other relatives;
• the practical difficulty and expense of a child spending time with and communicating with a parent;
• each parent’s ability (and that of any other person) to provide for the child’s needs;
• the maturity, sex, lifestyle and background of the child and either of the parents;
• the right of the child to enjoy their cultural background, including maintaining their connection with that culture;
• the attitude of each parent to the child and to the responsibilities of parenthood;
• any family violence involving the child or a member of the child’s family;
• any other fact or circumstance that the court thinks is relevant . The Court must also consider the extent to which each parent has or has not previously met their parental responsibilities as well as any events or circumstances since separation .

Recent Developments:

The High Court decision of MRR V GR (2010) - ("MRR")

The recent case of MRR v GR (2010) 240 CLR 461 ("MRR") has altered the way in which the Court has historically decided the issue of relocation. The case was initially heard in the Federal Magistrates' Court before Federal Magistrate ("FM") Coker. At that time, both parents resided in Mt Isa and the child was living with both parents on a week about basis ("equal time"). Both parents were originally from Sydney and had moved to Mt Isa during their relationship to allow the father to pursue employment.

The mother made an Application to the Court to return to Sydney with the child. The mother was living in a caravan park in Mt Isa while the father remained in the former matrimonial home. The mother informed the Court that quality affordable rental accommodation in Mt Isa was scarce and she had limited employment opportunities there. The Court found that the mother was despaired about residing in Mt Isa and felt isolated from her family. Coker FM found that these issues could be dealt with through counselling and accordingly found that the child (and consequently the mother) should remain in Mt Isa. The father informed the Court that he would not move from Mt Isa and therefore the only way to continue equal time with the child was for both parents to remain in Mt Isa.

On appeal, the High Court decided that Section 65DAA(1) of the Act requires the Court to consider these questions:
A) Whether it is in the best interests of the child to spend equal time with each of the parents; AND
B) Whether it is reasonably practicable that the child spend equal time with both parents.
If both of the above questions are answered in the affirmative, then it is open to the Court to make an order with equal time. Therefore, if the Court is satisfied that it is not reasonably practicable for a child to spend equal time with both parents, then it is not open to the Court to make such an order. In this instance, an order for equal time would only be reasonably practicable if both parents remained in Mt Isa, Coker FM should have considered the circumstances of the parties (more specifically, the mother) in determining whether equal time was reasonably practicable.

In this case, if the mother was to live in Sydney, equal time would not be reasonably practicable and accordingly it would not be open to the Court to make such an order. The Court would next need to consider the child having substantial and significant time with the parent whom the child did not live with. The High Court allowed the mother's appeal and set aside the Orders of the Federal Magistrates Court. The matter was then remitted back to the Federal Magistrates Court to be reheard.

Full Court of the Family Court Cases

Vanderhum & Doriemus [2011] famCAFC 100 (6 May 2011)
The mother resided with the children in a rural town in New South Wales. The father resided in Sydney, 250 kilometres away. The father made an Application to the Court seeking time with the children for eight days each fortnight and half of the school holidays. The father also sought that this time occur on the basis that the mother reside with the children within 25 kilometres of the school in Sydney, selected by the father. The father's appeal to the Full Court of the Family Court was dismissed on the basis that equal time was not in the children's best interests or reasonably practicable.

Deiter & Deiter [2011] famCAFC 82 (12 April 2011)
The parents lived in Sydney during their relationship and following separation (and an incident of family violence), the mother returned with the children to Perth in Western Australia. The mother's family resided in Perth and she had resided there prior to commencing a relationship with the father. An interim parenting order was made compelling the mother to return to Sydney pending the final hearing of the matter. An appeal against the interim order was allowed as too much weight was afforded to the father having a meaningful relationship with the children pending a final hearing.

Forbes & Barlow [2011] FamCAFC 76 (7 April 2011)
The parents commenced a relationship on the Gold Coast in their early twenties. The relationship ended when their child was 7 months of age and when the child turned 8 months, the mother relocated to the Sunshine Coast where her parents and sister resided. The Court found that the mother (who was in receipt of Centrelink benefits) required support from her family and did not have her own resources to sustain accommodation on the Gold Coast. Wilson FM found that the father should spend time three days each fortnight with the child and have two other visits, and that the mother should return to the Gold Coast when the child turned three. The Full Court allowed the appeal as they were not satisfied with the FM's consideration of what time was reasonably practicable.

Sigley & Evor [2011] FamCAFC 22 (10 February 2011)
In this case, the mother was the primary carer of the child and sought to relocate from a country town in southwest Queensland to north Queensland. The father sought time with the child every second weekend. The Full Court considered the concept of a "meaningful relationship" between the father and child, and concluded that there was no reason on the evidence why the father could not have a meaningful relationship with the child if the move was permitted.

Hepburn & Noble [2010] famCAFC 111 (21 June 2010)
The mother made an application to the Court that she be permitted to relocate with two children from Wollongong where both parents lived, to Victoria. The mother was found to be unhappy and bitter if she was not permitted to relocate to Victoria. The mother sought relocation in order to pursue a new relationship. The Court granted orders permitting the mother to move with the children.

Factors to be considered in whether the Court will allow relocation

Existing parenting arrangements
The recent cases in the Family Law Courts demonstrate that even if existing parenting arrangements are for equal time, the parent applying to relocate may still be successful. This will be the case especially where the parent relocating is found by the Court to be the primary carer of the child.

Reasons for relocating
Although the best interests of the child will be the determining factor, the Court will invariably consider a parent's reasons for relocating. The reasons may include moving to be closer to family (for support), family violence, improved employment opportunity or to improve psychological wellbeing. The parent's reasons for opposing the relocation may also be examined by the Court.

 

Unhappiness, depression, inability to cope
The state of mind and mental health of the parent wishing to relocate will be a highly significant issue. Especially if the parent relocating is the primary carer and has the child residing with them, the Court will consider whether in refusing their request to relocate, the parent's mental health would compromise their ability to parent. Consequently, this would effect the best interests of the child and is a major consideration for the Court.

Financial and Socio-Economic matters
For some parents, financially maintaining themselves and the child following separation is difficult. Parents may not have access to the same amount of funds that they had previously while in a relationship. Accordingly, they may seek to relocate for the simple fact that living in the area (or perhaps away from their family without support) is no longer financially viable. It is also a consideration for the Court that if they did permit a parent to relocate, whether that parent is able to continue facilitating time with the non-relocating parent. This will be where the Court considers what time is reasonably practicable, given all the circumstances involved.

Conclusion
Following the decision of MRR V GR (2010), parents are finding it difficult to successfully oppose relocation. This is largely due to the Court's interpretation of the Act in that case, namely that the Court must consider whether time with the parents (whether it be equal or substantial and significant time) is reasonably practicable, before that order can be made. If the time proposed is not reasonably practicable, then it is not open to the Court to make that Order.

The practical consequence of this case is that despite parents in some instances residing in the same area and spending equal time with their child, one parent may decide to relocate. Depending on the circumstances (including distance), if equal time (or substantial and significant time) is no longer reasonably practicable, the Court is not able to make an order that the time continue. The Court has shown hesitancy to restrain a parent from relocating, especially if the reasons outlined above in paragraph 4 indicate that the child's best interests coincide with the relocation. Although relocation is frequently contested, it is increasingly difficult for a non-relocating parent to successfully oppose relocation of the other. It is therefore recommended that detailed and accurate legal advice is obtained prior to contesting relocation, as it will involve significant litigation costs for what may be an inevitable result.


*For further information please contact Cosgriff Orchard Legal on (03) 5480 6344