Can Senior Judicial Registrars lawfully hear and determine “Rice & Asplund cases”?
In my opinion, the answer is no.
Subsection 65DAAA(1) of the Family Law Act 1975 commences with:
“If a final parenting order is in force in relation to a child, a court must not reconsider the final parenting order unless: …”
Subsections 65DAAA(2), (3) and (4) are informative or exclusionary.
There is no power to a court provided within that section. Rather, it imposes a restriction or limitation on the exercise of a power.1 It is akin to section 60I(7) in that respect.
Section 65DAAA has been expressed as the legislation of the ‘Rule’ in Rice & Asplund. That may be an accurate description. The ‘Rule’ was never itself a power but a mandatory consideration in a relevant parenting matter.
Notwithstanding that no power can be found in section 65DAAA, the Family Law Rules 2021 purport to delegate the ‘power’ under section 65DAAA to Senior Judicial Registrars who have been approved by the Chief Justice.2
That delegation is ineffective because no power has been delegated.
Senior Judicial Registrars are delegated the power to summarily dismiss a matter.3
However, subsection 254(3)(d) of the Federal Circuit and Family Court of Australia Act 2021 precludes the delegation of power to registrars to make an ‘excluded child order’.
Excluded child order is defined in section 7. Relevantly, it is ‘an order in relation to the welfare of a child’ other than a make-up time order, an order until further order, an order in undefended proceedings, or an order by consent.
The authorities in relation to the Rice & Asplund issue are inconsistent or at least uncertain about whether dismissing a parenting application on the basis of the ‘Rule’ could be summary dismissal.
Taking a liberal approach to delegated powers, assume that a Senior Judicial Registrar is empowered to summarily dismiss a parenting application on the basis of no reasonable prospects of successfully satisfying the requirement of subsection 65DAAA(1)(b). Exercising the power still requires the consideration of the best interests of the child.
In Defrey & Radnor [2021] FamCAFC 67, the Full Court emphasised that identifying changes in circumstances is a fact-finding step, but the second step requires the exercise of a discretion. It would seem that subsection 65DAAA(1) is no different.
An order that dismisses the parenting application is made because the court is not satisfied that litigation, when held up against all other circumstances, is not in the child’s best interests.
The Full Court in Defrey & Radnor said at [21]:
“… Axiomatically that is because unless other considerations are more weighty, it is not in the best interests of a child for that child to be the subject of repeated litigation between his/her parents. …”
It follows that an order summarily dismissing a parenting application, based on no reasonable prospects of successfully satisfying s65DAAA(1)(b), must be an order in relation to the welfare of the child.
It is plainly not an order: until further order, by consent, in default, or for make-up time.4
It is therefore an excluded child order, the power for which cannot be delegated to registrars.
David Marcolin Senior Associate
1 Albeit an ineffective limitation see subsection 65DAAA(4). 2 Schedule 4, Clause 2, Item 3.9. 3 Schedule 4, Clause 2, Part 31 of the Family Law Rules 2021. 4 The exceptions to the ‘excluded child order’ definition.
Pre-nups, mid-nups and done-nups – financial agreements
The Family Law Act permits a couple to enter into a contract about their financial circumstances in the event of a breakdown of a relationship, or after they have already separated.
In Australia we have one term for that type of contract, whether before, during or after a relationship: Financial Agreement.
The first rule to wrap your mind around is that pre-nups (and mid-nups) cannot regulate the financial conduct during a relationship. The terms of those contracts are only enforceable if and when the couple separates.
There are a number of reasons why people enter into Financial Agreements.
After separation
When a couple separates, either of them may apply to the family courts for orders about property settlement and/or spousal maintenance.
If the couple have reached an agreement about either or both of those matters, they generally have two options to document and create binding, their agreement:
A joint application to the Court to make a “consent order”; or
A financial agreement.
An effective agreement requires certainty and enforceability. If a party to an agreement can simply renege on the deal, it is not effective.
The Family Law Act provides that a court may make property settlement orders and spousal maintenance orders, if the court considers it appropriate, with only one exception: if a financial agreement is binding on both parties.1
The only way to create an effective agreement then is either to exclude the court’s jurisdiction or to exhaust the court’s jurisdiction.
The former is done by entering into a financial agreement.2
The latter is done by applying for a consent order. The Court may only exercise its power in relation to property settlement once.3 So a consent order will exhaust the jurisdiction.
There are reasons why people choose to enter financial agreements rather than apply for consent orders, and vice versa. This is important to understand, but it depends on your specific circumstances.
Before or during the relationship
The contract with which most family lawyers have a love-hate relationship: the “pre-nup”.
American TV tells us that husbands can demand weekly pillow fights from their multiple wives and wives can contractually limit the recreational activities of their husbands.
If a couple entering a relationship (or recently in one) wish to avoid the potential for litigation in the event of their future separation, they can enter into a contract setting out how their finances will be settled at the end of their relationship.
The legal effect of this agreement is as discussed earlier: the exclusion of the court’s jurisdiction.
There are ways for these contracts to be set aside in the future. It is critical that you understand this before entering the contract.
Another reason why a “pre-nup” may suit a couple is if they wish to settle their finances – in the event of the breakdown of their relationship – in a way that is unlikely to be the conclusion of a court.
In that sense, the law does not protect a person from entering a bad deal.4
What can we do for you
One of the reasons that couples choose to enter financial agreements (instead of apply for consent orders or let the court decide) is the flexibility of the content of their agreement.
Financial agreements must still meet the legal requirements of contract law generally, but they are not bound by the same principles upon which courts must base their decisions (including consent orders).
