News Archive for March 2008



Superannuation

Friday 14 March 2008

In December 2002, legislative changes involving superannuation were implemented to solve a long-standing problem in family law - namely, how to properly deal with an asset that is ordinarily not available for immediate division.

Together with associated regulations, the provisions of the Family Law Legislation Amendment (Superannuation) Act 2001enable separating married couples and courts exercising jurisdiction under the Family Law Act 1975 (Cth) (the Act) to effect a division of their superannuation entitlements.

A consideration of the effect of these changes should begin with the experience of other jurisdictions. In England and Wales, a similar scheme allowing the division or earmarking of superannuation interests began in December 2001. These "pension sharing" laws were initially forecast to be used in up to 50,000 of the 160,000 anticipated divorces in 2002. In the first six months of operation however, only 367 couples made use of the options to split their superannuation. There are possibly many reasons for the relatively dismal application of the options presented with respect to the division of superannuation entitlements in England. An examination of some of the prominent practical features of the English approach may ensure that the changes in Australia achieve their intended purpose.

Research has shown that women who are poor are less likely to avail themselves of legal advice during the course of separation. There are three basic areas that appear to have presented problems. First, there seems to have been a general reluctance on the part of superannuation fund members and their spouses to use the splitting options. Second, there was (at least initially) a hesitation among practitioners to make use of the new options, whether as a result of their unfamiliarity with the provisions or their uncertainty about implementing them. Third, there was a heavy workload associated with effecting any split, reflected in the administrative burden placed on trustees and supervisors of retirement savings accounts to facilitate the changes.

The legislative changes were introduced as the solution to a long-standing problem in family law - how to properly deal with an asset that is ordinarily not available for immediate division and is beyond the effective control of the parties. This issue takes on added significance when you consider that superannuation is now said to constitute at least 25 per cent of the asset wealth of the average Australian family. With an ageing population, tighter government policy and superannuation guarantee legislation, it is likely that this proportion will increase significantly over time.

Before the changes it was necessary to offset the superannuation entitlement of one party by providing the other with a larger share of the asset pool. This potentially left one party with insufficient capital to re-establish him or herself in the short term. But will the ability to divide such a major component of the average "asset pool" necessarily overcome this problem?

It would be straightforward enough if separating spouses each had an individual superannuation entitlement of an equal or equivalent amount. There is, however, a real and continuing discrepancy between the number of men and women who have interests in superannuation funds. Not only do fewer women have superannuation, but the median value of the superannuation held by women is considerably less than that of men. It is also inversely proportionate to the number of children a woman may have. Where separating couples have low overall asset wealth, superannuation tends to be, in relative terms, a larger component of the overall asset pool. As a result, those who would ordinarily benefit the most (at least statistically) from the option to split superannuation are women with limited means who have children.

Research has shown that women who are poor are less likely to avail themselves of legal advice during the course of separation. Unfortunately, therefore, those who would be best suited to make the most from the splitting of superannuation (spouses without their own superannuation interests and in a low-wealth family) are likely to be the very people who do not make use of the new options.

In the explanatory memorandum to the legislative changes which was circulated in 2000, the federal Attorney-General indicated that "the lack of flexibility in dealing with superannuation means that current property must often be traded away in exchange for an asset that may not be able to be realised for many years. This leaves one party with the realised asset of the house, yet with no retirement income and the other party with no realisable assets but often significant retirement income". Interestingly, the prospect of the latter spouse in the above example insisting on the division of their superannuation interest may create a different (and perhaps more challenging) problem. The manager of a large retirement savings group recently indicated that the division of superannuation between separating spouses, made in the context of a division of their capital, "could leave both parties with insufficient accessible proceeds to buy a new home".

For example, assume that a separating couple has a jointly owned unencumbered home valued at $200,000 and that the husband has a superannuation entitlement of an equivalent amount. In circumstances where the parties wish to divide their assets equally, the difficulty has been that the husband would necessarily keep his superannuation and so be left with a resource to which he has no immediate access. The wife, while keeping all the available capital, would be similarly disadvantaged in that she would be left with no future financial security.

