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Family Law Amendment (Financial Agreements and Other Measures) Bill 2015



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ISSN 1328-8091

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BILLS DIGEST NO. 89, 2015-16 25 FEBRUARY 2016

Family Law Amendment (Financial Agreements and Other Measures) Bill 2015 Mary Anne Neilsen Law and Bills Digest Section

Contents

Purpose of the Bill ............................................................... 3

Structure of the Bill ............................................................. 3

Background ......................................................................... 4

Schedule 1—Binding financial agreements ............................. 4

Family Law Act: outline ......................................................... 4

History ................................................................................... 5

Committee consideration .................................................... 6

Senate Legal and Constitutional Affairs Legislation Committee ............................................................................... 6

Senate Standing Committee for the Scrutiny of Bills .............. 6

Policy position of non-government parties/independents ..... 7

Position of major interest groups ......................................... 7

Financial implications .......................................................... 8

Statement of Compatibility with Human Rights .................... 8

Parliamentary Joint Committee on Human Rights .................. 8

Key issues and provisions..................................................... 8

Schedule 1—Binding Financial Agreements ............................ 8

New objects clause .............................................................. 8

When a financial agreement is binding ............................... 9

Termination agreements ................................................... 11

Financial agreements and termination agreements binding on de facto relationships ...................................... 11

Enforcement of agreements ............................................. 12

Maintenance ..................................................................... 12

Date introduced: 25 November 2015

House: Senate

Portfolio: Attorney-General

Commencement: Sections 1-3 commence on Royal Assent. Schedule 1 and Schedule 2 Part 2 commence six months after Royal Assent unless earlier by Proclamation. Schedule 2 Part 1 commences the day after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

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Death of maintenance payer or payee.............................. 12

Maintenance and re-marriage or re-partnering ............... 13

Setting aside a financial agreement .................................. 13

Schedule 2—Other measures ................................................ 14

Family violence measures ................................................. 14

Concluding comments ....................................................... 17

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Purpose of the Bill The Family Law Amendment (Financial Agreements and Other Measures) Bill 2015 (the Bill) amends the Family Law Act 1975,1 the main purpose being to amend the financial agreement regime to address existing uncertainties around requirements for entering, interpreting and enforcing binding financial agreements.

The Bill also contains a range of other family law measures, the more significant relating to: state and territory interim family violence protection orders and their interaction with parenting orders under the Family Law Act; new offences to do with international parental child abduction; and provisions to strengthen the courts’ powers to dismiss unmeritorious applications.

There are also a number of other minor and technical amendments, including clarifying definitions and removing redundant provisions, and amendments clarifying the status of the Family Court.

Structure of the Bill There are two Schedules to the Bill.

Schedule 1 contains the substantive amendments to the financial agreement regime in the Family Law Act.

Schedule 2 contains a range of other amendments to the Family Law Act and is divided into two parts according to commencement dates.

Part 1 of Schedule 2, which commences the day after Royal Assent consists of 14 Divisions and proposes amendments that include:

• removal of a 21 day time limit on the ability of state and territory courts to suspend or vary a parenting order and other injunctions or arrangements made under the Act when making an interim family violence order (Division 1)

• clarifying that the Family Court is a court of law and equity, as well as a superior court of record (Division 2)

• removing the prohibition on disclosure to a court that the making of an offer of settlement in relation to certain proceedings has been made, (although disclosing the terms of the offer would still be prohibited) (Division 4)

• removal of the requirement for a court to explain to a child orders or injunctions that are inconsistent with an existing family violence order where it would not be in the best interests of the child or where the child is too young to understand the explanation (Division 7)

• clarifying that registrars, like judges, have immunity when conducing conferences about property matters (Division 8)

• strengthening the powers of courts under the Family Law Act to make summary decrees to dismiss unmeritorious applications (Division 9)

• preventing, in most circumstances, cost orders against guardians ad litem2 (Division 10)

• new provisions relating to the arrest powers under the Family Law Act to provide more guidance on the appropriate boundaries and safeguards (Division 11) and

• other technical amendments including the removal of redundant and out-of-date provisions (Divisions 5 and 6)

Part 2 of Schedule 2 which commences up to six months after Royal Assent consists of three Divisions that include:

• new offence provisions relating to international parental child abduction (Division 2)3 and

1. Family Law Act 1975, accessed 12 January 2016. 2. A ‘guardian ad litem’ is a volunteer appointed by the court to protect the rights and advocate the best interests of a child involved in a court proceeding. 3. The proposed offences in new sections 65YA and 65ZAA are offences related to retaining a child outside Australia in breach of a court order

or the written consent of all the parties to a parenting order.

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• an extension of the location order provisions in the Act4 so that any person, including a person appointed as Central Authority for the Commonwealth, a state or a territory,5 can, for the purpose of the Child Abduction Convention6, apply for an order to locate children wrongfully removed from, or retained outside Australia (Division 3).

The Key issues and provisions section below deals in greater detail with Schedule 1 and Divisions 1, 7, and 9 in Part 1 of Schedule 2 of the Bill.

Background Schedule 1—Binding financial agreements Financial agreements have been a part of the family law landscape since Part VIIIA of the Family Law Act took effect on 27 December 2000.

The expressed intention of the then Government in introducing Part VIIIA was to enable parties to contract out of the property and spousal maintenance provisions of the Family Law Act in a legally binding fashion, whether before, during or after their marriage. As the then Attorney-General Daryl Williams described the change:

The aim of introducing binding financial agreements is to encourage people to agree about how their matrimonial property should be distributed in the event of, or following, separation. Agreements will allow people to have greater control and choice over their own affairs in the event of marital breakdown. Financial agreements will be able to deal with all or any of the parties' property and financial resources and also maintenance. An agreement may cover how property would be divided or how maintenance would be paid. Particular assets, such as rural properties, would be able to be preserved.

7

Family Law Act: outline Part VIIIA of the Family Law Act (sections 90A to 90Q) sets out the requirements for financial agreements made in relation to marriage, or in contemplation of marriage; Division 4 of Part VIIIAB of the Act (sections 90UA to 90UN) which came into effect on 1 March 2009 sets out the requirements for financial agreements relating to de facto relationships.