For pre-nups, there are many options to address what will happen in the event of separation and importantly when. For example, if a relationship were to end after 5 years, the couple may expect a very different outcome than if it were to end after 20 years.
David Marcolin Senior Associate
1 The actual legal position is a bit more technical. The exception applies to the extent that the financial agreement applies to the matters about which the court would otherwise seek to make orders. 2 See the note above. 3 Again, the legal reality is more nuanced. But this is assuming well prepared documents. 4 It does however protect a person from entering a deal for a bad reason. It is critical that you understand this before entering the contract.
Raising community awareness about the nature and impact of family violence
One woman was killed every 11 days, and one man was killed every 91 days by an intimate partner on average in 2022-2023 in Australia.1
Female intimate partner violence homicide victims are more likely to be killed during a period of intended or actual separation.
In more than 2 in 5 intimate partner homicide cases children were exposed to the violence between their parents.
Domestic and family violence has, historically, been a “closed-door” family issue.
Coercive control and other forms of domestic and family violence are more and more frequently being reported in the media following several high-profile cases, and tragic deaths.
With this high level of reporting, and the criminalisation of coercive control, it appears that a deeper comprehension and recognition of the different forms of family and domestic violence is beginning to gather momentum.
However, many victims of domestic and family violence are not aware that what they were experiencing was domestic and family violence.
Are we failing to educate our community on the nature and impact of family and domestic violence?
We, as lawyers, understand what abuse looks like. But do our clients?
It can be challenging for our clients to realise that they are victims of family and domestic violence.
The Women’s Safety and Justice Taskforce Hear Her Voice Report 1, Volume 3 discussed the critical need for significant community education prior to the criminalisation of coercive control.2
That report was released in December 2021. Coercive control was criminalised in Queensland on 6 March 2024.
What have we done as lawyers, individuals and as a community to increase our awareness and understanding about the nature and impacts of domestic and family violence including coercive control between December 2021 and now?
As lawyers, we have introduced preliminary domestic violence screenings into practice, we are increasingly becoming more trauma informed in our practice, and we see the effects of family and domestic violence on a daily basis. We are so constantly exposed to the research and reporting of domestic and family violence, that we can often understand the signs upon our first meeting with our client.
Our clients don’t receive the benefit of our exposure until they walk through the front door of our office.
To better protect future generations and victims of family and domestic violence, better community awareness and understanding about the nature and impacts of domestic violence is vital.
A common recommendation is the implementation of school-based education.
We teach children how to practice safe sex, but are we neglecting to teach children about cultivating healthy and safe relationships?
A positive step is Respectful Relationships Education which involves specialised resources for schools and teachers to assist young people in developing emotional and social learning in self-awareness, self-management and risk and responsible decision making.
Legal Aid Queensland has just produced a webinar aimed at changing young people’s attitudes and behaviours towards violence against women.
Within that webinar, they pointed to the Youth Advocacy Centre which is a Brisbane based not-for-profit organisation that has a mission to increase young people’s access to justice, both legal and social.
Within that service is their Domestic and Family Violence Legal Service open to both victim and perpetrator who are under the age of 18 years.
It is clear that we are taking steps to educate young people and the community.
“The procedural unfairness and erroneous application of legal principle which can be identified in the Reasons for Judgment both stem from disagreement over the proper construction of the June 2018 Orders and the manner in which those Orders blocked the mother’s applications.”
In the case of Deleon & Deleon [2023] FedCFamC2F 1366, the court was asked to make a Hadkinson’s Order.
The mother asked for parenting proceedings to be stayed because the father had not fully performed a property settlement order.
The father and the Independent Children’s Lawyer wanted the parenting proceedings concluded.
The case involves a short discussion of the legal principles espoused in the decision of Hadkinson & Hadkinson.
The court said, “At its heart, the rule is said to provide that a party in contempt will not be heard”.
The court has, over time, in subsequent decisions, confirmed that the rule is, firstly, a discretionary one and, secondly, is confined to proceedings in the same cause in which the alleged contempt has been committed. A lack of nexus between the proceedings in the same cause was said by the court to be fatal to any application to apply the rule.
Authority for that consideration is Fahmi & Fahmi [1995] FamCA 106; Watson & Watson [2013] FamCAFC 25; and Dautry & Wemple [2018] FamCAFC 237.
The father is in breach of proceedings under Part VIII of the Act. The relief sought by the mother is in proceedings for parenting under Part VII of the Act. The court determined they were separate causes of action.
The court considered there was a failure of the necessary nexus.
The court then considered the best interests principle and said:
“The best interests principle alone would be sufficient in my view to decline to make orders as sought by the mother. The court will not countenance any situation which might see a relisting of the father’s application on a liberty to apply basis. In my view, that would be tantamount to adjourning the proceedings sine die and does not meet with modern litigation procedures designed to bring litigation to an end.”
Amendments to the Family Law Act: The best interest principles and equal shared parental responsibility
Recently, the Australian Parliament has passed two pieces of legislation amending the Family Law Act 1975 (Cth).
This legislation was introduced with the aim of making the Australian family law system “simpler, safer and more accessible for separating families and their children”.
These amendments are to apply in relation to all proceedings after commencement, as well as proceedings already in the court-system but not subject to final order.
Family Law Amendment Act 2023
The Family Law Amendment Act 2023 was passed on 19 October 2023 and received assent on 6 November 2023.
Most of the changes to the law will apply from 6 May 2024, unless an earlier date is otherwise fixed by Proclamation.
Its purpose is to ensure that the best interests of the children of separating families are prioritised in the family law system.
Several changes will be made to the current Family Law Act 1975 (Cth).
This article briefly discusses the changes to be made in relation to the best interest factors and the repeal of the presumption of equal shared parental responsibility.
