Risks of failing to comply with financial orders in Family Law

A 2017 case named Blackwell & Scott [2017] FamCAFC 77 highlights the serious consequences which can apply if a party defaults on aspects of an Order for property settlement.

Section 90SN of the Family Law Act 1975 states that:

(1)  If, on application by a person affected by an order made by a court under section 90SM in property settlement proceedings, the court is satisfied that:

… (c)  a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order;

…..the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 90SM in substitution for the order so set aside.

In this case, the parties had entered into Consent Orders which were intended to have the effect of dividing the assets of the parties between them equally. In simple terms, one of the parties’ properties was to be sold and the net proceeds divided equally, and the other property was to be retained by the husband in exchange for a payment of 50% of the net equity to the wife. At the time the Orders were made, the payment to the wife was agreed in the sum of $130,000.00.

The husband however breached the Orders by failing to pay the wife $130,000.00 by the deadline of 23 May 2014 and still had not done so by September 2014. The wife then made a Court Application to have the original Consent Orders set aside.

The husband finally paid the wife the sum of $130,000.00 by mid-June 2015 but took until November 2015 to pay the interest which had accrued under the terms of the Consent Order.

Notwithstanding the husband had now paid the wife and ostensibly fulfilled the terms of the Consent Order (albeit 18 months late), the wife’s substantive Application for the Consent Orders to be set aside was still unresolved and remained before the Court.

As it happened, the property which the husband was to retain pursuant to the property settlement (referred to in the Judgement as the Suburb K property), had risen in value quite dramatically between the date of the original Consent Orders (February 2014) and the hearing of the wife’s new Application (end of 2015 / beginning of 2016). In 2014 the parties had agreed the value at between $600,000.00 (husband’s figures) and $650,000.00 (wife’s figures) but then a single expert valuer valued the property at $860,000.00 (December 2014) then at $1 million by late October 2015.

The Trial Judge (Brewster J in the Federal Circuit Court) agreed with the wife’s Application for the original Consent Orders to be set aside. He found that clearly the purpose of the original Orders was to effect an equal division of assets between the parties. By the time the husband finally complied with the Orders, the wife did not receive anywhere near to a 50% division of the parties’ assets. The rise in the value of the property at Suburb K had resulted in the wife receiving far less than 50% and the husband receiving far more.

The husband appealed the decision of Judge Brewster and complained, among other things, that the wife should have had to prove a “cause and effect” between his default in payment and the separate increase in value of the Suburb K property.

Aldridge J, hearing the appeal in the Full Court of the Family Court with Kent and Watts JJ, noted that

“… whilst it is entirely correct to say that the husband’s default did not cause house prices to rise, that is not the relevant enquiry. The relevant enquiry is whether circumstances have arisen as a result of the husband’s default that would make it just and equitable to reconsider the earlier orders. The circumstances that arose were that, as a common sense proposition, the wife received significantly less than an equal division of the property and the husband received considerably more. That difference resulted directly from the husband’s delay in complying with the orders. The primary judge was therefore entitled to find that the position of the wife had arisen as a result of the husband’s breach.

…It is not the point that the wife got the bargain to which she agreed. The point is that by reason of the husband’s default the agreed equal division of the parties’ property did not take place.”

All three Judges of the Full Court agreed that the husband’s appeal should be dismissed and he was ordered to pay the wife’s costs.

This case serves as a timely reminder that more importantly than ever, in an era where the values of real property, shares and the like can rise and fall significantly over time, it is critical not only to ensure your property settlement is enshrined in a legally binding Order, but that timelines set out in the Orders are strictly adhered to.

Shelley O'Connell

27 February 2018