For a financial agreement to be binding it must comply with certain formalities set out in the Act (section 90G for married couples; section 90UJ for de facto couples), and in particular:

• the agreement must be specified to be made under the appropriate section of the Act and be signed by both parties (sections 90B, 90C and 90D; sections 90UB, 90UC and 90UD)

• before the agreement is signed, each party must be provided with independent legal advice

• signed statements of independent advice must be provided to each of the parties and exchanged.

An agreement may only be terminated by another agreement complying with all of the same formalities as apply to the initial entry into the agreement, or by a court setting it aside.

However financial agreements between de facto couples also terminate automatically if the parties subsequently marry (subsection 90UJ(3)).

Note that these formalities have varied over time. The history and impact of those changes is briefly described in the next section and the provisions are discussed in more detail in the Key issues and provisions section below.

4. Location orders allow the court to make orders requiring a person to provide to the Registry Manager of the Court information that the person has or obtains about the child’s location. 5. The Commonwealth Central Authority is the Commonwealth Attorney-General. State and Territory Central Authorities are appointed by the Commonwealth Attorney-General under regulation 8 of the Family Law (Child Abduction Convention) Regulations 2008, accessed 25 January

2016.

6. Child Abduction Convention is defined as the Convention on the Civil Aspect of International Child Abduction, done at The Hague on 25 October 1980, [1987] ATS 2, (entered into force for Australia 1 January 1987) (new subsection 67K(5)). 7. D Williams, ‘Second reading speech: Family Law Amendment Bill 1999’, House of Representatives, Debates, 22 September 1999, p. 10151, accessed 6 January 2016.

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History The initial hope that financial agreements would provide legal certainty and an alternative to court orders for separating couples has proved elusive. The complexity of the provisions governing financial agreements, combined with the difficulties in their interpretation, have resulted in numerous court cases challenging the validity of the provisions. Some of the issues around financial agreements came to a head in Black v Black8 which held that a financial agreement entered into under Part VIIIA of the Act was not binding if it did not strictly comply with the technical requirements set out in section 90G.9

Two previous sets of legislative amendments aimed at ensuring more certainty have not resolved the difficulties and have arguably created fresh ground for dispute.10 Those amendments were in the Family Law Amendment Act 2003 which took effect from 14 January 2004 and the Federal Justice System Amendment (Efficiency Measures) Act (No 1) 2009 which commenced on 4 January 2010.11

Commentary from the legal profession has suggested that many lawyers are reluctant to draft financial agreements because of the risks of professional negligence claims and because of the time and expense involved in preparing them.12 Family law specialist Jacqueline Campbell, in analysing cases after the 2010 amendments suggests that the safest option for lawyers is to avoid them altogether. Writing in 2012 Campbell said:

The easiest and safest course for lawyers is to avoid drafting and advising on financial agreements altogether. Any agreement is at risk of being found not to be binding even if it appears that the technical requirements are met. It is difficult to see how a lawyer can minimise the risk of an agreement being found not to be binding under s90G(1)(b) or s90UJ(1)(b). It may help to exchange letters of advice, check that they comply with s90G(1)(b) and are accurate, and ensure that the other party speaks the language the advice was given in and has full capacity to understand the advice. However, exchanging letters of advice not only waives privilege and risks a demand that the whole file be disclosed, but may create further disagreement between the parties about the terms of the financial agreement. If there is litigation, the information disclosed in the letter of advice will be able to be used in that litigation. How does one legal practitioner check that the other party understands the advice? Is a psychiatric report required, and confirmation of that party’s ability to understand English? All these matters may need to be addressed before a lawyer signs a Statement of Independent Legal Advice.

A lawyer may have done everything necessary to meet the s90G(1) requirements but be thwarted by the failure of the other lawyer to meet the standard. There seems no obvious and risk-free way to be assured that the advice given to the other party meets the s90G(1)(b) requirements. 13

The Bill is a third attempt at amending the financial agreement regime in order to resolve the uncertainties around the requirements for entering into, interpreting and enforcing agreements.

Prior to the Bill’s introduction, the Government released an earlier draft of the Bill, which was entitled Civil Law and Justice Legislation Amendment Bill 2015: Family Law (‘the Exposure Draft’). The relevant consultation paper and the Exposure Draft (but not the submissions) are available on the Attorney-General’s Department website.

8. [2008] FamCAFC 7; (2008) FLC 93-357. 9. The case is discussed in: Family Law Section (FLS), Law Council of Australia, Submission to Senate Legal and Constitutional Affairs Legislation Committee, Inquiry into the Family Law Amendment (Financial Agreements and Other Measures) Bill 2015, pp. 4-6. 10. Attorney-General’s Department (AGD), ‘Proposed amendments to binding financial agreement provisions of the Family Law Act 1975’, AGD

website, accessed 11 February 2016. The 2010 amendments and subsequent court cases are summarised in FLS, Law Council of Australia, op. cit. 11. M Bartfeld, ‘Hoult and Hoult: The full court explains financial agreements - again’, Australian Family Lawyer, 23(3), Spring 2013. At page one Bartfeld states: ‘in what can only be described as ineptly drafted amending legislation, the Government has sought to implement a scheme

which purported to rectify the problems identified by the Full Court in Black and Black. In so doing, the poor drafting, the retrospective application of the amending legislation and the incomprehensible transitional provisions have led to three major Full Court decisions in which the true meaning and intent of the amending legislation was sought to be explained.’ 12. R Nickless, ‘Till pre-nup do us part’, Australian Financial Review, 28 January 2012. See also J Wade, ‘The perils of prenuptial financial agreements: effectiveness and professional negligence’, Australian Family Lawyer, 22(3), Winter 2012, p. 24. 13. J Campbell, ‘Binding financial agreements unbound’, Law Institute Journal, 86(11), November 2012, p. 34, accessed 18 January 2016.

