Johannes Schmidt

Barrister-at-Law & Accredited Mediator

Tag: FCFCOA

Shams & Alkaios (No 2) [2024] FedCFamC2F 620

1 June 2024 /

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In this episode, I discuss the judgment of Judge Glass in Shams & Alkaios (No 2), which is the first published parenting case determined on the basis of the 2023 amendments to Part VII of the Family Law Act.

Overview

As everyone who has anything to do with family law knows, the parliament passed the Family Law Amendment Act 2023 last year, which had a particular focus on Part VII of the Family Law Act 1975.

Since the first Exposure Draft of the bill was released, there has been much discussion about the effects of the amendments.

I was on the record early with a view that the amendments were, for the most part, a simplification and rewording of the same concepts, aimed at making the provisions easier to understand for self-represented litigants, rather than a massive upheaval.  Whether I was right or wrong, my views will forever be freely available online to haunt me in a TEN Fireside Chat with Jacky Campbell.

The amendments took effect on 6 May 2024.  That day, Judge Glass of the Federal Circuit and Family Court of Australia (Division 2) in Melbourne commenced a 3-day parenting trial.  

No doubt many other judges did the same, but Judge Glass has the distinction of delivering the first published judgment applying the amended provisions.

His Honour delivered judgment in Shams & Alkaios (No 2) on 20 May 2024.

It was a fairly straightforward relocation matter where the children had been living with the father in Melbourne, and the mother sought a change of residence for the children to live with her in Queensland.

There’s nothing extraordinary about the facts of the case, but it is the first (and at the time of writing only) published decision based on the freshly amended Part VII.

So, how did Judge Glass consider and apply the new provisions?

Are there drastic impacts as a result of the new simplified objects of Part VII?  

Does the absence of a presumption in favour of equal shared parental responsibility mean that sole decision-making orders will be the new normal?

Have the section 60CC best-interests considerations changed everything?

Decision-Making

The first thing one sees when looking at the judgment is order 1, which reads:

The parties make joint decisions in relation to all major long-term issues in relation of the Children…

This is the new equivalent to the old order for equal shared parental responsibility, but in language which makes it absolutely clear that the order is about decision-making, and nothing else which might have been read into the term “parental responsibility”.

Of course, absent from the judgment is any discussion of a presumption, as none exists anymore.

Decision-making is now just another aspect of the discretionary assessment of best-interests considerations.

However, in determining the allocation of decision-making (after analysis of the best-interests considerations, which I discuss below), Judge Glass referred to the “encouragement” prescribed by section 61CA, which provides:

If it is safe to do so, and subject to any court orders, the parents of a child who is not yet 18 are encouraged: 

(a) to consult each other about major long-term issues in relation to the child; and 

(b) in doing so, to have regard to the best interests of the child as the paramount consideration. 

New s 60B – Objects of Part VII

Judge Glass noted that he was guided by the objects of Part VII, as found in section 60B, but did not otherwise refer to them.

Section 60CC Factors

The new section 60CC is much shorter and simpler than the old one.

The old language of protecting children from harm has been replaced by a focus on the safety of not only the child, but also the child’s carers.

Section 60CC(2)(a) – Arrangements which would promote the safety of the child and carers

Under this factor, Judge Glass traversed the history of the parenting arrangements, what his Honour termed as “generalised assertions” by the mother about the father in relation to abuse and controlling behaviour, allegations of physical violence, and other allegations of family violence.

His Honour also included in this part of the judgment discussion about what in this case was a lack of family violence orders.

On my reading, there was nothing novel in the discussion.  It encompassed the matters which his Honour would have discussed pursuant to the old s 60CC(2)(b) and 3(j) and (k).

His Honour was ultimately not satisfied that the father had caused harm to the children, and was therefore not satisfied that a change of residence was necessary to promote their safety.

Section 60CC(2)(b) – Views expressed by the child

In the familiar way, his Honour discussed the children’s views as relayed by the family consultant.