Other key amendments include:
The requirement for the Independent Children’s Lawyer to meet directly with the children;
Greater powers to protect parties and children from the harmful effects of protracted and adversarial litigation;
A definition of ‘member of the family’ that is inclusive of Aboriginal and Torres Strait Islander concepts of family and kinship;
Simplified compliance and enforcement provisions for child-related orders;
Powers to enable government to regulate family report writers;
Ensuring that children’s voices are heard more easily in matters under the Hague Convention on the Civil Aspects of International Child Abduction.
Changes to the best interest principles
The current factors outlined under s 60CC, also referred to as the primary and additional considerations of the Court when determining parenting arrangements in the child’s best interest, were critiqued in the Australian Law Reform Commission Report Family Law for the Future: An Inquiry into the Family Law System: Final Report.
The ALRC Report stated that amendments were necessary to simplify, clarify and improve how the best interests of the children are considered in parenting matters.
The amendments see the abolishment of the primary and additional considerations.
Instead, the amendments introduce six general considerations, and two further considerations for Aboriginal or Torres Strait Islander children.
Under the reforms, the Court must consider the following when determining what is in the children’s best interests:
What arrangements would best promote the safety (including safety from family violence, abuse, neglect, or other harm) of
The child; and
Each person who has parental responsibility for the child;
Any views expressed by the child
The developmental, psychological and emotional needs of the child;
The capacity of each proposed carer to provide for the child’s developmental, psychological and emotional needs, having regard to the carer’s ability and willingness to seek support to assist them with caring;
The benefit to the child of being able to maintain a relationship with both of the child’s parents, and other people who are significant to the child, where it is safe to do so;
Anything else that is relevant to the particular circumstances of the child.
If the child is Aboriginal or Torres Strait Islander, the Court must look at two additional considerations. Namely, the Court must consider:
The child’s right to enjoy the child’s Aboriginal or Torres Strait Islander culture, by having the opportunity to connect with, and maintain their connection with, their family, community, culture, country and language;
The likely impact any proposed parenting order under this Part will have on that right.
Despite the changes, the Court retains their wide-ranging discretion to determine what parenting arrangements are in the child’s best interest.
Equal Shared Parental Responsibility
Currently, s 61DA of the Family Law Act 1975 (Cth) provides that when making a parenting order in relation to a child, the Court must apply a presumption that is in the child’s best interest for the parents to have equal shared parental responsibility for the child.
Section 65DAA, as it currently stands, requires the court to consider a child spending equal time, or substantial and significant time, with each parent when an order of equal shared parental responsibility is made.
This presumption, and consideration of equal or substantial and significant time, have been controversial since their inception.
The Explanatory Memorandum to the Family Law Amendment Bill 2023 outlines that recent inquiries into the family law system have found that the presumption of equal shared parental responsibility is commonly misunderstood as creating a right to equal shared time with children. This has never been the case and has led to inappropriate arrangements for children and increased parental conflict.
Given this, the presumption has been repealed. Under the reforms, there will be no presumption of equal shared parental responsibility.
Parenting arrangements will be based solely on what is in the best interest of the child.
The Court may make orders providing for joint or sole decision making about major-long terms decisions.
The Court may also find that it is in the children’s best interest that one parent has sole decision making in relation to a particular major-long term decision, but both parents have joint decision making in relation to the others.
The Court will still be required to consider the allocation of parental responsibility, and responsibility for decision-making about major long-term issues, when raised by the parties.
Essentially, the wording of the Act has been clarified to avoid conflating the term ‘equal shared parental responsibility’ with equal time.
Family Law Amendment (Information Sharing) Act 2023
The Family Law Amendment (Information Sharing) Act 2023 was passed on 19 October 2023 and received assent on 6 November 2023.
The purpose of the Family Law Amendment (Information Sharing) Bill 2023 is to ensure the courts have access to the full picture of family safety risk in order to prioritise the safety of children and families, particularly in circumstances where there is a risk of child abuse, neglect or family violence.
The main amendments to the Family Law Act introduced by this Act are the following:
Establishment of two new information sharing orders to allow courts to quickly seek information from police, child protection and firearms agencies about family violence, child abuse and neglect that may place children at risk;
Allowing a court to make these orders at any time during proceedings so information is accurate and up-to-date, and
Ensuring sensitive information is only disclosed in a safe and appropriate manner.
This article is not intended to be a complete outline of the amendments to be made to the Family Law act 1975 (Cth).
The team at Feeney Family Law have reviewed the amendments and understand how the law and the decision-making framework in parenting cases is expected to change.
If you have any questions in relation to the changes, please do not hesitate to contact a member of our team.
The appeal in Halloran & Keats[2023] FedCFamC1A 56 is a judgement dealing with parenting.
The appeal was allowed, and Orders made on the 15th of December 2022 were set aside, three of the Orders made on the 20th of June 2018 were aside and the matter was sent back to rehear an Amended Initiating Application filed in November 2022 and a Response to an Initiating Application filed on the 14th of September 2022. Costs Certificates were given.
The mother had appealed eight Orders dismissing her application to revise existing Parenting Orders and compelling her to pay the father’s costs of successfully resisting her application.
The parties had Consent Orders in place that were made in June 2018.
Those original Orders:
“also purported to regulate the manner in which the parties could revise them, by expressly providing this:
That the mother may submit to an independent psychiatric assessment, involving the provision of a written report. In the event she does so she shall ensure the psychiatrist is provided with copies of the reports previously prepared by [other expert witnesses]; the father’s affidavit affirmed 1 June 2018, and the mother’s affidavit affirmed 29 May 2018, and the mother shall make available to the psychiatrist any further material requested by the psychiatrist.