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Committee consideration Senate Legal and Constitutional Affairs Legislation Committee The Bill was referred to the Senate Legal and Constitutional Affairs Legislation Committee for inquiry and report by 24 February 2016. Details of the inquiry (Senate Committee inquiry) are at the inquiry website. The Committee’s report recommended that on the basis of two recommendations, the Bill be passed. Those recommendations being:

that the Commonwealth government, in conjunction with states and territories, consider the practicality of developing a protocol for sharing information between state, territory and federal courts where matters involve the protection of children and victims of family violence.

[…]

that the government consider amending the EM to include reference to the interaction between the provisions of the Bill, and Australia's Convention on the Elimination of all forms of Discrimination Against Women (CEDAW) obligations. 14

In a dissenting report, Labor Senators recommended that the Bill in its present form not be passed and in particular that Schedule 1 to do with financial agreements be excised from the Bill.15 One of its further recommendations was that consideration be given to the recommendation from the Women's Legal Service Queensland that ‘a better balance be obtained in the legislation between contractual certainties on the one hand and upholding principles of justice, equity and the protection of the vulnerable on the other, particularly protecting victims of family violence from ongoing financial abuse and harm'.16

In a further dissenting report, Australian Greens Senators also have concerns with the Bill noting in particular:

It would be counterproductive and regrettable if the Bill that purports to contain measures to improve the Family Court’s response to family violence was to result in an increase in the likelihood of vulnerable women being financially exploited. 17

The Greens report recommends that the Bill be amended to create a framework for binding financial agreements which addresses the concerns raised by Women’s Legal Service Queensland, Australian Women Against Violence Alliance and Soroptimist International.18

Senate Standing Committee for the Scrutiny of Bills The Standing Committee for the Scrutiny of Bills has drawn attention to a number of provisions in Schedule 1 that have retrospective application.19 As the Committee notes, the Explanatory Memorandum justifies this retrospectivity on the basis that some parties may have made financial agreements based on a misunderstanding of the current law and therefore the proposed law should be consistent with those misunderstandings. The Committee however believes that:

given that it is possible this retrospective operation of the law may cause detriment to some parties the committee seeks the Attorney-General’s detailed advice in relation to the appropriateness of the retrospective application of these amendments, particularly the extent to which the retrospective application may cause detriment to a party to an existing financial agreement.

20

14. Senate Legal and Constitutional Affairs Legislation Committee, Family Law Amendment (Financial Agreements and Other Measures) Bill 2015 [Provisions], Report, The Senate, Canberra, 24 February 2016, p. ix, accessed 25 February 2016. 15. Australian Labor Party (ALP), Dissenting report, Senate Legal and Constitutional Affairs Legislation Committee, Family Law Amendment (Financial Agreements and Other Measures) Bill 2015 [Provisions] The Senate, Canberra, p. 35 accessed 25 February 2016. 16. Ibid.

17. Australian Greens, Dissenting report, Senate Legal and Constitutional Affairs Legislation Committee, Family Law Amendment (Financial Agreements and Other Measures) Bill 2015 [Provisions] The Senate, Canberra, p. 37, accessed 25 February 2016. 18. Ibid., p. 38. 19. Senate Standing Committee for the Scrutiny of Bills (Scrutiny of Bills Committee), Alert digest, 14, 2015, The Senate, Canberra,

2 December 2015, pp. 7-12, accessed 10 February 2016. 20. Ibid., p. 8.

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The retrospective aspects of the provisions are described in further detail in the Key issues and provision section of the Bills Digest.

Policy position of non-government parties/independents As noted above, the Australian Labor Party and the Australian Greens raised concerns with the Bill in their dissenting reports to the Senate Committee inquiry. To date the position of other non-government parties and independents is not known.

Position of major interest groups The Family Law Section (FLS) of the Law Council of Australia was one of the few legal bodies to make substantive comments on Schedule 1 to the Bill. It notes that for over a decade it has made submissions to Government and called for amendments to address inadequacies in the legislative provisions dealing with financial agreements.21 The FLS of the Law Council therefore supports much of the Bill, with its submission focusing on the unusual and possibly controversial retrospective effect of a number of amendments and agreeing that the retrospective operation of certain parts will ‘help cure the problem for the public, the legal profession and the courts,’ of many of the possible thousands of existing agreements that would otherwise be declared non-binding due to relatively minor technical deficiencies. The submission also highlights additional areas where the FLS of the Law Council has proposed amendments which are not captured by the Bill currently before the Senate.22

The Law Society of New South Wales has not made a submission to the current Senate Committee inquiry, although it did welcome the Exposure Draft, being of the view that reform of the financial agreement regime is long overdue.23

The Women’s Legal Service Queensland in contrast has expressed concerns that the proposed changes to the financial agreement regime have not appropriately taken into account the issues for vulnerable people, particularly women and that the amendments fail to acknowledge the dynamics of family violence and how binding financial agreements can be used as a tool of financial abuse against victims of violence.

There is little doubt, in our opinion these proposed changes will make bfas [binding financial agreements] an even more attractive option for use by perpetrators of violence and will be a particularly useful tool to financially exploit vulnerable women. Our practice knowledge tells us that bfas are particularly used against culturally and linguistically diverse women, who have limited or no English, little understanding of their legal rights, have limited support and no understanding of the Australian legal system or laws.

24

The Women’s Legal Service does however support the amendments to section 68T of the Family Law Act which will assist state and territory courts in making interim family violence protection orders and are aimed at improving the family law system’s response to violence.25

The Australian Women Against Violence Alliance (AWAVA) supports the intention of the Bill and particularly the intention of enabling the courts to offer better protection to victims of family violence. However more generally AWAVA has reservations about whether many of the proposed amendments will achieve the purpose of offering better protection to victims of family violence:

Much more extensive change is needed in order to make the safety of women and children central to the operation of the family law system. 26

Further details of the various views of submitters to the Senate Committee inquiry is provided below in the Key issues and provisions section below.

