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Family Law - Binding Financial Agreements - Spousal Maintenance Provisions - The power of courts to order spousal maintenance regardless of binding financial agreements

Date: November 29, 2011

Authors: Patrick Mulligan B.A., LL.B.

CASE NOTE: MILLINGTON-V-MILLINTON [2007]famCA 687 (29 June 2007).

The purpose of this article is to highlight the importance of carefully drafting spousal maintenance provisions in binding financial agreements(BFA) under the Family Law Act. In this case a BFA was set as the requirements of s90G were not met.This section   provides for strict legal requirements that must be adhered to in order for a BFA to be binding. It also considered the application s90F that provides spousal maintenance provisions in BFAs are unenforceable where the court is satisified that at the time of entering the agreement the party was unable to support him or herself without the assistance of an income tested pension, allowance or benefit.

Facts.

The husband and wife were married for 24 years and had been living together for 26 years. Upon divorce they commenced proceedings and made consent orders on 2004 that were intended to finalise all property, spousal maintenance and financial matters between them. The orders provides that:

  1. The wife pay the husband $197,500 in consideration for transferring the matrimonial home;
  2. The husband pay adult child maintenance for one of their sons until he completed tertiary education;
  3. $25,000 out of the value of the property was attributed to spousal maintenance;
  4. A child maintenance agreement for $350/week was entered into for the youngest child.

A further application for spusal maintenance was signed by the wife and the matter dismissed on the understanding that both parties enter into a further BFA.

The court held that the BFA was not enforcaebale due to procedural errors and that notwithstanding that the spousal maintenance provisions in the BFA could not be enforced.

Held

Void for Procedural Errors in BFA.

Pursuant to s90G(1)(a) -(f) of the Family Law Act provides that the BFA is to be incorporated into a single document which is to be signed by both parties, after which the original document is to be maintained by one party and a copy to be kept by the other.

In this case the husband's solicitors forwarded a signed copy of the BFA together with signed and witnessed solictors certificates. The wife's solicitors had the wife sign the same copy of the BFA and solicitors certificate. They then returned a copy of the agreement to the husband. The copy however did not include the husband's solicitor's certificate and signature.

It was therefore held that the copy did not meet the requirements under the relevant provisions of the Family Law Act. The court adopted the test in J & J [2006] Fam CA that refers to the openining words of s90G(1) that states an agreement is binding "if and only if". In other words there are no exceptions to the requirements for both parties to have a complete copy of the BFA and solicitor's certificates signed by both parties.

Spousal Maintenance and BFA: Even if you are Asset Rich if you receive a pension of some sort a financial agreement cannot exclude spousal maintenance.

The court also examined the enforceability of spousal maintenance provisions aginst s90F and s90F(1A) of the Family Law Act.

s90F provides that no spousal maintenance clauses in a BFA limit the power of a court to make orders for the maintenance of that party where s90F(1A) applies.

s90F(1A) states that it applies where at the time of entering the agreement, the circumstances of the party were such that, taking into account the terms of the agreement, the party was unable to support himself or herself without an income tested pension, allowance or benefit.

The court held that even if the BFA was enforcable, the intention of the spousal maintenance provisions was to oust the jurisdiction of the court and not enforcable.

It was argued before Carter J, on behalf of the husband, that :

  1. Although the wife received a newstart allowance it did not necessarily lead to the conclusion that the person in question was not able to support himself or herself;
  2. The asset test for Newstart disregarded the principle home and that applicant's were eligable even where they held up to $161,000 of "non-principle residence assets";
  3. The house was valued between 1.6 to 1.4 million dollars and that if the house were sold or finances rearranged there would be sufficient income to live of comfortably.

Carter J held that the effect of the provision was to ensure that people do not rely on the social security system. He mentioned his surprise that someone could live in a 1.4 million dollar house, but that was not the relevant consideration for s90F(1A) in relation to BFAs.

He did however state that the argument that the wife could rearrange her financial affairs could be a relevant consideration for future affairs and is a relevant consideration when making property orders pursuant to s75(2) of the Family Law Act.

Observations.

This case shows how important it is to stick to the strict provisions of the Family Law Act when exchanging BFAs between partie's. An error could have drastic effects for either party where there are considerable assets at stake in for example a Pre Nuptial Agreement.

This case also shows that even if you are asset rich and receiving a pension, that does not prevent a court intervening at a later date and granting spousal maintenance orders if you or your partner makes an application.

One suggestion is to seek court orders or consent orders where s90F of the Family Law Act does not apply.

Disclaimer.

The contents of this article cannot be relied on as legal advice. In the event that you require assistance with drafting a financial agreement or want family law advice please contact LAC LAwyers directly for an appointment.

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