The mother must serve a copy of any such psychiatric report on the father by email or by post.
Both parties have liberty to apply to vary all Orders except 1, 2, and 10 on one occasion upon the completion of Orders 20 and 21, and this will be the occasion referred to in Notation A.”
There was a notation that said:
“Notwithstanding the authority of Rice v Asplund, that once the mother has complied with Orders 20 to 21, that the parties be at liberty to seek a variation of all Orders except 1, 2, and 10 on one occasion without demonstrating there has been a significant change in circumstances since these Orders were made and neither party shall raise that as a reason the Court should not hear the application.”
This case was of interest because from time-to-time parties do wish to have Orders that can be revisited on their own terms without needing to run the gauntlet of the Rice v Asplund tests.
It would appear that goal was that the mother was free to revive the proceedings “in an attempt to vary the original orders (save those governing the children’s residence and parental responsibility), provided only that she first obtains and serves an independent psychiatric assessment”.
In August 2022 the mother sought “the wholesale discharge and replacement of the existing orders.”
There was a hearing and “the primary judge only ordered the dismissal of the mother’s Initiating Application, but not her Amended Initiating Application, despite being well aware of the application in its amended form. Nevertheless, it is accepted by the parties that the appealed orders were intended to finalise the entire cause – not just to dismiss the mother’s primary application and leave her fall-back application to be determined on the merits at some later time.”
The mother’s amended application had brought her within the terms of the original plan that she wouldn’t need to establish a Rice v Asplund circumstance, but her original application had been one that would require it.
The Appeal Court found:
“The procedural unfairness and erroneous application of legal principle which can be identified in the Reasons for Judgment both stem from disagreement over the proper construction of the June 2018 Orders and the manner in which those Orders blocked the mother’s applications.”
The Court said the orders thereby “purport to exclude the operation of the principles established by Rice v Asplund under certain conditions.”
The difficulty was that her original application took her outside the ambit of the means by which the parties had intended to exclude the operation of the principles of Rice v Asplund and it was that application that was dismissed but the mother had filed a more cautious application that did bring her within the ambit of the 2018 plan.
The Appeal Court said:
“contrarily, the primary judge appears to have imposed upon her the obligation to demonstrate materially changed circumstances in all respects.”
Although the primary judge who had dismissed her application had not questioned the validity of the June 2018 Orders 20-22, the Appeal Court said:
“An anterior question arises as to the validity of those orders for two reasons. First, the source of power to make the orders is quite unclear and, without any source of power, they are ultra vires and hence invalid. Secondly, the orders are irreconcilable with the guideline legal principles espoused in Rice v Asplund, which principles require the demonstration of materially changed circumstances whenever any application is made under s 65D(2) of the Act to vary existing parenting orders.”
Section 64B(2)(g) of the Act defines a Parenting Order. That includes one which prescribes the conditions which must be fulfilled before an application is made to change Parenting Orders.
That section is shaped by the provisions of s 64B(4A) of the Act.
“Section 64B(4A) expressly states it does not limit the meaning of s 64B(2)(g) of the Act, but that does not mean the latter sub-section can be read so broadly as to empower the making of any condition imaginable to hinder a litigant’s right to re-contest parenting orders. There must be some proscription on the width of the sub-section, even if its limitations must be implied.”
His Honour says:
“The exercise of statutory power to make an order either shutting out or restricting a litigant’s right to litigate is serious and must be exercised with due care.”
This decision then refers to Oberlin & Infeld [2021] FamCAFC 66.
The Appeal Court in this case says:
“The Full Court discussed the caution with which a judge should contemplate and craft any order which conditions a litigant’s right to bring fresh proceedings under Pt VII of the Act, so as not to stray beyond express or implied statutory power. Those observations are pertinent here.”
The Court talks about limitations placed on litigants by Rice v Asplund and says:
“Such obligations imposed by law cannot be relieved by an order, whether merely procedural or purportedly made in the guise of a substantive parenting order. Orders are made by courts to fulfil the law, not to undermine or circumvent it.”
The Appeal Court said:
“There could be little doubt then that the primary judge understood how the mother asserted she was entitled to re-open the proceedings pursuant to the text of Orders 20–22 and Notation A, and just as importantly, how her fall-back position was supposedly governed by those orders and that notation, even though her primary application was not.”
The Appeal Court said:
“Regardless of the way in which the primary judge chose to construe the June 2018 orders, they were still used to globally dismiss both aspects of the mother’s dual application without differentiation.”
The Appeal Court said:
“Orders 20–22 made in June 2018 are most probably not valid parenting orders or injunctions. Nor could they be properly regarded as valid procedural orders…Those orders should be set aside, for otherwise s 138 of the FCFCA Act requires that they be treated as efficacious. The fact those orders were neither appealed at the time nor the subject of this appeal does not preclude their discharge. The power to do so exists in ss 36(1)(b) and 36(5) of the FCFCA Act.”
The Appeal Court said that the mother’s dual application, which must be re-heard by another judge, will entail application of the Rice v Asplund guideline principles unconstrained “by the artificial construct imposed by Orders 20–22 and Notation A.”
A single Judge appeal of Gare & Farlow [2023] FedCFamC1A 98 has some interesting points.
It is a case dealing with an unsuccessful appeal and costs fixed for the Appellant to pay the Respondent’s costs.
The wife appealed the trial decision that provided her with 66% of the parties’ net assets in which she retained her own superannuation.
The wife had a business. She complained in the appeal that the Primary Judge erred by overvaluing the business and as a result, the amount she had to pay the husband was greater than she considered it should have been.