21. FLS, Law Council of Australia, op. cit., p. 1. 22. Ibid., p. 2. These omissions are referred to at pp. 8, 10 and 13 of the Bills Digest. 23. Law Society of New South Wales, Letter regarding proposed amendments to binding financial agreement provisions of the Family Law Act 1975, 22 June 2015, accessed 1 February 2016.

24. Women’s Legal Service Queensland, Submission to Senate Legal and Constitutional Affairs Legislation Committee, Inquiry into the Family Law Amendment (Financial Agreements and Other Measures) Bill 2015, p. 2, accessed 1 February 2016. 25. Ibid., p. 8. 26. Australian Women Against Violence Alliance, Submission to Senate Legal and Constitutional Affairs Legislation Committee, Inquiry into the

Family Law Amendment (Financial Agreements and Other Measures) Bill 2015, accessed 1 February 2016.

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Financial implications The Explanatory Memorandum states that there are no financial implications from implementing the amendments in the Bill.27

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.28

Parliamentary Joint Committee on Human Rights The Committee has reported on the Bill and raised issues about Schedule 1 and the provisions that allow a court to set aside a binding financial agreement. 29 As amended by the Bill, the provisions would limit to exceptional circumstances the court’s powers to set aside certain financial agreement.30

The Committee has assessed these provisions against the Convention on the Rights of the Child and Australia’s obligation under that Convention to consider the best interests of the child. The Committee questions whether the amendments that only allow a court to set aside an agreement in exceptional circumstances may limit the court’s ability to act in the bests interests of the child to that couple.

The Committee has therefore sought further advice from the Attorney-General asking if the amendments are justified and if limiting the court’s power to set aside is a reasonable and proportionate measure.31

Key issues and provisions Schedule 1—Binding Financial Agreements As previously noted, the binding financial agreements regime in the Family Law Act is in two Parts—Part VIIIA setting out the requirements for financial agreements made in relation to marriage or contemplation of marriage and Division 4 of Part VIIIAB dealing with financial agreements for de facto relationships.

Comments in this section of the Bills Digest relate mainly to the proposed changes to Part VIIIA of the Family Law Act but will apply equally to the commensurate changes to Part VIIIAB.

New objects clause Item 1 inserts proposed section 90AL and proposed section 90AM which provide a simplified outline of Part VIIIA and explain the objects and the underlying principles of the Part. Proposed sections 90UAA and 90UAB are similar provisions with respect to Division 4 of Part VIIIAB dealing with financial agreements for de facto couples. 32

Proposed subsection 90AM(1) states that the object of Part VIIIA is:

• to provide for prospective, current or former parties to a marriage to make a binding agreement that excludes the power of the court to make orders under Pt VIII about either or both of the following matters:

(a) how property or financial resources either or both parties had before divorce are to be dealt with if the marriage breaks down (b) the maintenance of either party during the marriage or after divorce.

Proposed subsection 90AM(2) states that the principles underlying the object are that:

(a) prospective, current or former parties to a marriage should be able to take responsibility for resolving the matters described in paragraphs 90AM(1)(a) and (b) without involving a court; and

27. Explanatory Memorandum, Family Law Amendment (Financial Agreements and Other Measures) Bill 2015, p. 1, accessed 4 January 2016. 28. The Statement of Compatibility with Human Rights can be found at pages 2-8 of the Explanatory Memorandum to the Bill. 29. Parliamentary Joint Committee on Human Rights, Thirty-third report of the 44th Parliament, The Senate, Canberra, 2 February 2016, pp. 4-6, accessed 10 February 2016.

30. The provisions are described at p. 12-13 of the Bills Digest. 31. Ibid., p. 6. 32. Inserted by item 19.

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(b) such parties who make an agreement about those matters should have certainty that the agreement will bind those parties unless:

(i) they make another agreement to terminate the agreement, or (ii) a court sets the agreement aside under this Act.

Comment

There has been much litigation regarding how the Family Law Act should be interpreted with respect to financial agreements and the new objects provision is aimed at alleviating these interpretative uncertainties. The interpretation of provisions of the Act based on this objects clause, would favour an interpretation that leads to a binding agreement.33 Legal commentary is generally supportive of an objects clause, the Law Society of New South Wales noting that the need for a statement of object and principles is perhaps unarguable given the development of jurisprudence on Part VIIIA and Part VIIIAB agreements.34 The FLS of the Law Council recommends that the objects section should also recognise that financial agreements can deal with property acquired after relationship breakdown or divorce, and not just property and financial resources received or acquired prior to that time.35

When a financial agreement is binding Section 90G sets out the requirements for a financial agreement to be binding in regard to married couples. As already noted, it has undergone two sets of amendments since 27 December 2000 and has been at the nub of the uncertainty around the binding nature of financial agreements.

Section 90G is to be amended again (item 6), the rationale as stated in the Explanatory Memorandum being:

The wording of existing section 90G is confusing and has led to differing judicial interpretations, and has been further complicated by two sets of amendments following its initial introduction. 36

The objective of repealing existing section 90G and substituting new sections 90G, 90GA and 90GB is to give clarity as to when financial agreements are binding. Currently, there are three forms of section 90G that apply to financial agreements depending on when the agreement was made. The Bill introduces a fourth version. Each version of section 90G requires different independent legal advice to be given. Currently, locating earlier versions of section 90G to check against a financial agreement necessitates searching through amending Acts and interpreting transitional provisions. As the Explanatory Memorandum points out, the different versions make navigating the section 90G requirements ‘undesirable and unnecessarily complex’.37 It has led to difficulty in interpreting section 90G and made it difficult for legal practitioners to advise their clients. The Bill proposes that the different versions of section 90G be tabulated, to make it easier to understand the requirements at different times.38

The versions of section 90G prior to the passing of the Bill are:

1. Financial agreements made from 27 December 2000 to 13 January 2004: the legal advice must deal with:

(a) the effect of the agreement on the rights of that party, and (b) whether or not, at the time when the advice was provided, it was to the advantage, financially or otherwise, of that party to make the agreement, and (c) whether or not, at that time, it was prudent for that party to make the agreement, and

33. This is because the resolution of these disputes should be affected by this new objects clause because section 15AA of the Acts Interpretation Act 1901 requires that in interpreting legislative provisions ‘… the interpretation that would best achieve the purpose or object of the Act … is to be preferred to each other interpretation’.