This is unsurprising, as the wording of the new s 60CC(2)(b) is a truncated version of the old s 60CC(3)(a).

Section 60CC(2)(c) – Developmental, psychological, emotional and cultural needs of the child

Here, his Honour’s discussion turned to the family consultant’s opinions about the care provided to the children in their primary residence, and the support the children received at home and school.

His Honour also referred to the family consultant’s evidence about potential emotional distress which would be occasioned on the children by a move from their familiar environment and community to a new life in Queensland.

Section 60CC(2)(d) – capacity of each person who has, or is proposed to have, parental responsibility for the child to provide for the child’s developmental, psychological, emotional and cultural needs

Judge Glass’s discussion of this factor is reflective of the discussion one would have expected in relation to the old s 60CC(3)(f).

It has the usual themes of parental capacity and insight, child-focus and support of the children’s relationships with the other parent.

Section 60CC(2)(e) – Benefit to the child of being able to have a relationship with the child’s parents and other people who are significant to the child, where it is safe to do so

Here, his Honour considered the nature of the children’s relationships with each of the parents and other significant adults, ultimately determining that the children had strong and sound relationships with each parent, which could be sustained despite the geographical distances between them.

Having found earlier that there was no risk to safety, the last seven words of paragraph (e), being “where it is safe to do so” had no work to do in this case.

In the absence of safety concerns, the new s 60CC(2)(d) appears to reflect the old s 60CC(2)(a) and (3)(b), (c) and (d).

Section 60CC(2)(f) – Anything else relevant to the particular circumstances of the child

This new version of the old s 60CC(3)(m) catch-all provision.

His Honour did not discuss any relevant matters.

Conclusion

No doubt, we will see more and more judgments in the coming months, which will show us how various judges in all three Court – Division 1, Division 2, and Family Court of Western Australia, are applying the new provisions.  

In time, we will get further clarification from the Full Court and eventually the High Court.

Based on this first published judgment, though, it looks like we may all be able to relax a little bit about the amendments, as nothing much seems to have changed.  

Asset Preservation Orders with Robert Heath KC

1 May 2024 /

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In this episode, I am joined by Robert Heath KC, for a discussion about asset preservation orders.

Transcript

Johannes: 

Welcome to Divorce is Schmidt: A Family Law Series.

In this episode, I’m joined by a special guest.  Rob Heath KC is a leading commercial silk at the Victorian Bar.  In addition to his busy, and broad, advocacy practice, Rob is a highly sought-after mediator and arbitrator, both in Australia and overseas.

I had the privilege of being led by Rob in a matter in the Major Complex Financial Proceedings list in 2023, Rob’s first foray into family law.

That included a two-day interlocutory stoush, primarily about our topic of discussion in this episode: asset preservation orders.

Rob, what is an asset preservation order, and what is it for?

Rob:

The purpose of granting an asset preservation order is to prevent the frustration or inhibition of the court’s process, by seeking to meet a danger that a prospective judgment of the court will be wholly or partly unsatisfied.

Johannes:

And how does an asset preservation order operate?

Rob:

Asset preservation orders operate to prevent the party against which they are made from divesting or dissipating assets.

They’re intended to prevent the abuse or frustration of the processes of the court by preventing the respondents from dissipating their assets, or disposing of their assets, so as to deprive applicants of the fruits of any judgment obtained in the proceedings.

Johannes:

Okay, so an asset preservation order is a species of interlocutory injunction.  In the family law context, we’re looking at section 114(3) of the Family Law Act.  Now, that section provides that the court may grant an injunction if it appears to the court to be just and convenient to do so.

How does the court work out whether it’s just and convenient to grant an injunction, generally?

Rob:

In ABC and O’Neill, the High Court explained the organising principles relating to interlocutory injunctions.

According to these principles, on such applications, the court must make two inquiries.

The first inquiry is whether the applicant has demonstrated a sufficient likelihood of success to justify in the circumstances the preservation of status quo pending trial.