The eventual trial took four days and judgment was reserved and delivered a year later.
There had never been an order made compelling the parties to appoint a single expert to express an opinion about the value of the wife’s business. They each engaged adversarial experts and the trial became a combat between the two experts expressing different opinions.
The Trial Judge had accepted the adversarial expert opinion evidence adduced by the husband.
The wife argued that the husband’s expert’s evidence was inadmissible pursuant to the application of Section 76 and 79 of the Evidence Act. The Appeal Court noted that whilst s.76 renders opinion evidence inadmissible, s.79 allows for the exception in an area of specialised knowledge if based on relevant training study or experience.
At trial, both parties had taken objection to the admissibility of the other’s expert evidence, but all the expert evidence was admitted and thereafter evaluated by the Primary Judge in light of the cross-examination of each expert witness.
The wife complained the husband’s expert did not satisfy the exception of s.79 and that his opinion evidence had been late.
The appeal deals only with the alleged inadmissibility of the husband’s expert evidence by reference to the provisions of the Evidence Act.
There had been a voir dire on the discrete issue of the husband’s expert’s qualification and experience in the field of business valuation.
The Primary Judge had overruled the wife’s objection after the voir dire.
The wife, really, in her appeal, reissues the challenge to the expertise she made in the trial.
The court said:
“The evidence given by the husband’s expert in the voir dire verified his training and experience as the foundation for his specialised knowledge, thereby making his expert opinion evidence admissible under the Evidence Act as an exception to the opinion rule.”
The weight of the husband’s expert’s evidence was available to the wife to challenge, but not the admissibility.
This case, again, acknowledges the concept of the value to owner.
Paragraph 36:
“The essential point of difference between the two experts in respect of the “value to owner” methodology was the treatment of the business proprietor’s annual wage paid from the business. The husband’s expert added back to the business revenue the entirety of the wage paid to the business proprietor, whereas the wife’s expert would only add back the proportion of the proprietor’s wage which exceeded a reasonable wage for the time expended by the proprietor working in the business.”
The wife’s expert had properly admitted in cross-examination “that there was a distinction to be drawn between owner-operated and managed businesses, with the former type, like the business under consideration, often valued as the husband’s expert had done”.
The wife’s expert would apply a multiplier of 2.5 to the added back portion of the business proprietor’s annual wage from the business which was not much different from the multiplier of 2.75 used by the husband’s expert.
In the years before the trial, the wife had paid her sister $75,000 to acquire the other 50% shareholding in the corporation which owned the business. That would suggest the wife had believed it to be worth $150,000.
A discussion of the value to owner approach to valuation provided as follows:
“It is intended to capture the reality of the situation by bringing to account any special or additional economic benefit which is conferred upon the business owner by his or her control of the shareholding. It is intended to include within the value any commercial, financial or other advantage which accrues to the owner which might not necessarily be available to any hypothetical third party purchaser.”
The court discussed fair market value as the risk is considered from the hypothetical willing but not anxious buyer. It reflects the value of each asset and liability on a going concern basis and the profitability, market position and attractiveness of the business. The value to owner approach, on the other hand, considers risk from the perspective of the existing owner and assumes that the party wishing to hold onto the asset will do so in good faith and seek to maximise the value that could be obtained in a hypothetical sale.
The court considered the value to owner concept further.
The Appeal Court determined that the value to owner approach to valuation was appropriate:
There was no market for the wife’s interest in the business because there was no written commercial lease. As such, the business was not saleable as a going concern to a third-party purchaser and cannot be valued on that basis;
There was evidence the business was successful and profitable;
The unique benefit to the owner of the ongoing business is the security of its tenancy on favourable terms notwithstanding the absence of a written lease;
The business was inferred to have significant value having regard to what the wife was prepared to pay out her partner in 2002;
The evidence established that the wishes to retain the business; and
A further significant benefit to the wife is the likelihood that her landlord father would act in her best interest should she ever decide to sell the business.
This is interesting because it again refines the use of the value to owner concept with family lawyers being provided with further insight into the court’s approach.
The ground of appeal which is of interest is that there was a notional addback to the assets of $106,681.87 which the wife had paid her father in August 2018 supposedly in repayment of loans extending back some 20 years about 6 months before the parties separated. The Primary Judge discussed the evidence and concluded the sum should be added back to the asset pool.
Having determined to add back the wife’s savings, the Trial Judge failed to take the monies advanced by the wife’s father to the wife and the parties into account as a contribution by or on behalf of the wife and failed to consider the accrual of savings as a further contribution by the wife.
This ground of appeal failed. The court said:
“The wife impermissibly seeks credit for contribution of the $106,682 in two ways: first, as monies advanced to her by her father; and secondly, as a “further” contribution by her accrual of the savings. But the wife’s contribution could only be properly taken into account in one way, given the finding that the money was not advanced by the wife’s father as a loan. Either the money was a gift received from the wife’s father, for which the wife obtains credit as a contribution, or alternatively, she accumulated the money from revenue generated by the business, in which case she would derive credit for the contribution of the earnings.
The wife admitted putting aside the sum of $106,682 from revenue generated by her business and the primary judge expressly acknowledged her contribution by bringing in the business, running it, and generating income. The primary judge said this in that regard:
“˜In addition to her financial contribution to the matrimonial home, at the commencement of the relationship the wife was the sole director and shareholder of [the business], a business which had been successfully operating for about 10 years under her ownership. This business must also be taken into account as part of the wife’s initial contribution to the parties’ assets.’.”
The wife contended in another ground of appeal that having adopted “a methodology with respect to the wife’s [business] which capitalised the income of the wife as notional property, the learned trial judge erred in then “˜double counting’ the wife’s income when considering s 75(2)(b) of the Family Law Act 1975″.
