Family Law Council report on "parentage"

Recently the Family Law Council of Australia's "Report on Parentage and the Family Law Act" was released by the Attorney-General. The Council was asked to prepare the Report in light of the increasing diversity of family formation in Australia and the rapidly changing nature of reproductive technology.

In the Report the Council considers the role and meaning of "parent", who is considered to be a parent of a child under the Family Law Act, and the inconsistent, inappropriate and discriminatory outcomes for children on the basis of the status of the people who are raising them.

The Council made nineteen recommendations (summarized):

• One: The Government should conduct a comprehensive revision of the decision making provisions of the Family Law Act to ensure that it provides a consistent approach to decision making for all children regardless of their family form.
• Two: The reference to ‘both’ of the child’s parents should be removed from s 60B(1) and s 60CC(2)(a) of the Family Law Act. In addition, where the word ‘parent’ appears elsewhere it should be amended to include a reference to ‘other significant adults’ or ‘other people of significance to the child’ where appropriate.
• Three: The definition of parent in s 4 of the Family Law Act should be amended to make it clear that the term parent is inclusive and not limited to parents recognised under the law.
• Four: In determining the best interests of an Aboriginal child, s 60CC(3)(h) of the Family Law Act should be amended to include ‘the child’s right to enjoy his or her Aboriginal or Torres Strait Islander culture (including the benefit to that child to enjoy that culture with other people who have the responsibility to pass on that culture).’
• Five: Part VII of the Family Law Act should make specific provision for the making of orders in favour of one person or more than two persons where that supports the child’s best interests.
• Six: The Government should introduce a federal Status of Children Act that includes power to make orders about the status of children and legal parentage for the purpose of all Commonwealth laws.
• Seven: The Standing Council on Law and Justice should consider further state, territory and Commonwealth cooperation on harmonising parentage laws nationally.
• Eight: Section 60H of the Family Law Act (artificial conception procedures) be consistent in its approach to single and couple parents and with state and territory laws in this area that make provision about the parental status of donors of genetic material.
• Nine: Section 69U of the Family Law Act be amended to make it clear that the presumptions can be rebutted by other provisions in Part VII Family Law Act.
• Ten: The Government should seek a referral of power from South Australia consistent with the referrals from New South Wales, Queensland, Tasmania and Victoria which provide that the family courts may make a determination of parentage.
• Eleven: The Government should consider amending s 69W of the Family Law Act to make it clear that the court may consider the best interests of the child when deciding whether to make a parentage testing order.
• Twelve: The new federal Status of Children Act (Recommendation 7) should contain provisions specifically dealing with applications for 'transfer of parentage' in surrogacy cases where state and territory Acts do not apply.
• Thirteen: The provisions in the new federal Status of Children Act dealing with the transfer of parentage in surrogacy cases where state and territory Acts do not apply should contain a set of minimum requirements including the following:
• That any order is subject to the best interests of the child;
• Provision is made for when the parties change their minds;
• Evidence of the surrogate mother’s full and prior informed consent;
• Evidence of the surrogacy agreement, including any sums paid;
• Consideration should be given to whether the intending parents have acted in good faith in relation to the surrogate mother;
• Evidence of the intending parent/s actions in relation to ensuring the child will have access to information concerning the child’s genetic, gestational and cultural origins;
• Provision is made that where a surrogacy arrangement involves multiple births, orders must be made in relation to all children born;
• The legality of the surrogacy arrangement should be a relevant consideration for the court when determining parentage.

• Fourteen: Section 60H of the Family Law Act (artificial conception procedures) should be amended so that it is clear it does not apply to surrogacy arrangements.
• Fifteen: Section 60HB of the Family Law Act should be retained (in some form) to recognise state and territory orders that transfer parentage in domestic surrogacy arrangements.
• Sixteen: The Government should pass amendments to:
• Clarify whether the court has power to authorise the taking of a sample from a child without the consent of a parent.
• Amend s 69ZC of the Family Law Act to make it clear that a non-compliant parentage testing report may be admitted into evidence if the court is satisfied it should be.

• Seventeen: The Australian Law Reform Commission conduct an inquiry into the full range of issues raised by international surrogacy and its impact on Commonwealth laws.
• Eighteen: The Government should pass separate legislation to enable the family courts to transfer parental status to Torres Strait Islander receiving parents.
• Nineteen: Birth registration be reviewed and that consideration be given to harmonisation of records so that one search can track births (deaths and marriages) in all states and territories.

The Report can be found at www.ag.gov.au/FamiliesAndMarriage/FamilyLawCouncil/Pages/FamilyLawCouncilpublishedreports.aspx.

Tax ruling change - potential significant impact on property settlements

At end of financial year the Australian Tax Office issued a final public ruling that provides that payments from a private company to a spouse in accordance with a Family Law Courts order are now to be treated as a deemed dividend and subject to personal income tax. Previously these payments, per earlier practice and many private rulings from the ATO, were treated as tax free payments to the spouse receiving the money.