And the second inquiry is whether the balance of convenience favours the granting of the injunction sought.

Johannes:

I’m guessing, Rob, that the first limb there is quite important in general civil litigation, where a plaintiff or applicant needs to make out a cause of action.

In the context of family law property proceedings, that will virtually always be satisfied, won’t it?

Rob:

Yes, I think so.

Johannes:

And how does the court determine the balance of convenience in the second limb of that test?

Rob:

In order to succeed in obtaining an asset preservation order, an applicant must demonstrate the following.

First, a sufficient probability that they will obtain a favourable judgment, which, as we’ve just touched, on is usually a given in a family law property case.

And, second, the risk that, if not restrained by order of the court, the respondent will do something that brings about an unjustifiable dissipation of assets under the respondent’s control, with the consequence, Johannes, that this will interfere with the due administration of justice.

And, third, as a matter of discretion, the order ought be made.

Johannes:

So the real meat is in the second limb there, isn’t it?  A risk of unjustifiable dissipation of assets under the respondent’s control.

How does the applicant for the asset preservation order show that?

Rob:

The applicant will discharge that burden if they can show that there’s a real risk that a judgment will go unsatisfied, in the sense of a real risk that unless restrained by injunction the respondent will unjustifiably dissipate, or dispose of, their assets, other than in the ordinary course of business.

Second, unless the respondent is restrained by injunction, assets are likely to be dealt with in a way such as to make enforcement of any judgment more difficult, unless those dealings can be justified for normal and proper business purposes.

Johannes:

Okay, and what’s the level of evidence required to demonstrate a real danger of judgment frustration?

Rob:

The applicant must show by evidence, and not by assertion, that there’s a real danger of dissipation of assets such as to render the judgement wholly or partly ineffective.

The applicant must prove facts from which a “prudent, sensible commercial” person can “properly infer a danger of default if assets are removed from the jurisdiction” or dissipated.

Johannes:

So it can’t just be a fear or speculation on the part of the applicant that the respondent might do something dodgy, and a prudent person needs to be able to draw an inference of default from the evidence.

What if conflicting inferences are open on the evidence?

Rob:

In 1952, the High Court in Luxton and Vines held that courts cannot draw the “appropriate inference” if the admissible evidence gives rise to “conflicting inferences of equal degrees of probability so that the choice between them is mere matter of [speculation or] conjecture”.

Johannes:

And you said earlier that the third limb of the test is whether, in the court’s discretion, the order ought to be made.  What does the court consider there?

Rob:

Courts must consider the customary discretionary calculus.

Johannes:

What does that involve?

Rob:

First and foremost, analysing the first and second considerations together and doing so with an appreciation of both the underlying purpose of the rule and the relative risks of granting or withholding relief.

Second, considering other matters, such as the breadth of the orders sought and the likely impact of those orders upon the person against whom it’s made, and also upon third parties.

Johannes:

Okay, and is there any remedy for the respondent, or third parties, if they suffer losses because of the asset preservation order being made?

Rob:

Yes.  On the assumption that it should not have been made as things turn out, courts look back to an undertaking as to damages, which the applicant may have had to have provided.  And the authorities make it clear that, ordinarily, an application for an asset preservation order should be coupled with the giving of an undertaking as to damages by the applicant.

In exercising the discretion at the final steps, courts have regard to the likely difficulties associated with the quantification and recovery of damages pursuant to the usual undertaking, if it should turn out that the order should not have been granted, and the likely problems for the identification of events which would trigger that entitlement to damages at the end of the whole process.

Johannes:

Thanks, Rob.

So what are the key takeaways for our listeners here?

Rob:

First, there needs to be a real risk of unjustifiable dissipation of assets – not justifiable dissipation; it has to be unjustifiable.

Second, there needs to be a risk that such dissipation will undermine the administration of justice.

And, third, there must be evidence of the risk.  Not mere speculation or conjecture, and not assertion.  That won’t cut it.