If the husband was to insist on the division of his superannuation entitlement so as to gain immediate access to some capital, it may be unavoidable that the home be sold with no guarantee that either party would then be able to purchase elsewhere. The ability to divide the superannuation entitlement on a proportionate basis will alleviate this problem, but in such cases will not provide a real solution to the immediate difficulties faced by the spouse left with little capital and a relatively large amount of superannuation.

It is, of course, the case that administrative considerations are relevant to the ease with which the options can be used. The amendments themselves will have a significant impact on the operations of trustees of superannuation funds as they present many varied administrative and compliance issues.

For example, on receiving a request in the appropriate form, a trustee is required to provide information to a member's spouse regarding the member's entitlement.. They are prevented, under risk of personal penalty, from revealing the address of the member to the spouse, just as they are prevented from informing the member that a request for information has been made. Trustees are obviously required to effect the terms of an order or agreement regarding the splitting or flagging of a superannuation interest and thereafter provide ongoing information to the members. While trustees and administrators of funds are entitled to charge "reasonable" fees for these administrative tasks,\

Another potential problem for trustees and managers under the new scheme lies in the introduction of superannuation agreements. These agreements are analogous in form and operation to the binding financial agreements currently provided for in the Act.They provide a means by which separating couples can formalise an agreement with respect to the division of superannuation without the need to involve the courts. While the agreements need to comply with certain requirements and be certified by each party's independent practitioner, they are otherwise limited in only three basic respects:

1. they must identify the superannuation interest which is the subject of the agreement;

2. the agreement must be in force at the operative time (as defined in the legislation); and

3. the relevant superannuation interest must not be an interest with a withdrawal value of  less than $5000 (referred to as an "unsplittable interest"). As superannuation agreements are not, by definition, ratified by a court or necessarily administered by any other authoritative body, it is likely that the terms, content and wording of each agreement will vary. Parties to the agreement (unlike the court15) will be able to specify the method by which the superannuation interest will be split and are not otherwise required to obtain a valuation of the interest to be split. This may give rise to particular problems. For example:

4. The provisions of the legislation override any inconsistent state and commonwealth laws and are paramount to anything contained in a trust deed or other prevailing

5. Superannuation agreements can be made before marriage, although they will only take effect on marriage and after separation. It does not matter whether or not the superannuation interests are in existence at the time the agreement is made.It is presumably possible therefore for one spouse to provide an individual separation declaration to a trustee, together with a superannuation agreement that makes no specific reference to the interest to be split. Trustees will no doubt incur an additional workload as a result.



Practicing Family Law

Tuesday 18 March 2008

When I am often confronted with the question, "What is it like to be a family lawyer?", my response is instantaneous - "There is never a dull moment in this jurisdiction".

Welcome to life as a family lawyer. Handling emotional clients, juggling court filing deadlines and coping with unexpected twists and turns in the conduct of a case are all part and parcel of the job. The one pervading attribute that all family lawyers possess is a genuine love for people (or a voyeuristic interest in their sometimes sordid lives)!

After undertaking my Articles and practicing for a couple of years as a Banking and Finance Lawyer in a top tier national law firm, I had my personal seachange at the age of 26. Could I see myself drafting mortgages and advising on the intricacies of commercial hire purchase agreements for the next 40 years of my life? NO.

As it was my childhood dream to engage in legal practice, I opted to pursue a new career path in family law. I had had the opportunity of working in a specialist family law practice as a para-legal whilst undertaking my law degree and was attracted by the interface between the law and everyday life.

Family law offers a diverse scope of practice for any budding practitioner. The key areas that we deal with include:

•·         Children's issues (whom do they live with or spend time with and issues relating to parental responsibility);

•·         Property settlements for married and de facto couples

•·         Child support

•·         Spousal maintenance

•·         International child abduction

•·         Financial Agreements (pre and post-nuptial agreements and cohabitation agreements)

•·         Divorce

•·         Family violence issues

Family lawyers must possess a wide array of skills. The first key element is to establish empathy with your client and to gain their confidence. Often clients are very emotional when they are going through the process of separation and your role as a lawyer may include a degree of quasi-counseling. It is important to refer your client to suitably-trained professionals if they need this level of support.

