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Limiting bites at the cherry: Searching for finality

Feature Articles

Cite as: June 2014 88 (06) LIJ, p.30

The issue of spousal maintenance is a significant consideration in most financial settlements. Practitioners are often confronted with how to properly deal with and/or extinguish parties’ competing and potential future claims.

By Sally Baker

It has been increasingly uncommon for orders or agreements in Australia to provide for long-term periodic maintenance between spouses and de facto partners. Enshrined in the Family Law Act 1975 (Cth) (FLA) is the clean break principle which favours resolutions of financial matters that avoid continued financial obligations between spouses (s81 and s90ST). Capitalised spousal maintenance clauses are commonplace in financial agreements (FAs), as a way of protecting parties from a future application for spousal maintenance.

I propose to explore the impact of capitalised spousal maintenance clauses and how effective they are in finalising parties’ financial relationships. I will also consider some practical tips to guard against future applications being made to ensure that maintenance orders are as watertight as possible, as well as the impact of FAs in assisting parties to achieve finality and to protect against a future spousal maintenance claim.

Relevant Provisions of the Family Law Act

I will refer to the relevant provisions in Part VIII and VIIIA for married spouses and in Part VIIIAB for de facto couples.

Section 81 and s90ST set out a clear obligation for the court to achieve, if possible, a final and clean break between the parties in relation to financial matters, which militates against ongoing spousal maintenance orders. This must be weighed against the policy of not increasing the burden on the public purse to support spouses who are not provided for by periodic maintenance payments. When a court is considering an application for maintenance, it must disregard any entitlement the applicant may have to an income tested pension allowance or benefit (s75(3) and s90SF(4)). Further, property orders and FAs require the identification of the proportion of property to be retained or transferred to a spouse which is attributable to the spouse’s lump sum maintenance. This obligation is imposed by s77A, s90SH, s90E and s90UH, which provide for capitalisation of spousal maintenance clauses.

Capitalisation clauses are common in property settlements and are often included to provide the financially dominant partner with some security against a future claim for maintenance.

Capitalisation of spousal maintenance

In Caska1 the Full Court of the Family Court of Australia (FC) considered an application to vary a maintenance order pursuant to s83. Consent orders were made in 1996 which provided for the husband to pay the wife lump sum spousal maintenance of $60,000. The following year (after the payment had been made), the wife applied to vary the order and sought periodic spousal maintenance from the husband. The consent orders in 1996 specifically provided that the lump sum be paid as spousal maintenance. However, no reference was made to s77A.

The FC allowed the wife’s application and did not accede to the husband’s argument that, as the order for spousal maintenance had been wholly satisfied, there was no longer an order in force which could be varied. The FC commented that the reported cases on s77A offered little assistance and “merely draw attention to the ambiguity or obscurity of the operation of s77A”.2 Caska demonstrates that spousal maintenance is alive and well and that practitioners should be alert to the possibility of claims of the nature of those made in this case.

In Price3 consent orders were made in 1994 finalising the parties’ property settlement. An amount of $12,000 of a total payment of $55,000 to the wife was attributable to her spousal maintenance pursuant to s77A. Almost four years later, the wife applied for periodic spousal maintenance. At first instance, the trial judge (TJ) granted leave for the wife to proceed with her application out of time. It is interesting to note that the TJ decided that the s77A clause in the consent orders (which provided that an amount of $12,000 be paid to the wife) was an order for maintenance. However, in contrast to the view espoused in Caska, the TJ found that, as the order had been wholly satisfied (i.e. the amount had been paid to the wife), there was no longer an order in force which could be varied. It was for that reason that it was necessary for the wife to make an application for leave to proceed out of time. The wife was ultimately awarded $250 per week maintenance for an indefinite period, as the TJ was satisfied on the evidence that the wife’s return to the work force was no more than a possibility and, therefore, she was entitled not to limit the maintenance order as to time. The FC dismissed the husband’s appeal against that order and agreed with the reasons of the TJ.

The FC considered the application of a s77A order in the case of Doig.4 The facts of the case and the decision are unremarkable, but it is worth noting the FC’s comments in relation to s77A. Property orders were made whereby the wife received the former matrimonial home and the husband retained his superannuation. The orders stated that $55,000 of the value of the home was attributable to the wife’s maintenance for the purposes of s77A. The husband appealed on the basis that the TJ erred as a matter of law by awarding the wife $55,000 by way of lump sum spousal maintenance. The FC dismissed the appeal, noting that s77A is designed to circumvent possible demands upon income-tested pensions. If the TJ was in error, it was in making the s77A order, which had favoured the husband. The husband, therefore, could not be aggrieved by it.

In Vault & Isle the FC permitted the wife to bring a further application for periodic maintenance seven years after a maintenance order had already been made and complied with.5 The parties had not divorced. This case reinforces the fact that a court is not prevented from making further orders regarding spousal maintenance, even if it has made similar orders in the past. It is interesting to note that no s77A clause was included in the original order.

In Rattigan & Rattigan the wife applied for an order for property settlement and periodic spousal maintenance.6 The parties’ asset pool was modest and the wife was disabled and reliant on the disability pension. The TJ considered the wife’s need for support, the husband’s limited capacity to provide support, and the modest asset pool, and ordered that the husband pay the wife periodic spousal maintenance of $150 per week for 12 months, to allow her sufficient time to transition to her changed standard of living.7

What conclusions can be drawn in light of the cases above?

1. In appropriate cases, the court is willing to make orders for ongoing periodic maintenance and lump sum maintenance.

2. It is possible to seek a variation of a maintenance order without seeking leave of the court. A lump sum payment made pursuant to a s77A clause may arguably preclude a subsequent application for variation of spousal maintenance from being successful under s83. However, a payment of spousal maintenance that does not include a s77A clause may subsequently be varied, or a further application could be made.