Johannes:

So, actual evidence.

Rob, a lot of the authorities on asset preservation orders come from outside the family law sphere.  For the people listening to this who, like me, are mere family lawyers, where can they find all of the citations of the principles that you’ve spoken about today?

Rob:

Mercifully, Johannes, they’re all set out in our article in issue 1 of volume 33 of the Australian Family Lawyer, which is published by the Family Law Section of the Law Council of Australia.

Johannes:

Rob, thank you so much for joining me, and for your insights on asset preservation orders.

Rob:

My pleasure. Thanks for having me.

Johannes:

This is Robert Heath KC.  I’m Johannes Schmidt.  Thank you for listening.

Stella & Stella [2023] FedCFamC1F 1092

27 March 2024 /

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In this episode, I discuss Strum J’s recent judgment in Stella & Stella, which involved Stanford arguments, multiple pools and late inheritances.

Overview

Stella & Stella was a matter heard by Strum J in the Major Complex Financial Proceedings list.

Each of the husband and wife was in their early- to mid-50s. They had 3 adult children together.

The total value of the non-superannuation property of the parties, or either of them, was around $16 M.  There was controversy about add-backs and treatment of contingent tax issues. Around $10.5 M worth of the non-superannuation property had been obtained by the parties by way of inter vivos gifts or inheritances received from the husband’s late grandmother, or by distributions from a trust associated with her.

It’s important to note at the outset that those property interests were variously received by each of the parties, not only by the husband.

The crux of the case was how those gifts, inheritances and distributions to each of the parties were to be treated.

Positions

The husband’s position was that it was not just and equitable for there to be any property adjustment at all.  He was running what family lawyers often call a Stanford argument.

The wife contended for a 2-pool approach:

  • Pool A consisting of so-called “non-inherited interests”
  • Pool B consisting of the property interests derived from the husband’s late grandmother.

She contended that it was just and equitable for there to be property adjustment with respect to Pool A, but not with respect to Pool B. In other words, she was running a Stanford argument only in relation to Pool B.

Legal Principles

His Honour traversed the authorities in relation subsection 79(2), being the subsection which requires the Court to assess whether it is just and equitable to make a property adjustment order.

His Honour referred to the observation by the Full Court in Bevan & Bevan that subsection 79(2) is unlikely to impact most cases, as the just & equitable requirement will readily be satisfied by virtue of the parties no longer living together, and there is no longer the common use of property.

Importantly, his Honour discussed the 2017 Full Court decision in Zaruba, where it was held that, whilst in the vast majority of cases the justice & equity question is appropriately addressed without making distinctions between individual assets, “the position is likely to be different in circumstances where … the characteristics of the property and the circumstances of its acquisition, improvement and the like can be seen to differ significantly…”

In relation inheritances, Strum J considered the two 2017 Full Court decisions, Holland and Calvin & McTier, which in turn referred to well-known authorities like Bonnici, and Farmer & Bramley.

The upshot is that the Court has a discretion as to how to treat late inheritances, including whether to include them in a global pool or deal with them separately, and how much weight to give to contributions made directly to the inheritance as opposed to global contributions in the relationship.

Strum J also, of course, discussed the principles arising from Gosper and Kessey, and how Chisholm J in 1997 discussed those principles in Pellegrino.

At paragraph 87 of his judgment, Strum J summarised the principles arising from the authorities.  I highly recommend that you read that paragraph in full.  

Some key points relevant to my discussion here are the following:

(q)          Whilst, in the vast majority of cases, it will be appropriate to address the s 79(2) question by ascertaining the legal and equitable interests in property without making distinctions between individual assets, the position is likely to be different in circumstances where the characteristics of the property and the circumstances of its acquisition, conservation and improvement can be seen to differ significantly and where the parties’ relationship has taken on quite different characteristics during the period to which the s 79 enquiry is directed.