In addition to understanding the concepts of family law, practitioners regularly import skills and require an understanding of other practice areas including property law, trusts, corporations law, criminal law, wills and probate and equity. In complex property cases, it is not unusual to undertake a degree of forensic analysis which may involve the assistance of skilled accountants.

Family law practice can be immensely rewarding. Securing an outcome for your client which enables them to move on with (and re-establish) their lives and maintain some form of dignified relationship with their former partner (if possible, particularly if children are involved) should be the modus operandi for any practitioner. Sadly this is not always possible however the end of protracted and stressful proceedings for the client and their legal representatives often brings a degree of celebration.

Most family lawyers do not derive the financial rewards that commercial practice yields however salary levels are improving. For those of you motivated by the bottom line, it is worth noting that there are a number of QCs who practice exclusively in family law who ply their services at a fee of $5,500 per day! .... It only takes exceptional talent, a very thick skin (or degree of pig headedness) and approximately 25 years of legal practice to aspire to that!

As the law becomes increasingly more specialized and the rate of marriage and relationship break-up escalates, the number of specialist family law practices is increasing. I work at a boutique family law practice with offices on Collins St and the Mornington Peninsula which employs 6 solicitors and 2 articled clerks. We deal in all aspects of family law.

Many commercial firms have divested themselves of their family law operations however it is a lifeblood of most suburban and country practices. Junior lawyers working in a family law practice are likely to have a significant degree of responsibility at an early stage. You are likely to handle client files, undertake court appearances, draft correspondence and court documentation, research points of law and brief and instruct counsel. It is essential for any junior practitioner to possess a good system of triage (prioritizing more urgent matters), establish a reliable diary system and learn how to work well with your support staff.

The secret to family law practice is commonsense and if you can encourage your clients to look beyond their own feelings of injustice, resentment or bitterness to their former spouse (or a combination of all 3!) inevitably a better and quicker outcome will follow. Getting the confidence to make appropriate judgment calls takes time and more seasoned  practitioners will inevitably try to put one over you!

To quote Monty Python, one should "always look on the bright side of life" and it is important to try to avoid taking on board your client's problems and stress.

Best wishes for your future practicing careers. I look forward to working alongside many of you in the years to come as you negotiate the trials and tribulations of family law practice.

Vic Rajah

Associate, Richard Calley Family Lawyers

Accredited Specialist Law Institute of Victoria

  

 



Property Division

Friday 7 March 2008

As long ago as 8 November 2002, the federal Attorney- General announced that each of the Australian states and territories had agreed "to a referral of powers to the ACommonwealth in relation to dealing with property disputes relating to separating de facto couples".1 The Family Law (De Facto Property and Other Amendments) Bill is scheduled to be introduced to the commonwealth Parliament in the Spring sittings.

To date, Queensland, New South Wales, Western Australia and Northern Territory have tabled legalisation giving effect to the referral. While Victoria's progress in that regard has apparently stalled, is it arguable that the Family Law Act 1975 (Cth) (the Act) does in fact already cover the property and financial aspects of de facto marriages?

Fundamental to the above question is a consideration of what a "marriage" actually is. Debate has recently resurfaced as to what should constitute a legal "marriage" in contemporary terms. Many overseas jurisdictions are extending the definition of marriage to cover homosexual couples and Tasmania has recently put in place a system for the registration of "significant" relationships.

The Family Court's decision in Attorney-General for the Commonwealth v Kevin and Others2 gave rise to a significant amount of commentary regarding the adequacy of the current legal definition of marriage in reflecting community practices and standards.