The Judge had in fact found an adjustment in favour of the wife at 1%.
The court said:
“The findings reflected the reality that the wife controlled a valuable business, generating her annual income, which could be sold to a willing purchaser (with a lease). Whilst ever she retained the business, she had an income.”
This is an interesting case in that there is clearly a particular perspective in mind in relation to the argument about the addback once added back requiring the recognition of a contribution.
Why students shouldn’t be so quick to write off family law
Every law student who aspires to be a family lawyer has experienced the somewhat awkward, but not surprising, shocked gasp and grimace of another person after telling them that family law is the goal.
That person (usually the aspiring corporate or commercial lawyer) almost always responds with a statement along the lines of “but that must be so hard and emotional”.
Given that many students aspire to be the Harvey Spector’s or Elle Woods’ of the world, it is incredibly common that many of them write off family law without considering the numerous benefits this area has to offer to a young lawyer.
As there is no Hollywood fictionalised family lawyer for students to aspire to, this article outlines three big ticket items of family law for young lawyers, and why students shouldn’t be too quick to write it off.
Time in court
A common goal of the aspiring corporate lawyer is their desire to become a great litigator. The aspiring commercial lawyers can be seen participating in the law school mooting competitions, or witness examination at every opportunity to advance their skills in this regard.
These students are ready for their time in court.
What many of them do not realise is that young family lawyers often have more exposure to the court system and appear far mor regularly in the Federal Circuit and Family Court than young corporate or commercial lawyers.
Between court ordered dispute resolution conferences and defended hearings, there are ample opportunities for young lawyers to appear before the court. Obviously, this greatly assists young lawyers with gaining an in-depth understanding of the court system and processes early on in their career.
Here at Feeney Family Law, our young lawyers frequently appear on behalf of our clients before the court for numerous reasons.
Interacting with the clients
Unlike commercial or intellectual property law, family law allows you to build significant rapport with your clients.
Our clients are almost always “everyday” people who come from an array of backgrounds and cultures, which require legal assistance as a result of a breakdown in their relationship.
Young lawyers have far more involvement in speaking and meeting directly with the client on a regular basis, than they might in a tax or commercial setting.
It is extremely common for young lawyers, and paralegals to have relatively constant communication with the client.
As you can imagine, this naturally develops young lawyers’ interpersonal skills which greatly assists in all aspects of life.
It is expected, and very common, that the clients are likely to be extremely emotional and in a particularly fragile, anxiety-fraught part of their life. Our work, and the outcome that we receive from a matter can have a potentially drastic effect on our client’s lives. For this reason, it is vital that young family lawyers actively listen and correctly advise their client’s while understanding the emotional turmoil and difficulty they are facing.
Students often wish to make a positive change in the world. Once a matter is finalised, and the client is satisfied with the outcome, it is immensely rewarding to have had such a positive impact in their lives. Often it is not just the client, but also their children that benefit from our work. This is something for students to consider when deciding whether family law is an option for them.
Getting the win
Something that practitioners who work in family law recognise very early on in their careers, is that there is no real win or lose in family law.
In many cases, a partial win is a win. It is not uncommon for client’s to “˜give and take’ throughout the process, especially at the negotiation and mediation stages of a matter.
The “need to win” mentality common in other areas of law is significantly challenged in family law.
That is not to say that family lawyers don’t need to fight to advance their client’s case, but the goal should never be to bulldoze over the other side to advance our client’s case.
Our clients are people, who often share children with the other party, and it is vital that we work together with the other side to advance everyone’s best interest.
A drawcard to family law is that it is resolution focused, rather than “˜win’ focused. While the collaborative approach is not always possible, it does allow young lawyers to acquire and exhibit skills of cooperation and “˜big picture’ thinking.
Family law practitioners choose to specialise in family law for an array of reasons, the pros outlined above are just a handful of them.
Hopefully next time a student is faced with the very common utter shock and disbelief from others, they enlighten them with the ample positives of a career in family law. Who knows, family law may gain a practitioner or two.
In the recent case of Gare & Farlow [2023] FedCFamC2F 109, Judge Forbes considered valuation issues.
This case also deals with parenting, but this note will focus on the valuation points.
The value of the wife’s business was one of the contentious issues.
At paragraph 17 of the Judgment, the Court said:
“The expert evidence regarding the valuation of the wife’s business was contested, complex and detailed.”
At paragraph 21, the Court said:
“The wife owns and operates F Pty Ltd (“˜the Business’). She is employed in the Business as a worker and manager. She asserts that she currently earns approximately $62,000 per annum although her earnings have varied over time and her potential income potential remains an issue in dispute.”
At paragraph 27, the Court said:
“In 1998, some ten years before cohabitation, the wife purchased the Business with a friend and business partner, Ms O, in equal shares. Each of them contributed $25,000 towards the $50,000 purchase. The pair incorporated F Pty Ltd to run the Business. At the time of purchase, the business premises was subject to a third-party lease for which the rental was $3,330 per month.”
A year later, the freehold of that premises came up for sale and the wife’s father and Ms O’s father-in- law purchased the premises. Importantly, no written lease was entered into between the business and the landlords, and the wife and Ms O were permitted to carry on the business in the absence of a written lease. They, however, continued to pay commercial rent at the rate it had been paid to the previous landlord at $3,330 per month and they maintained the property and paid all the outgoings.
By 2002, the wife purchased Ms O’s interest in the business for $75,000 and became the sole director and shareholder.
Between 1998 and 2002, the wife paid a total of $100,000 for the business. It continued to operate out of premises owned by her father as it does to this day.
