Australian Family Lawyer

THE CHILD'S INTERESTS IN FAMILY PROPERTY PROCEEDINGS A "FAIR" GO FOR AUSSIE NIPPERS

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The Question

Should the best interests of the child be considered by the court when exercising property adjustment powers under s79 of the Family Law Act 1975 (FLA)? They are in England & Wales: there, section 25(1) of the Matrimonial Causes Act 1973 (MCA) says that the court, in determining financial provision and property adjustment in connection with divorce proceedings, has

a duty … to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen.

But when the Australian Law Reform Commission (ALRC) asked, at paragraph 152 of its Review of the Family Law System (Issues Paper 48, March 2018) whether

suggestions that the requirement to regard the best interests of the child as the paramount consideration should also apply to adjustment of property

the Law Council of Australia (LCA), in its response dated 7 May 2018, said at paragraph 228

The LCA considers that such suggestion fundamentally misunderstands the rights being determined in property proceedings and would inappropriately displace those rights in favour of a third party, in the event that there were children of the relationship.

This article reviews the contrasting legislative framework and case law in England & Wales and in Australia and argues (contrary to the position taken by the LCA) that the government should, in accordance with the ALRC’s suggestion, amend FLA Part VIII (Property, Spousal Maintenance and Maintenance Agreements) to require that the interests and wishes of children and young people must be taken into account in s79 property adjustment proceedings between their parents. Similar amendments should be made to Part VIIIAB (De facto Relationships) and perhaps Part VIIIA (Financial Agreements).

Back to the future

It’s July 1999. The millennium bug threatens doomsday in six months. But the boffins at the Family Law Council (FLC) have more important matters to worry about. In their Submission responding to the Attorney-General’s Department (Cth) Discussion Paper Property and Family Law: Options for Change, they contemplated in Chapter 3 what are the

Characteristics of a good law

and suggested in Principle 2 that

The law should conform with values accepted in the community

In accordance with the good law characteristic of conforming with values accepted in the community they recommended

Priority to the welfare of dependant children

3.18 – Property adjustment should take account of the best interests of dependant children.  This might imply a principle that orders for property adjustment should, so far as possible, be framed to minimise the disruptive impact of parental separation on children, for example, by seeking to avoid an immediate sale of the family home.

3.19 – In England and Wales, the court is required to give ‘first consideration’ to the welfare of dependent children under legislative guidelines for the making of property orders (see Chapter 5).

In Chapter 5 of their Submission, the FLC experts expanded their comment on the English law:

Where there are children, a high priority is given to preserving the matrimonial home for the primary carer and the children, at least until the children reach 18.  Various forms of order have been devised to achieve this. Australian Law Reform Commission Issues Paper 48, March 2018: Review of the Family Law System.

Law Council of Australia, 7 May 2018.

Early support for a change in the Australian law

Professor Dr Patrick Parkinson (having survived the millennium bug) urged the government to follow the FLC’s 1999 recommendation, first in a paper presented at the Family Law Section’s Sydney family law conference in July 2000 and then in the Summer 2000 issue of Australian Family Lawyer. Where, in an article entitled Unfinished Business: Reforming the Law of Property Division, he wrote that the court should, in matrimonial property adjustment proceedings

ensure that the housing needs of any children of the marriage are adequately met (which should be the first and paramount consideration)

When the government finally got around to amending the FLA six years later, in 2005, these recommendations by the FLC and Professor Parkinson were ignored.

The law in England & Wales

The cases footnoted to the FLC’s summary of English law were two Court of Appeal decisions:

Mesher v Mesher and Hall (decided 12.02.1973). Court of Appeal set aside the trial judge’s order for an outright transfer of jointly owned former family home to the wife and substituted an order that the property be occupied by the about to be re-married wife, her new husband and the (then) 8-year-old child of the former marriage until the child reached “a specified age” (17?), then sale and equal division of net proceeds.