What is a marriage? In August this year, the federal Parliament acted to insert, for the first time, a definition of the term "marriage" into the Marriage Act 1961. The only other legislative indication of the meaning of the term appears in s43(a) of the Family Law Act 1975, which provides that a court shall, in the exercise of jurisdiction under that Act, have regard to "the need to preserve and protect the institution of marriage as the union of a man and a woman to the exclusion of all others voluntarily entered into for life".3 There has been a relative dearth of guidance from the High Court as to the intrinsic or constitutional meaning of "marriage".4 This may in part be a consequence of the fact that federal Parliament did not exercise its power to legislate with respect to marriage until the Matrimonial Causes Act 1959 (Cth) and the Marriage Act 1961 (Cth). The requirements as to what constitutes a "valid marriage" for the purposes of Australian law remain substantially set out in the latter.

The Marriage Act, in addition to now defining "marriage" otherwise prescribes what features of a marriage will cause it to be legally valid. Section 23B(1)(c) of the Marriage Act provides that a marriage is "void" where "by reason of s48 the marriage is not a valid marriage".

Turning then to s48, a marriage "is not a valid marriage" where it is "solemnised otherwise that in accordance with" ss40 to 47 of that Act. Those sections make provision for the role of authorised celebrants, the giving of notices of intention to marry, the presence of witnesses, the form of ceremony and the requirement of celebrants to explain the nature of the marriage relationship. A "void" marriage under the Marriage Act therefore seems to include a marriage that is solemnised but does not otherwise meet requirements of form and procedure contained within ss40 to 47.

In the Marriage of L,5 the Full Court of the Family Court stated that "a ‘de facto relationship' connotes a connection between a man and a woman who live with each other as husband and wife but are not married to each other". For the purposes of this article, a "de facto" or "domestic" relationship is taken to be one that has all the hallmarks of a marriage, or the consortium vitae, save for the ceremonial formalities required by the Marriage Act.

Historical development

The development of the current law relating to marriage has its basis in ecclesiastical law. Before the decree of the Council of Trent in 1563, marriage existed in "the popular mode of verbal contract or spousals, accompanied by folk rituals".6 The Church and canon law encouraged the constructive formalisation of relationships to be marriages - in the "Finer Report" of 1974 it was stated that "in order to reduce the chances of exposure to deadly sin through sexual waywardness, the Church maximised the number of ways in which a lawful union could be contracted. In the result, marriage became a formless contract requiring little more than the consent of the parties".7 As Christopher Lasch states, "Because it upheld marriage as an antidote to lust, the Catholic Church made it easy to marry and almost impossible to obtain a divorce." 8

Formal requirements including the registration of marriages were not effectively introduced in England until Lord Hardwicke's Marriage Act in 1753, supposedly "for the better preventing of clandestine marriages".9 Some commentators believe that the main purpose of that Act was to protect property interests10 while it also would have worked to prevent the occurrence of the former tort of jactitation of marriage.

In any event, the development of the legal concept of marriage before the Council of Trent is aptly summarised in the judgment of Baker J in The Marriage of W and T, where he said by way of obiter "that the fact of marriage, namely, the mutual consent of two competent persons to take one another for man and wife during their joint lives, was alone considered necessary to constitute true and lawful matrimony, in the eyes of both Church and State".11 The fact of public cohabitation in itself gave rise to a strong presumption of such consent.12

What brings about a marriage therefore is historically entirely distinct from the notion of a ceremony or a wedding. The underlying concept of marriage appears to be the consensual union for life between a man and a woman, not what are the relatively recent formalities imposed on the union for the purposes of regulation.

While it may be that the Marriage Act requires that certain formalities be undertaken for a marriage to be considered "valid", it is submitted that the absence of such formalities does not render the marriage non-existent, it simply means it is not valid under s48 and is therefore "void".

A couple who consensually enter into a union, ostensibly for life and to the exclusion of others, in circumstances where the existence of their consent is corroborated by their cohabitation, may therefore be argued to have entered into a marriage, albeit a void one.

Again, under the provisions of the Marriage Act a "void" marriage is one that is solemnised but does not meet requirements of form and procedure. In the Marriage of Kapadia,13 Kay J stated that "it seems to me that the essence of marriage is that it is a ceremony conducted between two persons of opposite sex who are each capable of contracting a valid marriage . . .". Does the fact that the parties have not participated in a form of ceremony necessarily mean the marriage has not been "solemnised"? Do the parties need to go through a "purported" marriage ceremony?