3. Section 77A clauses do not forever extinguish spousal maintenance. Nor do they prevent subsequent applications for leave to proceed out of time pursuant to s44(3).

Finalisation of spousal maintenance

How then can one finalise claims for spousal maintenance? The answer is with great difficulty and, in some cases, perhaps not at all. The best that can be done is to tie up as many loose ends as possible. The best way to achieve this is by way of an FA under Parts VIIIA and VIIIAB.

FAs as a means of achieving finality

FAs (provided that they meet the requirements in s90G and s90UJ to make them binding and have not been set aside under s90K and s90UM) oust the court’s jurisdiction to hear an application under Parts VIII or VIIIAB in relation to the matters covered by the agreement (s71A(1) and s90SA(1)).

In Garra-Marsh the applicant was seeking interim spousal maintenance and child- support orders, pending the determination of her application to set aside a financial and child support agreement.8 Their Honours took the view that strict compliance with the statutory provisions is necessary to oust the court’s jurisdiction. In this case, the court held that the FA complied with the statutory provisions and that any jurisdiction of the court to determine an application for spousal maintenance was ousted. The wife’s application was dismissed.

The main exception to the finality provided by FAs is set out in s90F and s90UI, which provide that an FA cannot exclude the power of the court to order maintenance of a party to the marriage if that “party was unable to support themselves without an income tested pension, allowance or benefit” (s90F(1A) and s90UI(2)).

In Millington & Millington the wife sought an order for the husband to pay her spousal maintenance.9 The husband opposed the wife’s application, arguing that the parties had entered into an FA which ousted the court’s jurisdiction to consider her application. However, the wife was in receipt of an income tested pension (Newstart Allowance) at the time the agreement was purportedly entered into, and at the time of her maintenance application (notwithstanding that she owned a home of significant value). The court found that no binding FA had been effectively executed between the parties. Even if it had, the court’s jurisdiction would not have been excluded because the wife was in receipt of a pension.

Section 90E and s90UH require specification in an FA of the amount or percentage value of the property or the portion of any payment made that is attributable to a party’s maintenance (should the agreement provide for such maintenance). Incorporation of such clauses which comply with this section is imperative to protect against a subsequent maintenance claim.

In Corney & Hose the respondent de facto wife sought an order that a recital in an FA which related to spousal maintenance be declared void and severed from the agreement.10 She argued that the provision did not comply with s90UH (the equivalent of s90E in FAs for de facto couples) as the FA did not specify “the party for whose maintenance provision is made and the amount or value of the property attributable to this maintenance”.11 The de facto husband argued that since s90UJ (the equivalent of s90G in FAs for de facto couples) had been complied with, the wife should be estopped from pursuing her application.

The TJ referred to previous case law to assert that s90UH “has the purpose of protecting the revenue”.12 His Honour determined that the parties cannot choose to opt out of s90UH and found the recital void, excised it from the agreement and ordered the de facto husband to pay periodic spousal maintenance.

The best practice to achieve overall finality and protection against a future claim is to document a property settlement in a consent order and enter into an FA in relation to spousal maintenance issues only. A consent order alone (with or without a capitalised spousal maintenance clause) will not oust the court’s jurisdiction should a party wish to have a second bite at the cherry down the track.

Some Practical Tips

Practitioners should take the following into account when advising in this area:

1. Consider the positions of the parties at the time an agreement is reached. If both parties are working and it is unlikely that either would have a need for spousal maintenance then, the risks having been pointed out to the client, consent orders may be adequate.

2. Consider whether the parties are divorced and the impact of s44(3).

3. If there is a disparity in income and earning capacities, and limited property and financial resources to compensate the financially weaker party, consider seeking ongoing periodic maintenance and/or lump sum/capitalised maintenance and documenting any agreement reached in an FA.

4. Consider incorporating s77A, s90SH, s90E and s90UH clauses with details of the period covered and an annual value. However, be aware of the court’s power to vary an existing maintenance order.

5. Consider inserting sunset clauses and/or terminating events in any maintenance orders. If you act for the recipient of the maintenance order, then diarise those events so that any application to vary can be made prior to those events expiring, therefore avoiding that party having to potentially seek leave of the court to proceed with any subsequent application out of time.

6. If preparing an FA, consider inserting clauses to protect against the application of s90F and s90UI. As a tip to practitioners, it is worth considering inserting protective clauses to the effect that the financially weaker party warrants that, at the date the agreement came into effect and having regard to its terms and effect, she/he is able to support her/himself without the assistance of an income tested pension, allowance or benefit. Such a clause may also state that it is not an agreement to which s90F or s90UI (as the case may be) applies.

7. Remember to dismiss any extant maintenance applications when final agreement is reached.

SALLY BAKER is special counsel at Mills Oakley Lawyers and an LIV accredited family law specialist.

1. In the Marriage of Caska (1998) FLC 92–826.

2. Note 1 above at 85, 415.

3. Price & Price [1998] FamCA 1499.

4. (1995) FLC 92–869.

5. Vault & Isle [2012] FamCAFC 93.

6. Rattigan & Rattigan [2011] FMCAfam 94.

7. Note 6 above at [21], [130].

8. Garra-Marsh & Garra-Marsh (No. 3) [2012] FMCAfam 1144.

9. Millington & Millington [2007] FamCA 687.

10. Corney & Hose [2010] FMCAfam 1462.

11. Note 10 above at [3].

12. Note 10 above at [2], [6].


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