Martin v Martin (decided 10.03.1977). Court of Appeal upheld the trial judge’s decision, in a childless marriage, to allow the wife to remain in the jointly owned former family home for life, her remarriage or her vacating the home, on the basis of a trust for sale in equal shares. Of interest is this comment by Stamp LJ:

It is of primary concern in these cases that on the breakdown of the marriage the parties should, if possible, each have a roof over his or her head. That is perhaps the most important circumstance to be taken into account in applying section 25 of the Matrimonial Causes Act 1973 when the only available asset is the matrimonial home. It is important that each party should have a roof over his or her head whether or not there be children of the marriage.[iii]

See also Clutton v Clutton (1990)[iv], in which the Court of Appeal approved Martin. In the process of analysing the case their Lordships provide an erudite summary of the differences between a Mesher Order and a Martin Order and when each, or neither, may be appropriate. The appeal court was no doubt assisted by the persuasive arguments of a young Nicholas Mostyn of Counsel, later to become famous as a speaker at Australian family law conferences (and, incidentally, as a High Court judge).

In Mansfield v Mansfield (2011)[v], the Court of Appeal followed Mesher in circumstances where the husband had bought the former family home before marriage with money awarded in a personal injuries case. The trial judge’s order for him to pay the wife a lump sum sufficient to allow her to re-house herself and the (then) 4-y-o twins, in default sale to raise the lump sum, was, on the husband’s appeal, set aside. Per Thorpe LJ:

The need to give special reflection to the origin of the family capital … can be properly reflected in converting the order below into a Mesher order.

I would quantify the extent of the husband’s reversionary interest, or residual interest, at one third of the capital awarded to the wife … the property to be acquired by the wife in an assumed purchase … will be charged as to one third of its equity in favour of the husband, that charge to be redeemed when the twins achieve maturity.

Inspired by the Court of Appeal’s guidance in Mesher and Martin, the principle of the primacy of the child’s welfare in financial proceedings was introduced into English statute law as s25(1) MCA as cited above, an amendment made by s3 of the Matrimonial and Family Proceedings Act 1984.

Section 25 MCA provides a list of other (but secondary) matters which the court shall ‘in particular have regard to’. They include the parties’ financial resources, needs, standard of living, age, health, duration of marriage and contributions to the welfare of the family. Case law says that, while the child’s interests are to be given first consideration pursuant to s25(1), the order in which the secondary matters are listed in s25(2) does not reflect a hierarchy: their significance will depend entirely on the facts of the case.

The factor or factors which are ‘magnetic’ amongst the s25 considerations are commonly identified at the outset by family lawyers and judges in a particular case. In cases of limited resources, the needs of the economically weaker spouse and the children will dominate. Contributions will dominate only in cases where the assets are sufficient to permit application of the sharing principle. This principle was developed in appellate case law from the considerations of length of marriage and contributions to the welfare of the family in set out in s25(2): see White v White (2000)[vi]. The court’s goal is to achieve a “fair” outcome.[vii]

Section 25A MCA, also introduced by the 1984 Act, imposes a duty on the court to “consider” a clean break. Although this provision appears similar to s81 of the FLA (see below), in practice a clean break is imposed less frequently in England & Wales than in Australia, especially where there are minor children.

Déjà vu

In March 2018 the ALRC’s Issues Paper 48 subtly reminded the government that it had ignored the recommendations made almost two decades earlier by footnoting the FLC’s 1999 Submission as the source of the “suggestion” that the child’s best interests should apply as a paramount consideration in property adjustment proceedings. As quoted above, in May 2018 the LCA dismissed this revived attempt at introducing what the FLC considered would be a “good law” which would “conform with values accepted in the community”. Why? Because such a law would “inappropriately displace [parents’] rights in favour of a third party, in the event that there were children of the relationship”.

The LCA, through its Family Law Section, has an influential voice in helping government design prudent policies and legislation in the field of family law. Its opposition to a change in the law may have been the reason that, when the ALRC published its Discussion Paper 86 in October 2018, the “paramount interests” suggestion at paragraph 152 of its March Issues Paper 48 was quietly dropped. The LCA response to the Discussion Paper, submitted on 16 November, was content to remain silent on the point.