In the Marriage of Lengyel and Rasad,14 Nygh J said by way of obiter that "if parties, speaking of a purely domestic situation, were to take themselves to the beach and, in the moonlight, pledge eternal troth, that would not be something that could be described, in any way, as a ceremony of marriage. But, on the other hand, if the parties go through a specific ceremony which, if certain authorised persons had been present, would have constituted a valid marriage, then, in my view, they have gone through a ceremony of marriage, albeit one which because of the absence of the required persons is void". it is submitted that this passage imparts his Honour's view that there is some threshold definition of a ceremony of marriage. Of course, had the "ceremony" on the beach taken place before an authorised celebrant, with appropriate advance notices and the attendance of witnesses, etc. there appears to be no reason why it could not be a valid ceremony of marriage. The absence of any or all of the requirements of ss40 to 47 of the Marriage Act is what, after all, renders the marriage void.

In the subsequent decision of Najjarin and Houlayce,15 Nygh J made a declaration of nullity of marriage on alternate grounds, one being the fact that a ceremony of marriage did not take place. In a recent article, the now retired Chief Justice of the Family Court Alastair Nicholson observed that "[t]here are no longer any requirements in Australia for a religious ceremony associated with marriage, and its occurrence, formalities and registration are purely secular".16

Historically, the fact of cohabitation in itself was the ordinary means of "entering into" a marriage. As Professor John Wade has noted, "a ceremony was not legally mandatory in England in order to create a full status marriage at least between 1200 and 1753, and possibly before that time also. Moreover, a substantial period of cohabitation where the couple were known in the community as husband and wife, would lead to a very strong presumption that they had expressly or impliedly exchanged the necessary promises to be legally married".17

Could not the fact of cohabitation continue to give rise to the "very strong presumption that [a de facto couple] had expressly or impliedly exchanged the necessary promises" giving rise to the marriage relationship?

The Family Law Act Part VIII of the Act confers jurisdiction on the Family Court to deal with "property, spousal maintenance and maintenance agreements". Section 79, which is included in Part VIII, states: "In proceedings with respect to the property of the parties to a marriage or either of them, the court may make such order as it considers appropriate altering the interests of the parties in the property . . .".

Section 71 defines "marriage" for the purposes of s79 to include "a void marriage". As the Act does not include a definition of "void marriage" reference needs to be had to the Marriage Act, which incorporates all the above considerations. It is arguable in light of the foregoing discussion that in applying to void marriages, Part VIII of the Act operates to cover de facto relationships.

As a matter of interpretation, it is interesting to note that for the purposes of Part VIII of the Act "marriage includes a void marriage" (per s71) while the provisions of Part VII (through s60E) are stated to apply "in relation to a purported marriage that is void". Does the co-existence of these two sections imply that not all void marriagesneed to be purported marriages, or vice versa? If s71 has a wider scope than s60E, can it be argued that the parties to a void marriage need not purport to be married at all?

Constitutional considerations

The need for the states to refer power to the Commonwealth to legislate with respect to a matter is predicated on the fact that the Commonwealth otherwise lacks the power to deal with that matter. Does a law with respect to a "void marriage" fall within the federal Parliament's constitutional power? If not, would the Act be necessarily read down so as to preclude application to de facto marriages? Section 51(xxi) of the Constitution gives the federal Parliament the power to make laws with respect to "marriage".