At paragraph 31, the Court said:
“The wife contends that during her adult life, commencing in her late teens or early twenties, she has been the recipient of various loans from her father… A repayment of the “loans” by the wife to her father, shortly prior to separation, is the subject of dispute in these proceedings.”
In 2014, the wife’s father purchased Ms O’s father-in-law’s interest in the business premises. Her father, Mr K, has never offered her a written lease and asserts he has no intention of doing so. The wife continues to occupy the premises and pay rent at the rate of $3,330 per month and outgoings. She is required to keep the premises in good repair by redoing the floors, painting and landscaping approximately every three (3) years.
The absence of a lease is a relevant fact in the case. The husband argues that there’s no lease in place because of the father/daughter relationship and argues that they have refrained from entering any formal arrangement in order to minimise the value of the business as an asset in these proceedings.
The wife asserts that by August 2018, her father made demand for repayment of a substantial portion of the funds owed to him and she paid him the sum of $106,681 from her savings.
Formal separation occurred in February 2019 after this payment.
The initial application was for a division of 70% to her.
The wife sought the appointment of a forensic accountant to value her business.
At paragraph 54, the Court said:
“On 6 November 2019, Mr G, the forensic accountant instructed by the wife, valued the business at $57,129, based on a valuation method developed by him over two decades….Mr G’s valuation was based on an assessment of the earnings before interest and taxation (i.e. EBIT) that could reasonably be expected to flow to a hypothetical purchaser as profit.”
The husband’s valuer valued the business at $60,288 on a fair market value basis.
He said, however, that he would have adopted a value of $361,723 for the business if it had an industry standard lease in place.
The husband’s valuer prepared an amended valuation assessing it to be valued as a going concern at $400,000 on a value to owner basis.
The wife’s valuer, Mr G, stayed with his valuation of $56,948.
By February 2022, the husband’s valuer valued her business at $429,500 on a value to owner basis.
Just before the trial, Mr H reverted to the same fair market value methodology used in the preparation in his November 2019 valuation, and he then expressed the realisable value of the business absent a commercial lease to be $224,820 on a fair market value basis.
The discussion of the valuation of the wife’s business in the Judgment commences at paragraph 102.
The wife’s case is that the business provides her with a source of income but if she were to sell it, she would not recover anything other than the cash value of the business assets. She agreed she could receive a higher return for the business if her father entered a written commercial lease with her or a prospective purchaser, but she said she had no intention of selling and that her father would not offer a written lease in any event.
At paragraph 109, the Court said:
“The gravamen of the husband’s case is that the Court should conclude, on the evidence, that in the event that the wife wished to sell her interest in the business, her father (as landlord) would provide a purchaser a suitable commercial lease for the continuation of the business at that site in order to maximise the financial return to his daughter by allowing her to realise the goodwill of a successful 20+ year investment.”
There is a heading in the Judgment called “Lay evidence”.
The wife has been able to draw a regular income of up to $130,000 per annum, but her salary had decreased substantially from about the time of separation.
The wife did not accept the contention that her father would enter into a lease so she could get the best possible price at time of sale.
The father said that he owned a number of commercial properties and that if she chose to close the business, he would revert the current business premises into another business centre.
His evidence was he wouldn’t provide a lease to a purchaser to maximise her gain as he would rather repurpose the building.
The father has many properties where he has no lease with the tenants.
The Court said of the father:
“I felt that his answers in cross-examination, although confidently expressed, were tailored to a narrative that would minimise the value of the business in the asset pool. In giving his answers my impression was that Mr K was not prepared to seriously countenance the possibility that his daughter would ever contemplate selling the business as a going concern…my impression was that Mr K did not really think it would ever happen and for that reason was confident to maintain the position that he would repurpose the building if his daughter did not want to continue operating the business. However, if confronted with the reality that his daughter’s business might realise well over $400,000 (on Mr H’s evidence) if sold with a lease, I have considerable doubt, given his previous acts of generosity, that Mr K would deny his daughter the opportunity to realise the fruits of her 25 year investment.”
Mr G said that he had given an opinion of the intrinsic value of the business rather than any market value. He explained he had produced an objective valuation based on the notion of a rational hypothetical purchaser meeting with a rational hypothetical vendor both possessed of the same information and both intent on acting in a rational manner. He said that his valuation was based on what the rational purchaser would be prepared to pay and what the rational vendor would accept.
One of the relevant considerations in such a hypothetical exchange of critical information would include the true profit of the business after remunerating the owner. The price to be paid by a rational purchaser would be derived by capitalising the true profit by the capitalisation rate. Based on that analysis, a business with no viable EBIT would be considered unsaleable as a growing concern.
Mr G said he did not need to look at comparative sales under his valuation methodology.
He agreed he had not undertaken any market research to establish how much potential purchasers are paying for business in Victoria. He conceded also that in Australia, small businesses often, or at least sometimes, change hands on the basis of the purchaser buying themselves a job where the value of the business is derived by applying a multiplier to the proprietor’s wages.
Mr G remained steadfastly of the view that the approach taken by Mr H was flawed.
Mr H explained that “that without a long-term lease or ownership of the property on which the business is operated, the business had no goodwill value to a potential purchaser. The goodwill of the business is dependent upon a potential purchaser having the ability to continue to operate the business out of the same location after purchase. For goodwill to be transferred to a potential purchaser, a potential purchaser would require a transfer of lease or ownership of the property from which the business operates. These views are consistent with those expressed by Mr G” for the wife.
