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The case involved a de facto relationship of approximately 10 years of which 2 children were born. For convenience we refer to the female as the wife and the male as the husband.
After some negotiations the husband and wife entered into Consent Orders which involved amongst other things:
1. Sale of one property with the division of the proceeds; and
2. The husband pay to the wife $130,000.00 in return for the equity in the second property.
The wife contended and the husband acknowledged the orders were negotiated on the basis the orders effected an equal division between the parties of their net assets. This was critical to the Family Court setting aside the Orders in circumstances of the breach.
In this particular case the husband was to retain an investment property and pay the wife $130,000.00 within 90 days (3 months). However it took 13 months to pay the wife the sum of $130,000.00. Further the husband paid interest thereon at the rate provided in the Rules. However during this time the value of the property had increased from $860,000.00 to $1,000,000.00 according to a Valuer who gave evidence at the hearing on the Application.
Section 90SN sets out the basis of which a Court may very well set aside Consent Orders altering property interest. These are similar to provisions of Section 79(a) of the Family Law Act in relation to married persons.
Critically in this case Section 90SN (1)(c) states:
Varying and setting aside orders altering property interest
1. If on Application of a person affected by an order made by Court under Section 90SM in property settlement proceedings the Court is satisfied that:
(c) a person has defaulted in carrying out an obligation imposed on the person by the order and in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and then make another order in substitution of the order.
The first issue that came before the Judge hearing the matter was whether the Order should be set aside. The Court set aside the Order to which we refer to below.
The second issue that arises if the Court sets aside or varies the Order what Order should be made in substitution of the Consent Orders.
The Court can vary the order that has arisen as a result of the default and make an order which is just and equitable.
The Court did not make any comments in the recent judgment as to how this should be dealt with. Does one look at what would be a just and equitable decision in all circumstances of the relationship as if no Consent Orders had been made; or the order to be just and equitable having regard to the circumstances that have arisen as a result of the default? Does that mean you only look at the default and the consequences of that default? The Court did not in this case give any guidance as to this aspect.
However in this particular case the acknowledgement that the agreement between the parties embodied in the Consent Orders was based on a 50/50 split of the net assets may assist the Court in determining what is just and equitable having regard to the default.
Was interest payable on the debt the appropriate adjustment? The Family Court held that it was not and the Full Court of Appeal dismissed the husband’s appeal against that proposition. The matter has not been determined as far as we are aware at this stage.
It may be that in light of the basis of the agreement embodied is the Consent Orders; namely that the parties were to receive 50/50 split of the net assets the increase in the value should be divided 50% to the husband and 50% to the wife a simple adjustment based on the increase in the value of property from either the date of default (or the date of the consent orders) and the date of payment may determine the adjustment to be made. The alternative is that the Court needs to review all the circumstances and determine what would be the appropriate division on the basis that the Orders were set aside and did not exist rather than having the Orders varied.
There have been cases even where the Consent Orders provide for what happens in default. A usual order for example could have been that the property be sold and the net proceeds be divided firstly in paying the $130,000.00 to the wife and then the balance to the husband. In such circumstances there would be a possibility of the Orders being varied pursuant to Section 90SN(1)(c). However we suggest in those circumstances when there is a provision for a default order it is less likely that the Court will set aside those orders in the event of a default. However nothing is certain and each case depends on the facts of the matter.
Where there is a significant change in the value of the property whether it be real estate or other property one needs to be careful to comply strictly with the Orders otherwise one may be met with an Application to Set Aside the Orders.
It is unlikely (although not impossible) that the party who defaults will receive a better outcome having defaulted.
One needs to carefully consider the documentation of the Orders when the parties agree and there are Consent Orders. The form of the Orders needs to, as far as possible, deal with the alternatives that may arise. In particular the Orders should deal with the circumstances that may occur which gives rise to a default.
If you are unsure as to whether your Consent Orders have been appropriately drafted or have any queries in relation to Consent Orders potentially being set aside and the ramifications thereof, please do not hesitate to contact our family law Solicitors and contact Richard Watson or his Personal Assistant Shereen DaGloria to discuss the matter.
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