34. Law Society of New South Wales, op. cit. 35. FLS Law Council, op. cit., p. 6. 36. Explanatory Memorandum, op. cit., p. 12. 37. Ibid., p. 13. 38. J Campbell, ‘Financial agreements: more legislative amendments coming in 2016’, Wolters Kluwer Law Chat, blog, 22 December 2015,

accessed 2 February 2016.

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(d) whether or not, at that time and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable (new section 90GA, table, item 1).

2. Financial agreements made from 14 January 2004 to 3 January 2010: the legal advice must deal with either the matters required for the previous period or those required for the following period (new section 90GA, table, item 2)

3. Financial agreements made from 4 January 2010 to the present: the legal advice must deal with:

(a) the effect of the agreement on the rights of that party, and (b) the advantages and disadvantages, at the time the advice was provided, to that party of making the agreement (new section 90GA, table, item 3).

A fourth version will apply from the commencement date of new section 90G.

Proposed subsection 90G(1) will provide that, for the purposes of the Act, a financial agreement made after 26 December 2000 is only binding on the parties if and only if the following conditions are met:

• the agreement is signed by all parties; and

• either:

- all the conditions in new section 90GA (about legal advice relating to the agreement) that are relevant to the agreement are met, or - a court has made an order under section 90GB declaring that the agreement is binding, and • the agreement has not been terminated (before, on or after the commencement of this section), and

• the agreement has not been set aside by a court (before, on or after the commencement of this section).

Under proposed subsection 90GA(2), either before or after signing the agreement, each spouse party must have been provided with a signed statement by a legal practitioner confirming that, before the agreement was signed, that party was provided with independent legal advice about the matters described in the table for the agreement at the relevant time.

From the commencement of proposed section 90GA, the independent legal advice must be regarding ‘the effect of the agreement on the rights of that party under this Act’. The existing requirement to cover ‘the advantages and disadvantages, at the time the advice was provided, to that party of making the agreement’ has been removed. The Explanatory Memorandum points out that this change substantially simplifies the obligation on legal practitioners by limiting the requirement for independent legal advice.39

Family law specialist Jacqueline Campbell suggests that although not dealt with in the Bill, the issue of whether financial agreements entered into after the commencement of new section 90GA but which use the pre-90GA wording of section 90G applicable since 4 January 2010, and refer to ‘advantages and disadvantages’ will undoubtedly arise. She states:

A similar issue was considered in Collagio & Collins [2015] FamCA 263 where the breadth of the advice given was greater than section 90G required but the agreement was still held to be binding. Of greater concern is whether it is appropriate for the Bill to reduce the protection of clients by lowering the legal advice requirements for parties surrendering their rights under Pt VIII.

40

The Women’s Legal Service Queensland does not support the ‘watering down of the legal advice requirements’ arguing that this lessens clarity around the nature of the legal advice that is being sought and protection for vulnerable parties.41

Proposed section 90GA also sets out extra conditions for agreements entered into after 3 January 2010. These are set out in a tabulated form and are outlined below:

39. Explanatory Memorandum, op. cit., p. 15. 40. J Campbell, Financial agreements: more legislative amendments coming in 2016, op. cit. 41. Women’s Legal Service Queensland, op. cit., p. 7.

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• After 3 January 2010, but before the commencement of new section 90GA—the statements of independent legal advice must be exchanged between the spouses or their lawyers

• After the commencement of new section 90GA—not only must a copy of the statement be given to the other spouse or to their lawyer, but the spouse must give a written acknowledgement that they were provided with independent legal advice about the effect of the agreement on their rights under the Act before signing the agreement and the acknowledgement must be given to the other spouse or to their lawyer.

The new requirement of an acknowledgement aims to increase certainty by limiting the potential for parties to dispute the validity of financial agreements on the basis that they were not provided with independent legal advice.42

In determining whether an agreement is binding, a court is not to consider whether the advice described in proposed subsection 90GA(2) was actually provided (proposed subsection 90GA(5)). The Explanatory Memorandum states that this means ‘that the court should not go behind the statement provided by a legal practitioner to examine the content of advice’.43 According to Campbell,

this is aimed at removing the uncertainty raised by such cases as Hoult & Hoult (2013) FLC 93-546; [2013] FamCAFC 109; Logan & Logan (2013) FLC 93-555; [2013] FamCAFC 151, although in Wallace & Stelzer (2013) FLC 93-566; [2013] FamCAFC 199 the Full Court said (at 103):

… that the only enquiry necessary is as to whether the advice was given and not as to the content of that advice. 44

Again, the Women’s Legal Service Queensland is critical of this provision arguing that it is ‘overly restrictive and against notions of an independent, open and accountable legal system’ stating:

A court should be able to determine all relevant evidence to assist its decision making and should not be limited in this role by parliament. 45

The FLS of the Law Council is supportive of this provision but suggests it should be drafted to give even more certainty:

Whilst the provisions of s90GA and 90UJA go a long way to preventing agreements being the subject of attack in respect of the content of the legal advice provided, FLS had submitted that matters would be made clearer, by the legislation containing a deeming provision that once a signed statement of independent legal advice has been provided, the requirements are met and the legal advice cannot be further scrutinised as a basis for declaring an agreement non-binding.

46

Termination agreements Section 90J deals with termination of financial agreements and is to be repealed and replaced by item 12. The new section 90J obligations are modelled on the obligations as contained in new section 90G (that is, the agreement must be signed by all parties, and either the appropriate legal advice has been given, or there is a court order declaring the agreement is binding and the agreement has not been set aside by the court).

Financial agreements and termination agreements binding on de facto relationships Similar changes as those discussed above are proposed with respect to existing sections 90UJ and 90UL, which deal with financial agreements and termination agreements binding on de facto parties.47 Further explanation is provided in the Explanatory Memorandum.

