Matrimonial Property Settlement Proceedings

In a recent Family Court decision handed down on 3 May 2016, the Court was asked to review a decision of a Registrar who refused to make Consent Orders between two parties to a marriage.  The orders that the parties sought had the effect of allowing the husband and wife to continue to conduct childcare businesses through two companies of which both the husband and the wife were directors and equal shareholders.

When assessing whether to make orders for property settlement, the Court should have regard to Section 81 of the Family Law Act which states as follows:
In proceedings under this Part, other than proceedings under Section 78 or proceedings with respect to maintenance payable during the subsistence of the marriage, the Court shall, as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.”

The Judge in this particular case referred to a 2014 case where the Full Court of the Family Court confirmed that Section 81 does not bind the Court but rather is an expression of desire or an “exhortation to the Court” and that whilst Section 81 is a provision that must be taken into account, it is not a provision that is a head of power to be applied in every case and there are exceptional cases where there is not a financial separation or division of the parties’ financial interests.

The Judge in this particular case in question applied this principle and noted that both parties had each had the benefit of independent legal advice and that the Application for Consent Orders including a signed statement by each of the lawyers that the parties had been provided with independent legal advice.

It was also conceded by both parties that in the event of any future breakdown in the relationship between the parties with respect to the operation of the businesses, the remedy to such dispute would lie in the Corporations Act 2001 (Cth) and the parties would need to look outside of the Family Court to resolve any dispute between them as to the operation of the business.

On that basis, the Judge presiding over this particular case made the Consent Order that both parties wanted.

Therefore, in limited circumstances, parties to a marriage that has broken down may seek orders by consent from the Family Court that will not finally determine their financial relationship and in some instances that may mean continuing in business together and remaining directors and shareholders of companies that operate one or more businesses.  Please note that this is the exception and not the rule and ultimately, Section 81 referred to above should be considered as an important principle when negotiating matrimonial property settlements.  Often leaving separated parties in business together leads to more trouble than it is worth.

Ben Farmer

5 December 2016