As stated above, the High Court has considered the scope of the marriage power on relatively few occasions, and there has been a divergence of opinion in that Court as to what marriage means in a Constitutional sense.18 In the decision of Attorney-General for the Commonwealth v Kevin and Others, the Full Court of the Family Court stated "that it would be potentially highly destructive to the institution of marriage for its definition to be frozen at any point in time".19

While progressive Constitutional interpretation in the High Court may have reached its zenith in the 1990s,20 certainly McHugh J has envisaged a time where the marriage power may be seen to extend to the regulation of homosexual relationships. In Re Wakim, his

Honour stated that "in 1901 ‘marriage' was seen as meaning a voluntary union of life between one man and one woman to the exclusion of all others. If that level of abstraction were now accepted, it would deny the parliament of the Commonwealth of power to legislate for same sex marriages, although arguably ‘marriage' now means, or in the near future may mean, a voluntary union for life between two people to the exclusion of others".21

The fact that "marriage" is now to be defined within the Marriage Act as the union of a man and a woman - to the exclusion of all others - voluntarily entered into for life, does not of course operate to define marriage for the purposes of the Constitution.

Conclusion

It may of course be argued that when enacting the Family Law Act, Parliament did not intend that the term "void marriage" should include de facto relationships; there is, however, no definition of that term in the legislation.

It is submitted that the historical analysis of the development of the institution tends to support the view that the current concept of Law Act.

PROPERTY DIVISION

a de facto or domestic relationship is indeed a "marriage" and that such relationships can properly fall within the marriage power of the Commonwealth.

It is also submitted that a consideration of the provisions of the Marriage Act gives rise to the conclusion that a de facto relationship is indeed a "void marriage" for the purposes of Part VIII of the Family

In light of the increasing judicial willingness to recognise "marriage" as an evolving concept, it may be that in order to properly "preserve and protect the institution of marriage" the Family Court will inevitably include the de facto relationship as its increasingly prevalent form.22 It is arguable that the current legislation would allow it to do so. .

ADRIAN STONE is a solicitor in the family law department at Richard Calley Family Lawyers. He is also an accredited specialist in family law.

1. " Commonwealth wins de facto property powers", press release, 8 November 2002,

Attorney-General's Department.

2. [2003] 30 Fam LR 1.

3. Recounts the dictum of Lord Penzance in Hyde v Hyde and Woodmansee[1861-73] All

ER Rep 175. It should also be noted that s46(1) of the Marriage Actrequires celebrants

to pronounce words "to the effect" of that section when performing ceremonies.

4. Meagher, D, "‘The times are they a-changin'? - can the commonwealth Parliament

legislate for same sex marriages?" (2003) 17 AJFL134.

5. [1984] FLC 91-563 at 79,544.

6. Stone, The Road to Divorce: England 1530-1987(2nd edn), Oxford University Press, 1992, at p53.

7. Report of the Committee on One Parent Families(1974) vol 2, p86, cited in the judgment of Fogarty J in The Marriage of W and T(1998) 23 Fam LR 175 at 186.

8. Christopher Lasch, "The suppression of clandestine marriage in England: The Marriage Actof 1753" Salmagundi26 (1974) at pp 90-91.

9. 26 Geo II c33.

10. Stone, The Family, Sex and Marriage in England, 1500-1800, Harper, 1979, pp30- 35, cited in the judgment of Fogarty J in note 8 above, at 187.

11. (1998) 23 Fam LR 175 at 203.

12. Wade, "Void and de facto marriages" (1981) 9 Sydney Law Review356, at 359.

13. (1991) 14 Fam LR 883 at 887.

14. (1990) 14 Fam LR 198 at 201.

15. (1991) 14 Fam LR 889.

16. Justice Alastair Nicholson, "The Family Court and the legal regulation of marriage", (2003) vol 17 no 1, Australian Family Lawyer, p1 at p5.

17. Note 12 above, at 375.

18. See the comments of Nicholson CJ, Ellis and Brown JJ in note 2 above.

19. Note 18 above.

20. Stone, "Constitutional interpretation" in The Oxford Companion to the High Court of Australia, Oxford University Press, 2001, at p139.

21. Re Wakim; Ex parte McNally(1999) 198 CLR 511 at 553.

22. In 2001, 12 per cent of all couple families were de facto. The proportion of couples living together before marriage increased from 46 per cent in 1986 to 72 per cent in 2001, the marriage rate declined from 7.2 to 5.3 marriages per 1000 population over the same period - source, ABS 1986 and 2001 Censuses of Population and Housing.

 

 


 

Law Institute of Victoria