Another lobbying success for the LCA? It appears so. But maybe the Family Law Section should ask the LCA to think again. After all, those inconvenient “third parties” may one day be the only source of emotional and financial support for parents who thought their children’s housing needs “inappropriate” for consideration at the time of the divorce.

The Australian law contrasted – judicial ingenuity required

While English judges can rely on MCA s25(1) to protect the welfare of children in family property adjustment proceedings, their Australian sisters and brothers are constrained by the FLA to focus on other criteria.

FLA s79(2) says the court shall not to make an order for the alteration of property interests unless it would be “just and equitable” to do so. The criteria by which this concept is measured are orientated towards “contributions” made before marriage breakdown: ss79(4)(a), (b) and (c). “Needs” considerations are flagged by ss79(4)(e) and 75(2) which, according to the headings of ss 74 and 75, relate only to spousal maintenance. There is a passing reference way down at s75(2)(d)(ii) to the parties’ commitments to the support of a child. But one would need to stretch the principles of statutory interpretation to conclude that the Australian legislation protects the welfare of the child to the same extent as in England & Wales.

The language of Part VIII of the FLA directs the focus in property adjustment proceedings only to the contributions of the parties and their needs. The needs of children appear, on the face of the legislation, to be relevant only incidentally, as a component of spousal maintenance.

Section 81 says that the court “…shall, as far as practicable, make such orders as will finally determine the financial relationships between the parties …”. The language is clearly more directive than in the similar English s25A MCA (see above) and, consequently, clean breaks are the norm in Australia, perhaps sometimes even when this affects minor children adversely.

In practice, Australian judges can, and do, take the welfare of children into account in s79 property adjustment proceedings. An example is the case of Causey & Causey (2018) (discussed below). But they are not helped by the way the Part VIII is drafted. If it is hard for judges to explain how children are considered in the context of ss79 and 75(2), how hard must it be for the increasing number of unrepresented litigants to understand what the FLA requires of them? The statute should be clearer about the extent to which children’s interests are considered in s79 proceedings.

There a few reported Australian cases with which to contrast the English approach, but the principles to be applied can be gleaned from the three summarised below.

In Stanford v Stanford (2012), the High Court of Australia dismissed the deceased wife’s s79 claim for alteration of property interests, with costs. The husband had provided for her needs during her lifetime. She had died before the Full Family Court delivered judgment. Therefore, the property adjustment order made by the magistrate at first instance was not “just and equitable” at the time the Full Family Court judgment was handed down. The s79 property adjustment claim continued by the legal personal representative of the deceased wife’s estate was dismissed. The High Court said that, in considering a s79 application, the court must consider the following:

[37] First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. 

[38] Second, although s79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion.

[40] Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out ins 79(4).

In Zagoreos & Zagoreos (2018)[v], Forrest J dismissed the husband’s interim application, which sought to dismiss the wife’s financial application: The husband failed in his argument that it was not just and equitable for any property adjustment order to be made. His Honour commented that

… it has to be acknowledged that the High Court’s decision in Stanford has raised many questions about the way in which property adjustment proceedings in this Court are determined and that not all of those questions have necessarily been definitively answered at this point in time.

In Causey (supra), Murphy J allowed an appeal so as to give the wife with four children, the youngest of whom had special needs associated with intellectual impairment, an outright transfer of the husband’s interest in the former family home without a cash compensation payment, thus increasing her share of the asset pool from the 70% awarded by the trial judge to 78%. His Honour strove to justify the result with reference primarily to the parties’ respective contributions. Section 75(2) considerations took up just two short paragraphs of the ex tempore appeal judgment:

  1. The “adjustment” for the factors taken into account pursuant to s 75(2) by reason of s79(4)(e) being assessed at 10 per cent, has a dollar value of about $26,600. It is, of course, important for an assessment of those factors to have regard to the true dollar value of any adjustment for them.
  1. That adjustment and amount fails, in my view, to take account of the cost and arduous nature of the ongoing care of the parties’ child which will continue long into the future. That care impedes the wife from obtaining full-time work. That in turn impedes the wife from earning her way out of the financial difficulties inherent in the breakdown of this relationship.