(r)          The expression “any property of the parties to a marriage or either of them” in s 79(4)(a)–(b) is sufficient to encompass both the entirety of their property and their individual assets, such that if the parties’ interests in specific items of property differ, or they have made differing contributions, justice and equity may best be served by proceeding upon an asset by asset basis in the division of the property between them.

(s)          The nature of a particular interest or interests in property, and when and how it was acquired, conserved, improved, or used, may be very relevant to whether a s 79 order should be made at all; whether contributions should be assessed globally or asset by assets or by reference to two or more pools; and what is the nature and extent of each party’s contributions. This calls for the exercise of discretion, to be exercised not by reference to whether property might conveniently be described as “an inheritance” or “after-acquired” but, rather, by reference to the nature, form and characteristics of the property in question and the nature, form and extent of the parties’ contributions of all types across the entirety of their relationship. However, there is no basis for excluding from consideration any property in which the parties have an existing legal or equitable interest.

(t)          Whilst it might be convenient to describe property by reference to a characteristic (for example, as an “inheritance” or “post-separation” or “after-acquired” property), its place within the ambit of s 79 is determined by the fact that it exists as a legal or equitable interest of the parties to the marriage or either of them and that the nature, form and characteristics of it and the contributions of all types made by the party suggest that it should be treated in a particular way.

(u)          A party cannot be regarded as contributing significantly to an inheritance received very late in the relationship or after it has terminated, except in very unusual circumstances, including the care of the testator prior to death.

(x)          Where a relative of one of the parties to a marriage gifts property to both of the parties, dependent upon the circumstances of the case, it is open to the Court in such a case to look at the actuality and treat that as a “financial contribution made directly … on behalf of” the party related to the donor. In many such cases, that gift was only made because of that relationship and, in reality, as a means of benefiting that relative in the marriage. In other cases, the evidence, including evidence that the donor intended to benefit both spouse parties, may not justify that conclusion. If so, the application by the parties of that property to the marriage would, at least at that point, be an equal contribution by them.

On the facts of the case, his Honour determined that it was just and equitable to make a property adjustment order with respect to Pool A – the property which was not derived by way of inter vivos gifts or inheritances from the husband’s grandmother.

Without going into the detail, essentially, there was, irrespective of the husband’s initial contribution, jointly owned property, and no express consideration by the parties of how their property interests should be arranged.

In relation to the inter vivos gifts, Strum J held that there was insufficient evidence of the late grandmother’s intentions to find that the gifts to the wife were intended to specifically benefit her, rather than the parties jointly or the husband. 

This was despite his Honour finding that the wife and the husband’s grandmother had had a close relationship.

In relation to the inheritances, particularly the inheritance received by the wife, Strum J considered the fact that there were separate bequests to the husband and the wife (among many others).  His Honour gave significant weight to the language of the late grandmother’s will, including a reference to her “granddaughter-in-law”, as opposed to a term such as “my grandson’s wife”. 

His Honour found that the evidence established a clear intention on behalf of the grandmother to separately benefit each of the husband and the wife by her separate bequests to each of them.

On that basis, his Honour determined that it would not be just and equitable to make an adjusting order with respect to the parties’ respective inheritances from the husband’s late grandmother.

However, the same could not be said of the inter vivos gifts, which his Honour grouped with the Pool A assets, and which were therefore subject to adjustment.

Family Law Rules 2021 – A Few Thoughts

6 October 2021 /

On 6 October 2021, I presented a CPD session for the Family Law Bar Association, together with Senior Judicial Registrar Parker of the Federal Circuit and Family Court of Australia and Dr Robin Smith of the Victorian Bar, about recent changes to Australia’s family law system.

I shared a few thoughts about the harmonised Family Law Rules. Whilst I did not write a paper per se, I thought that some practitioners may find utility in the notes I used for my presentation, a copy of which you may download, or view below.

A recording of the entire session is available to members of the Victorian Bar on the CPD section of the Bar website, and to others by subscription to CPD In Session.

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