42. Explanatory Memorandum, op. cit., p. 15. 43. Ibid.

44. J Campbell, Financial agreements: more legislative amendments coming in 2016, op. cit. 45. Women’s Legal Service Queensland, op. cit., p. 7. 46. FLS, Law Council, op. cit., p. 6. 47. See items 23 and 29 of Schedule 1.

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Enforcement of agreements Proposed section 90GB deals with enforcement of financial agreements by a court. It is an amended version of existing subsection 90G(1A) and, as the Explanatory Memorandum notes, reflects the same policy of existing subsection 90G(1A).48 If an enforcement application is made to a court seeking a declaration that the financial agreement or a termination agreement is binding on the parties to the agreement and the section 90GA requirements are not all met, then the court must make the order if it is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement (disregarding any changes in circumstances from the time the agreement was made).

The transitional and savings provisions for proposed sections 90G and 90J in item 13 aim to ensure that the decisions of courts made under previous provisions cannot be re-litigated because of amendments made by the Bill.

Maintenance Existing section 90E (and section 90UH for de facto relationships) sets out the requirements for provisions in financial agreements relating to the maintenance of a spouse or child. A maintenance provision in an agreement is void unless the provision specifies:

(a) the party, or the child or children, for whose maintenance provision is made; and

(b) the amount provided for, or the value of the portion of the relevant property attributable to, the maintenance of the party or of the child or each child, as the case may be.

Section 90E is to be amended by item 3 to replace the words ‘the value of the portion’ of the relevant property with the words ‘the amount or proportion of the value’ of the relevant property. This will make the section 90E requirement easier to meet, by not requiring a dollar figure. A percentage can be used instead.

Section 90E is further amended by item 4 to clarify that a dollar figure can be a ‘nil’ value. Not only, as the Explanatory Memorandum points out, can there be practical difficulties associated with ascribing an actual dollar figure for maintenance to be provided at an unspecified time in the future, but the wording of the existing section 90E is unclear as to whether parties can nominate a ‘nil’ value for maintenance. Although some legal practitioners believed it was possible, many legal practitioners nominate a nominal $1.00 figure if they do not want to allocate a large lump sum. Campbell argues:

The amendments do not address whether there is any better protection offered by a lump sum figure, intended to represent say 2-3 years of realistic periodic maintenance, or a small amount such as $1 or even nil. Of course, this remains uncertain in relation to property orders as well. 49

The amendments to section 90E apply to all financial agreements made before, on, or after the commencement of the amendments (item 5(1)). This, for example, retrospectively validates provisions (if they were invalid) which give a ‘nil’ value for maintenance.50

Death of maintenance payer or payee Sections 90H and 90UK currently provide that a financial agreement continues to operate despite the death of a party to the agreement and is binding on the legal personal representative of the deceased party. Proposed subsections 90H(2)-(4) and subsections 90UK(2)-(4) cover maintenance obligations in the event of the death of the payee or the payer.

The expanded sections 90H and 90UK will mean that provisions for ongoing spousal maintenance will terminate on the death of either party except as the agreement otherwise provides. Death will not prevent the recovery of arrears of maintenance due before the death. The changes will make these provisions consistent with existing subsections 82(8) and 90SJ(5) which deal with the recovery of maintenance payable under a court order.51

48. Explanatory Memorandum, op. cit., p. 16. 49. J Campbell, ‘Financial agreements: more legislative amendments coming in 2016, op. cit. 50. Ibid.

51. Ibid.

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Maintenance will be able to be recovered if paid after the death of either party (proposed subsections 90H(5) and 90UK(5)). This is consistent with subsections 82(7) and 90SJ(4) which deal with court orders for maintenance.

The new sections 90H and 90UK will apply to financial agreements made on or after the commencement of the Bill and are not retrospective (items 9 and 26 respectively).

Maintenance and re-marriage or re-partnering Proposed section 90HA52 (and proposed section 90UKA for de facto relationships) specifies that ongoing spousal maintenance obligations under an agreement will terminate in the event of the party receiving the maintenance remarrying or entering into a de facto relationship with a person other than the spouse party, unless the agreement expressly provides otherwise.

Campbell states that a major difficulty with this amendment will be defining when a party has commenced a de facto relationship.

Costly litigation about whether a de facto relationship has met the jurisdictional requirements in Part VIIIAB for a property settlement or maintenance order to be made is frequent. A possible solution, or at least a partial solution to this problem, which was suggested by the Law Institute of Victoria in its submission with respect to the Exposure Draft, was that the payee be in a relationship which met at least one of the criteria in section 90SB with respect to the new de facto relationship.

53 This proposal was not adopted in the Bill. 54

Setting aside a financial agreement Section 90K of the Family Law Act sets out the circumstances in which a court may set aside a financial agreement or termination agreement. Item 14 repeals and replaces paragraph 90K(1)(d) to provide that a court can only set aside an agreement where, if the court did not set aside the agreement, a child or an applicant with caring responsibility for a child of the marriage would suffer hardship for reasons described in new subsection 90K(2A). New subsection 90K(2A) provides that the test for determining hardship depends upon when the financial agreement was entered into:

• for agreements entered into before a separation declaration is made—the test is a ‘material change in circumstances that relate to the care, welfare and development of the child of a marriage’;

• for agreements entered into at the same time as, or after the making of a separation declaration (i.e. after separation)—the test is ‘circumstances of an exceptional nature that relate to the care, welfare and development of the child of the marriage’.

Proposed subsections 90UM(1)(g) and 90UM(4A) are similarly worded but apply to de facto relationships.