Clearly this was the right result. But if the court had been guided by a “best interests of the child” principle applicable to property adjustment proceedings, and not confined by s75(2) to the indirect effect of child care on the wife’s own spousal maintenance needs, the judge’s task would have been made easier. Judges, the parties they serve and the lawyers advising the parties should not have to employ the jurisprudential ingenuity of a Murphy J to reach a just and fair result. The statute should help them understand what, in the words of the 1999 FLC’s Submission to the Attorney-General, constitutes “a good law … [which conforms] with values accepted in the community”.

The answer – children first!

Should Australian children be considered mere “third parties” when their divorcing parents argue over the family treasure, as suggested by the LCA? At such a scary time, with the security of their family home, their school and friendship networks threatened with disruption, shouldn’t the physical, financial and emotional welfare of the children be at the forefront of parental thoughts, as mandated in the English legislation?

If parents are too selfish to consider the welfare of their children in property adjustment proceedings, a civil society should intervene with laws to protect them. Children who are exposed to the risks of economic deprivation and homelessness, brought about by their parents’ inability to see what is best for their own offspring, need help. And parents need clearer statutory guidance about their obligations to ensure the financial and housing security of their children.

It is not too late for the LCA to reconsider the position set out in its May 2018 response to ALRC Issues Paper 48. The ALRC is due to report to government with recommendations about family law reform in March 2019.

If the LCA and the ALRC were to recommend that legislation be introduced mandating that “first” or “paramount” consideration be given to the interests of children when parents seek s79 property adjustment orders, judges would have greater flexibility, in appropriate cases, to make orders protecting their housing and other needs when parents are disinclined to do so. They would not have to fall back on “contribution” assessments to get to a fair result, as Murphy J, was able to conjure in the fact scenario which arose in the Causey appeal. If the law had expressly required that the interests of the four children must be considered, it is likely that the trial judge in that case would have found a path to the right result, thus avoiding the necessity for an appeal to ensure that justice was done.

A transfer of interest in the family home to the principal carer of the child may not be an option that would be exercised in many cases, but in some (for example, where a child has special needs, as in Causey) it may be crucial. Such a transfer, if required to guarantee the security of the child, should not be dependent on ingenious computations of the parents’ respective “contributions” and the effect of child care on spousal maintenance needs.

It seems incongruous that children living in England & Wales have an express statutory regime that protects their welfare generally, and in particular (through case law) their security of housing, while their Australian cousins are treated as mere “third parties”, without any right to be considered in the property adjustment litigation between their parents.

Australians pride themselves on giving everyone “a fair go”, especially the disempowered, the disenfranchised and the dispossessed. The children of divorce suffer all these disadvantages. It is only fair that they be given special protection.

In November 2017 Federal Circuit Court Registrar Christopher Turnbull published his Ph.D. dissertation, in which he urged legislative amendments to take account of children’s interests in property adjustment proceedings. In his Submission to the ALRC on 20 August 2018 he recommended that, in proceedings for alteration of property interests

The financial interests of dependent children [should] have priority, irrespective of any child support paid or payable, having regard to children’s role as future economic and social members of society.

For two decades experts – including the FLC, Prof Parkinson, and now Dr Turnbull have been asking the government to amend section 79 to give better protection to the welfare of children, especially in relation to their housing needs when their parents divorce.

It is time for the LCA, and the government, to listen to the experts.

For children, there’s no place like home.

Research

The Family Law Section News of 14 August 2018 reported that a team from Melbourne Law School, Flinders University and ANU is seeking participants for a qualitative research project on “The meaning of home for children and young people after parental separation”.

The researchers seek the assistance of family lawyers with recruiting participants for their study, which involves talking with parents and children/young people about what home means to them. The aim of the project is to encourage and make it easier for parents and family law professionals (including courts, lawyers, and mediators) to think from a child’s or young person’s perspective when living arrangements are decided post-parental separation.’.