“The “˜value to owner’ approach to valuation was selected by Mr H (valuer for the husband) because it takes into account the value of the business in the hands of Ms Gare as the current sole director and operator and allows consideration of any benefits afforded to her that would not be available to a potential purchaser. In his opinion an appropriate way to value the wife’s interest, in terms of its actual value to her as owner, was to capitalise future maintainable earnings (or PEBITDA) using a multiple based on market data for sales of similar businesses.”
He determined the capital value of future income flows from the business rather than the price at which it may change hands.
While he acknowledged the business has no realisable value to a potential third-party purchaser without a long-term lease, he said he had taken into account the benefit of ownership which encouraged retention of the business by the owner for an indefinite period.
He said, “The value to owner methodology is appropriate because the value of the business to Ms Gare is higher than the value of the business to a potential purchaser“.
At paragraph 175, the Court began its conclusions as to the value of the business.
The Court reviewed a series of cases for principles in relation to valuation methods and stated:
“It is open to the trial judge as a matter of discretion to determine which valuation method is most appropriate, although the Court will of course be guided by (but it is not bound to uncritically accept) expert evidence on the issue.”
The Judge accepted the evidence of the husband’s valuer and valued the business at $429,500 on a value to owner basis.
This is clearly in the context where the Judge found the wife’s father’s evidence about a lease to be unsatisfactory.
An erroneous procedural ruling which affects the final result of a trial may nonetheless be appellable: Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478 at 6.1
Simmons & Simmons [2023] FedFamC1A 44 is a recent decision of the Full Court considering the appealable error of not admitting into evidence a report of a child’s treating therapist in a case involving allegations of sexual abuse.
The parties had three daughters. The eldest was four at the time of separation in November 2015; the twins were one.
The mother claims that in around March 2016 the eldest daughter disclosed to her that she had been sexually abused by the father. She started observing sexualised behaviours.
A child protection investigation found the allegation of sexual abuse unsubstantiated.
The children commenced overnight time with the father in late 2016.
By 2018 the eldest daughter became increasingly aggressive. She began seeing a psychologist in mid-2018 and made further disclosures of sexual abuse.
The disclosures were not made during a second child protection investigation in late 2018. The allegations were again unsubstantiated.
The time arrangements resumed.
During early 2019 the mother presented the eldest child to “a number of medical professionals”, receiving “varying diagnoses”.
She was referred to a counselling service offered by the Department.
The eldest child began attending on counsellors from two services. In mid-2019 both services recommended the child’s time with the father cease.
By the time of the trial in early 2022, the children had not spent time with the father since August 2019.
Single expert clinical psychologist
A single expert clinical psychologist was appointed by consent. Initially, she recommended the children live with the mother and spend time with the father depending on the Court’s findings in relation to sexual abuse.
In late 2021, a video emerged of the eldest child and one of the twins “engaging in sexualised activity”. The single expert “ultimately reversed her earlier recommendations, opining that orders should be made in line with the father’s proposed orders” because the video evidenced the mother “struggling to set boundaries for the children”.
Treating psychologist
The eldest child continued attending on a psychologist from the service referred by the Department.
That psychologist prepared a report on the request of the ICL. She opined that the eldest child had in fact been the subject of trauma rather than simply subjected to the message from her mother that she had suffered trauma.
At trial, the judge questioned whether a party intended to adduce that report at trial. Counsel for the mother had not read the report. The trial judge declined to admit it into evidence.
Later in the trial, counsel for the mother applied for a “˜short service subpoena’ to the psychologist. The judge refused.
The Full Court considered the procedural function of the trial judge in respect of rulings in relation to admissibility or use of evidence before the evidence has been adduced and particularly in parenting proceedings, and, referring to Annesley & Pembleton2 and CDJ v VAJ, 3 said:
48. … the Court is bound to have regard to the effect that evidence “may have in determining whether the best interests of the child” are served by the admission of that evidence.
In a parenting matter, to refuse to admit the report into evidence must have consideration of the circumstances of the case. The primary judge was asked to consider a change of residence in circumstances where:
the mother was the children’s primary carer and attachment figure;
the children had not seen their father for almost 3 years;
the eldest child genuinely believed that her father had sexually abused her;
the children would be separated from their infant half-brother.
The trial judge accepted that:
477. … The expert considered this escalation in their problematic behaviour as arising from the mother’s inability to set appropriate boundaries, the eldest child having received the message that her behaviours are a function of trauma, and the influence of the eldest child’s behaviour on the younger child with the result that she had begun to engage in similar behaviours which in turn have adverse psychological and social impacts. …
The Full Court considered the treating psychologist’s report “highly relevant to this finding because it provided a counter narrative to the conclusion reached by the primary judge.”
The Full Court said:
51. While such an order needed to be balanced against the potential long-term psychological consequences for the children, it was nonetheless acknowledged that the orders proposed by the father to achieve that outcome would be likely to cause “significant emotional distress” to the children in being separated from both their mother and their younger half-brother.
52. Before making such an order that in and of itself was likely to cause such significant emotional distress to the children with potential lifelong implications for them, the Court had an obligation to ensure that a decision of such magnitude for these children was based upon the most comprehensive and relevant evidence that was reasonably available. For reasons which we explain, this included the report of [the treating psychologist].
The appeal was upheld on the basis that:
65. “Having regard to the contents of the report of Ms R to which we have referred, it is clearly the case that the admission of her report could rationally have affected the determination of several issues in the proceedings. …”
An example that An erroneous procedural ruling which affects the final result of a trial may nonetheless be appellable: Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478 at 6.
1 Simmons & Simmons [2023] FedFamC1A 44 at [34] (McClelland DCJ, Aldridge and Baumann JJ). 2 Annesley & Pembleton [2022] FedCFamC1A 8. 3 CDJ v VAJ [1998] HCA 76.