For agreements entered into after separation, the test for setting aside a financial agreement for circumstances relating to children is, therefore, to be ‘exceptional’ rather than ‘material’, which is in line with section 79A and section 90SN relating to property settlement orders. The body of case law developed under these provisions will apply.55

The Explanatory Memorandum explains that the difference in tests reflects the possibility that, for agreements made prior to separation, a substantial period of time may have elapsed and the circumstances of the couple may have changed in ways not contemplated by the original agreement. For example, a couple may have had a child since making the agreement whose needs may not be appropriately reflected in the agreement. If the agreement is entered into at the time of or after separation, a higher bar is considered appropriate, as the couple should be able to anticipate the future financial needs of the children.56 Campbell suggests that perhaps the wording of the Explanatory Memorandum should read that the parties will be in ‘a better position to anticipate the future financial needs of the children’, as such foresight is not absolute.57 Campbell does however

52. Inserted by item 10. 53. Section 90SB provides a list of factors that are to guide the court when determining the existence of a de facto relationship. 54. J Campbell, ‘Financial agreements - more legislative amendments coming in 2016, op. cit. 55. Ibid.

56. Explanatory Memorandum, op. cit., p. 20. 57. J Campbell, ‘Financial agreements: more legislative amendments coming in 2016, op. cit.

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agree that the amendment, at least in relation to separated couples, improves consistency between section 90K and section 79A, and will make it more difficult for agreements to be set aside because of changes in circumstances relating to children.58

The Law Society of New South Wales, commenting on the equivalent provision in the Exposure Draft stated that while it understood the desirability of the use of consistent language, the lower threshold of ‘material change in circumstances’ should remain in section 90K(1)(d). The submission stated:

The Committee does not support this change because of the different circumstances in which a court order and financial agreement are made. A court order is made under section 79 of the Family Law Act after the Court has had regard to what is ‘just and equitable’ in a particular case at the time the court order is made. In these circumstances, it is appropriate that an application to set aside a court order under section 79A of the FLA should only be made where circumstances of an exceptional nature have arisen since the court order was made. However, a financial agreement is a private contract between parties and is not open to judicial scrutiny at the time it is made. It is possible that financial agreement is made in circumstances where there is a power imbalance between spouse parties or where there is some form of economic abuse. It is for these reasons that the Committee is of the view that the current threshold of ‘material change in circumstances’ is appropriate when seeking to set aside a financial agreement.

59

The FLS of the Law Council in contrast takes a tougher approach submitting that the threshold should be uniformly lifted from the current ‘material change’ of circumstances test, to an ‘exceptional circumstances’ test, arguing this would be consistent with section 79A of the Family Law Act and section 136(2)(d) of the Child Support (Assessment) Act 1989, and further lessen the likelihood of agreements being set aside by courts.60

Schedule 2—Other measures

Family violence measures The Government introduced the Bill on the International Day for the Elimination of Violence Against Women, stating that the Bill will enable courts to better protect Australians from family violence. The Attorney-General in his media release stated:

On the International Day for the Elimination of Violence against Women, it is important to recognise that every woman has the right to feel safe and to live without fear. The rates of violence against women in this country are unacceptable and demand action.

This Bill provides important improvements to the family law system’s response to family violence and builds on the Coalition Government’s ongoing commitment to help keep Australian women and children safe. 61

Division 1 in Part 1 of Schedule 2 of the Bill proposes amendments aimed at strengthening protections from family violence.

Section 68R is in Part VII Division 11 of the Family Law Act, which deals with inconsistency between protection orders made under state and territory family violence legislation and Family Law Act orders that provide, require or authorise a person to spend time with a child. The purpose of this Division is:

• to resolve inconsistencies between orders

• to ensure that such orders do not expose people to family violence and

• to achieve the objects and principles in section 60B of the Family Law Act, which relate to meeting the child’s best interests.62

58. Ibid.

59. Law Society of New South Wales, op. cit., p. 5. 60. FLS, Law Council of New South Wales, op. cit., p. 6. 61. G Brandis (Attorney-General), New measures to provide greater protections for Australians affected by family violence, media release, 25 November 2015, accessed 2 February 2016.

62. Section 68N of the Family Law Act.

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Section 68R addresses the situation where a victim of family violence seeks a protection order after a parenting order has been made and is seeking conditions in that protection order that would be inconsistent with the existing parenting order. As the Australian Law Reform Commission has explained:

Because conditions in a parenting order made under the Family Law Act will override any inconsistent conditions in a protection order, 63 a protection order that is inconsistent with a parenting order may not provide effective

protection for a victim of family violence, as the inconsistent conditions in the protection order are not binding and cannot be enforced. Section 68R provides a mechanism for state and territory courts to amend the parenting order to remove the inconsistency and ensure that the person is protected from violence. 64

Section 68R operates differently depending on whether a parenting order is amended by a state or territory court during proceedings for an interim protection order or for a final protection order. When a parenting order is revived, varied or suspended under section 68R in proceedings to make or vary an interim protection order, section 68T provides that the variation or suspension of the parenting order only has effect for the period of the interim protection order or 21 days from the date of the order, whichever is earlier. In contrast, the Family Law Act does not place a time limit on parenting orders revived, varied, discharged or suspended in proceedings to make or vary a final protection order.

The Explanatory Memorandum explains that the existing strict 21 day time limit can result in inconsistent orders about parent-child contact. For example, if a party is unable to have their parenting matter heard in the family courts within 21 days, the parenting order that was varied or suspended by the state or territory court is revived. This can result in two valid, yet inconsistent, orders— an interim family violence order prohibiting or limiting the other party’s contact with a child, and a parenting order providing for the party’s contact with the child. This outcome has the potential to put children and their carers at risk of further family violence.65

To address this issue, item 2 would amend section 68T in order to remove the 21 day limit and instead provide that the court’s revival, variation or suspension under section 68R ceases to have effect at the earliest of:

• the time the interim family violence order stops being in force

• the time specified in the interim order

• the time that the order is affected by an order made by a court.

The effect would be that any revival, variation or suspension of an Order would always cease upon the expiration of the interim protection order, but judicial officers would have the flexibility to determine timeframes and relist matters to manage cases according to their particular circumstance.66

This amendment would implement recommendation 4 of the Family Law Council’s Interim Report on families with complex needs and in the intersection of the Family Law and Child Protection Systems67 which in turn recommended the Government adopt the relevant part of Recommendation 16-5 of the Australian and NSW Law Reform Commissions’ 2010 report.68

Comment

Submissions to the Senate Committee inquiry into the Bill have commented on this provision.

