Family Law Lecture Notes on Spousal Maintenance and Financial Agreements

Family Law Lecture Nine: Spousal Maintenance and Financial Agreements

Overview

This lecture provides an in-depth analysis of spousal maintenance and financial agreements under the Family Law Act $1975$ (Cth). These mechanisms serve to address the financial consequences of relationship breakdowns, either through court intervention or private contractual arrangements. While spousal maintenance focuses on ongoing financial support based on need, financial agreements allow parties to 'contract out' of the standard legislative provisions for property and maintenance division.

Spousal Maintenance

1. Definition and Purpose

   • Spousal maintenance involves financial support paid by one party to a former spouse or de facto partner when they are unable to support themselves adequately.

   • Difference from Property Settlement: Property alteration under section $79$ (or section $90SM$ for de facto) involves a final division of assets. Spousal maintenance focuses on future needs and can be ordered in addition to property settlements (periodic or lump sum).

   • It is based on the principle of 'mutual obligation' that survives the end of a relationship in specific circumstances of financial disparity.

2. Legal Framework and Thresholds

   • Marriage Relationships: Governed by Part VIII. The primary threshold is found in section $72(1)$, which states a party is liable to maintain the other only if the first party is reasonably able to do so, and the second party cannot support themselves by reason of:

     • Having the care and control of a child of the marriage (under $18$).

     • Age or physical/mental incapacity for appropriate gainful employment.

     • Any other adequate reason.

   • De Facto Relationships: Governed by Part VIIIAB, specifically section $90SE$. The requirements mirror those of married couples but are subject to jurisdictional requirements (e.g., $2$ years of cohabitation).

   • Family Violence: Section $75(2)(aa)$ mandates that the court must consider the effect of family violence on the earning capacity of the party seeking maintenance.

3. Section $75(2)$ Factors (The 'Section $75(2)$ List')

   When determining the amount and duration of maintenance, the court evaluates:

   • The age and state of health of each party.

   • The income, property, and financial resources of each party.

   • The physical and mental capacity of each party for gainful employment.

   • Whether either party has the care or control of a child.

   • The commitments of each party that are necessary to support themselves or a child/another person.

   • The eligibility of either party for a pension or allowance.

   • A standard of living that in all the circumstances is reasonable.

   • The duration of the marriage and the extent to which it has affected the earning capacity of the party seeking maintenance.

4. Application and Time Limits

   • Marriages: Applications must be filed within $12$ months of the divorce order becoming final.

   • De Facto: Applications must be filed within $2$ years of the date of separation.

   • Urgent Maintenance: Under section $77$, the court can make an immediate order for 'urgent' maintenance if a party is in immediate need of financial assistance but it is not yet possible to determine the final amount.

Financial Agreements

1. Nature of Binding Financial Agreements (BFAs)

   • BFAs are private contracts that allow parties to determine how their property and maintenance will be handled upon separation, effectively excluding the jurisdiction of the court to make orders under sections $79$ or $72$.

   • They can be made:

     • Before marriage (Section $90B$ - 'Prenuptial').

     • During marriage (Section $90C$).

     • After divorce (Section $90D$).

     • (Equivalent sections for de facto: $90UB$, $90UC$, $90UD$).

2. Strict Legal Requirements (Section $90G$ / Section $90UJ$)

   For an agreement to be 'binding', it must strictly adhere to statutory requirements:

   • The agreement must be signed by all parties.

   • Independent Legal Advice: Before signing, each party must be provided with independent legal advice regarding the effect of the agreement on their rights and the advantages/disadvantages of making the agreement.

   • Legal Practitioner Statement: A signed statement from a lawyer must be provided to the party and the other party (or their lawyer) confirming the advice was given.

   • The agreement has not been terminated or set aside by a court.

3. Setting Aside Financial Agreements

   Under section $90K$ (marriages) or $90UM$ (de facto), a court may set aside an agreement if:

   • It was obtained by fraud (including non-disclosure of assets).

   • It is void, voidable, or unenforceable (e.g., uncertainty or mistake).

   • A party entered the agreement for the purpose of defrauding a creditor.

   • Material Change in Circumstances: Relating to the care, welfare, and development of a child, leading to hardship if the agreement is not set aside.

   • Unconscionable Conduct: Where one party took unfair advantage of a special disadvantage of the other party.

Important Case References

• The Marriage of Waters and Durek ($1995$): Clarified that spousal maintenance is not an 'equalizer' of incomes but is focused on the 'adequacy' of support for the party in need.

• Thorne v Kennedy ($2017$): High Court decision that set aside two BFAs due to unconscionable conduct and undue influence, emphasizing that the 'independent legal advice' requirement does not automatically cure a lack of free will.

• Rice and Rice ($2020$): Discusses the evaluation of 'future needs' and the weight of section $75(2)$ factors in property and maintenance contexts.

• Saxena & Saxena ($2006$): Examines the validity of agreements and the importance of full and frank disclosure of financial positions.

Conclusion

Practitioners must navigate the 'need vs. capacity' test of spousal maintenance while ensuring that Financial Agreements meet the rigorous requirements of the Act. Failure to provide comprehensive advice or ensure full financial disclosure can lead to agreements being set aside, potentially leading to professional negligence claims. The interaction between maintenance and property remains a cornerstone of ensuring equitable outcomes in family law matters.