Australian divorce law
The English/Welsh and Australian jurisdictions have many things in common, but there are two particularly interesting areas where they differ.
First is the Australian courts’ approach to couples who have been living in a cohabiting relationship for two years acquiring the same rights as a married couple.
This is very different from the English jurisdiction approach, where a cohabiting couple’s rights remain extremely limited (and usually limited to the division of property where they can show they have an interest in) regardless of how long they have lived together.
Second is the procedural differences in how the Australian system has less of a link between divorce and sorting out financial arrangements.
In the English jurisdiction, there is a more direct link between divorce and financial settlements both in terms of when a court can approve a financial settlement and make it an order (after the Decree Nisi has been pronounced); and when it becomes fully enforceable, for example, the implementation of a pension sharing arrangement (after the Decree Absolute has been pronounced).
I wonder what our readers consider are the pros and cons of a system that treats cohabiting couples in the same way as married couples? I will hand over to Steven Edward of Australian Family Lawyers to explain further.
Formalising a family law financial settlement agreement
In Australian divorce law, an agreement reached on how to divide assets can be formalised at any time once there has been a separation between a husband and wife – there is no need to wait until the divorce.
This was not always the case. Until 1985 you had to be separated for at least 12 months, then apply for a divorce, and once a divorce order was made a financial settlement agreement could be approved by the court.
Since the end of the “divorce first” rule in 1985, it has become common to see a breakdown of marriage, negotiations, a financial settlement being formalised and then years later there may be a divorce application when either the husband or the wife wants to remarry.
There are also plenty of situations where a financial settlement will be formalised but no one ever applies for a divorce.
Once a divorce is granted, if a settlement agreement has not been finalised, there is a 12-month period available for a financial settlement agreement to be formalised, or for one side to commence court proceedings to achieve a settlement.
Beyond the 12-month post-divorce order period, the court has to grant leave for court proceedings to go ahead, but the courts are often very flexible in granting leave if there has not been a long delay.
De facto relationships
Where there has been a separation between parties to a de facto relationship (including a same-sex relationship), there is no divorce process so negotiations can commence for financial settlement agreement at any time after separation and an agreement formalised.
The phrase “de facto relationship” is what we use to describe a couple living together on a genuine domestic basis.
There are a range of factors the Court can look at to work out if the couple has lived together on a genuine domestic basis, including the extent of financial interdependence; whether a sexual relationship exists; the degree of mutual commitment to a shared life; whether others knew them as a couple; care and support of children; the extent of their common residence and whether the couple registered their relationship (registration does happen but it’s not common).
Though in practice, if the couple has lived together for at least 2 years, it’s not common to have disputes on whether they did so on a genuine domestic basis.
The rule in Australia is that if the couple is living together on a genuine domestic basis, and that has gone on for at least 2 years (subject to two exceptions), then, following separation, either of them can use property division and spouse maintenance rights under the Family Law Act in the same way as for married couples.
The exceptions are if there’s a child of the relationship, or one person has made substantial contributions and there would be serious injustice if the Court did not allow property division/spouse maintenance proceedings to go ahead.
An agreement will need to be formalised inside 2 years from separation, and if negotiations break down then court proceedings have to be filed inside 2 years from separation to avoid the need to apply for leave out of time (although the courts have shown the same flexibility here as for divorced spouses).
Formalising a financial settlement
In Australian divorce law, the normal way to formalise a financial settlement agreement is with an application for consent orders lodged with the Family Court. That is a detailed document that sets out enough background facts for a registrar of the court to work out whether the settlement proposed is within the range of what a judge at trial would decide is appropriate.
An experienced family law solicitor will usually be able to predict if an application for consent orders will be approved by a registrar or be a waste of time and money.
There are exactly the same property division entitlement rules following the end of a marriage, or a de facto relationship, and everything that is “property” can be divided, including superannuation entitlements.
Where the financial settlement agreement is outside the range of what a registrar would accept, the parties need to instead use a binding financial agreement. This is not lodged with the court but requires a statement of independent legal advice signed by a lawyer for each party confirming that advice has been given on the meaning and effect of the agreement and the advantages and disadvantages of the agreement.
One advantage of a financial agreement compared to an application for consent orders is the ability to not only divide up assets but also cancel out any future spousal maintenance entitlements, so long as neither party has an entitlement to a government pension.
A binding financial agreement can also be used at the start of a marriage or de facto relationship to exclude the power of a court to divide up assets and to specify who gets what if the marriage or de facto relationship breaks down i.e. a prenup.
It’s also possible to have a binding financial agreement during the course of a marriage or de facto relationship, though these are pretty uncommon.
Not many people in happy marriages/relationships focus on setting up a formal agreement on who would get what if everything goes bad. You might call that a “midnup”.
One of the big questions is whether a prenup is worth the paper it’s written on.
If it is properly prepared, it adheres to normal contract certainty principles, each side has plenty of opportunity to receive advice, there is no duress or undue influence tainting the making of the agreement and there is full financial disclosure from each side, then the risk of a prenup being successfully attacked is minimal.
For a nuptial agreement to be valid and binding, there is no requirement for the Court to first consider the proposed outcome to be fair.
If the required formalities are followed, then the agreement is binding and enforceable unless set aside by a Court i.e. the agreement ousts the jurisdiction of the Court. Grounds to set aside an agreement can include duress, unconscionable conduct, fraud and also the usual contract law requirement of certainty.
There is no ground to set aside an agreement simply because it was a bad bargain. However, having said that a common thread in cases where the Court has set aside agreements has been that the outcome is way outside what a Court would consider fair.
Some recent “big money” cases have shown that where one person is getting a very bad deal, it’s often because there’s been duress or unconscionable conduct by the other party. So, a bad deal and bad behaviour often go hand in hand.
It is actually possible to have a prenup about one single asset-e.g., who gets the pet dog. We’ve heard those called “petnups“.
Australian divorce law advice
Family law advice
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