The Chief Magistrate, Adelaide Magistrates Court argues the removal of the 21 day period in section 68T will create difficulties with a significant risk that parties may choose to lodge their matters at the Magistrates Court

63. Subsection 68Q(1) of the Family Law Act. 64. Australian Law Reform Commission, Family violence: a national legal response, report, 114, ALRC, Sydney, 2010, paragraph 16.17, accessed 2 February 2016. 65. Explanatory Memorandum, op. cit., p. 33. 66. Ibid., p. 33. 67. Family Law Council, Interim Report on families with complex needs and in the intersection of the Family Law and Child Protection Systems,

June 2015, p. 104, accessed 2 February 2016. 68. Australian Law Reform Commission, op. cit.

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rather than the Family Court with a substantial shift of the work from the Commonwealth jurisdiction to the State jurisdiction. This has the potential to create significant practical difficulties for the Magistrates Court.69

However, the Women’s Legal Service Queensland supports the amendments to section 68T and thanks the Government for taking quick and decisive action on this measure.70

Division 7 in Part 1 of Schedule 2 of the Bill contains other provisions that may have an impact in relation to family violence. Existing section 68P sets out the obligations of a court when making an order or granting an injunction under the Act, that is inconsistent with an existing family violence order. Item 13 amends subsection 68P(2) removing the requirement for the court to explain orders or injunctions that are inconsistent with an existing family violence order to a child where:

• it would not be in the child’s best interest, or

• the child is too young to understand the explanation.

The Explanatory Memorandum justifies this amendment on the basis that although in most cases, it will be in a child’s best interests to understand the application of court orders to their family, this may not always be the case.

In particular, it may not be in the child’s interest in all cases to be exposed to the parental controversy to the extent necessary for courts to comply with this section. The Bill would provide an appropriate discretion for courts to dispense with this requirement provided that to do so would be in the child’s best interest. 71

Division 9 in Part 1 of Schedule 2 of the Bill proposes amendments that strengthen the powers of courts under the Family Law Act to make summary decrees to dismiss unmeritorious applications.

Item 15 would insert new section 45A which would replace existing section 118.72

New subsections 45A(1) and (2) would allow the court to make a summary decree in favour of one party, in relation to the whole or part of a proceeding, if satisfied that a party has no reasonable prospect of successfully prosecuting/defending the proceedings or part of the proceedings. In determining whether a defence or proceeding has no reasonable prospect of success, proceedings need not be hopeless or bound to fail (new subsection 45A(3)).

New subsection 45A(4) would also empower the court to dismiss all or part of the proceedings if it is frivolous, vexatious or an abuse of process. This reflects the existing dismissal power in existing section 118.

New subsections 45A(5)-(7) would confirm other powers of the court including the power to makes costs orders as it sees fit.

The Explanatory Memorandum states that new section 45A would improve outcomes for victims of family violence by strengthening the court’s powers to dismiss proceedings where people are using the legal system as a tool of victimisation. It would also improve court efficiency by providing greater clarity on when applications can be dismissed by the court.73

The Women’s Legal Service Queensland, while supporting provisions that strengthen the court’s ability to dismiss unmeritorious claims, argues that because of the number of litigants in person in the family law system there should be careful consideration about whether this provision will achieve its policy objective and instead may be misused by the more powerful party and further injustice.74

Their submission states:

Many of our clients who are victims of family violence are also litigants in person. Often their paperwork is not of a high standard and they can present badly because of their fear and trauma. They can often be facing their

69. Chief Magistrate, Adelaide Magistrates Court, Submission to Senate Legal and Constitutional Affairs Legislation Committee, Inquiry into the Family Law Amendment (Financial Agreements and Other Measures) Bill 2015, December 2015, accessed 4 January 2016. 70. Women’s Legal Service Queensland, op. cit., p. 8. 71. Explanatory Memorandum, op. cit., p. 4. 72. Section 118 is to be repealed by item 19. 73. Explanatory Memorandum, p. 38. 74. Women’s Legal Service Queensland, op. cit., p. 8.

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perpetrator on the other side who is at times legally represented, as he can afford this. Her claims may seem on their face unmeritorious. In many instances her case, with assistance, could be substantially improved with the gathering of evidence and assistance with affidavit materials.

We are concerned however that this provision can be misused by perpetrators or their lawyers to threaten her that her case is without merit and they will seek to dismiss it and seek costs against her. We have concerns that if she withdraws and then seeks legal assistance and files again later with a stronger case, she may still be perceived as vexatious for making multiple applications.

We believe there are other ways that victims of family violence can be protected in the family law system. 75

Concluding comments It has long been recognised that the legislation covering financial agreements is complex and far from satisfactory. The number of amendments since 2000 and the differing interpretations by the courts has increased the complexity.76 While commentary from the legal profession has welcomed the Bill as being long overdue, it has also conceded that it is difficult to predict whether these proposed amendments will make financial agreements a more viable option than they are at present.

As Campbell states, the Bill will hopefully give greater certainty to financial agreements and reduce the amount of litigation with respect to whether financial agreements are binding. The past versions of section 90G will be more accessible and when there are disputes about the interpretation of legislative provisions, the new objective and principles may help increase certainty and clarity. In Campbell’s view the Bill addresses some significant problems with financial agreements, and hopefully unlike previous amendments ‘does not create too many more problems’.77

With respect to the amendments aimed at offering better protection for victims of family violence, the Government’s promotion of this aspect of the Bill may be slightly overstated. While advocates against family violence are supportive of the amendments to do with state and territory interim family violence protection orders they have reservations about whether other amendments will achieve the purpose of offering better protection of victims of family violence and argue that much more extensive change is needed to make the safety of women and children central to the family law system.

75. Ibid.

76. J Campbell, ‘Financial agreements: more legislative amendments coming in 2016’, op. cit. 77. Ibid.

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