This is a considerable policy change impacting on those couples whose property includes family companies. Indeed the ruling from the ATO notes a reversal of a "significant body" of previous private rulings and a general practice.

Additionally, it is arguably contrary to other tax breaks that are available for separating couples, such as stamp duty exemptions and capital gains tax rollover relief.

Business advisers have been quoted in news articles (such as in the Australian newspaper and the Australian Financial Review last week) as saying that the change could mean that people are unable to retain their businesses as they are required to come up with more money to make up the difference to their former spouse and to do so they will have to sell the business.

Whether that will occur or not will depend on the circumstances of each case but what is going to occur is that parties to family law proceedings will need to carefully consider whether non-company assets should be divided in a different manner in order to achieve a better tax outcome. But there are some matters where almost all of the assets that the parties "own" are held by a company and such an option will not be available. In those cases, accountants will need to determine the tax implications and costs of splitting the assets so parties know what the net outcomes will be.

If there is extra tax payable it will need to be taken into account when determining a just and equitable outcome between the parties with the result that the parties are dividing less than they previously would have been.

In some circumstances, where a spouse does wish to retain the company and its assets, it is also possible that company restructures will be necessary resulting in complex tax arrangements being undone in order to try and achieve an equitable result.

Some commentators are calling for government intervention - legislation to overturn the ATO's ruling. It will be interesting to see if the government responds. 

Annual conference

This past week I, along with two colleagues, attended the annual Hunter Valley Family Law Practitioners Association conference.

This conference is the highlight of the conference calendar in my opinion. Firstly, while there may be conferences in more glamorous climes the Hunter Valley Vineyards region is not too bad a location for a conference - there's is something wonderful about waking up to the sight of hot air balloons rising over the vines and the event wraps up on Saturday afternoon, leaving plenty of time for wine tasting and picnics. But most importantly, the conference is without comparison in terms of an opportunity to discuss that thing we all do - family law - with our Judges, experts and fellow practitioners in a relaxed environment.

This year, as always, the speakers and topics were excellent.

We had a session presented by a visiting Justice entitled "Children in the Family Law Courts - Are They Seen and Not Heard?"; one by our local expert on the taxation consequences for parties to proceedings and consideration of whether there is a more effective option available; one by one of our local Justice's on 'Relocation' Cases; another by one of the experts regularly used by the Court on parenting matters entitled "Parental Mental Health Issues - Impact on Development and Attachment, Parenting Arrangements and Developmental Stage"; a session on the often complex ethics involved in family law matters; one by one of our local experts on self-managed superannuation funds; one by a local Magistrate entitled "AVOs -  Practical Aspects of the Crimes (Domestic and Personal Violence) Act 2007"; and a review of the latest and greatest by our local Judges and one of the visiting Judges. 

What Court and when?

The Australian court system is intricate. This is in large part due to our Constitution and the allocation of powers and responsibilities in relation to various matters between the Federal government and the State governments.

One clear example is in family law.

There are several courts - at both state and federal level - that deal with issues concerning families. Each court has jurisdiction to deal with specific types of cases, although there are several areas which overlap and certain matters could very well be heard in any number of courts.

For example, at a federal level, there is the Family Court of Australia and the Federal Circuit Court of Australia. Both courts have jurisdiction to consider property division and/or parenting disputes between separating married or de facto couples. Generally speaking the Family Court will consider the more specialised or complex types of matters. However, in New South Wales, the Local Court, District Court and Supreme Court also have jurisdiction to make orders under the Family Law Act in relation to property division. There are limitations on the orders that these courts can make - for example the Local Court and District Court can only consider property division cases that involve an asset pool under a certain amount ($100,000 in the Local Court and $100,000-$750,000 in the District Court). Additionally, the NSW Children's Court can make orders for the care and protection of children who are at risk of harm.

However, family law matters also provide another example where the respective jurisdictions of the federal courts and the state courts are further entwined. That is, where the same facts could result in different applications being made in either a federal court or a state court.

In yesterday's Sydney Morning Herald there was an article on this example of how the two jurisdictions interrelate.

In May of this year an order was made by the Supreme Court of New South Wales, upon an application made by a soon-to-be former mother-in-law (Ms McDonald), for the son-in-law (Mr Street) to pay her $540,729.92 plus interest and costs. Last month a garnishee order was made directing all of Mr Street's income to be paid to Ms McDonald in repayment of that debt.

It is understandable that Ms McDonald commenced her claim in that Court. Ms McDonald was claiming that she had loaned Mr Street monies when he was struggling to pay his mortgage and that Mr Street had failed to repay her those monies. That is, that Mr Street had breached a contract between himself and Ms McDonald. Ms McDonald was relying on the Supreme Court's common law civil jurisdiction.

Mr Street however has now sought an adjournment of the garnishee order to enable him to seek that the matter be transferred to the Family Court.

The ability of the Family Court to consider the matter is based on the breakdown in the marriage between Mr Street and Mrs Street, Ms McDonald's daughter. The Family Court, in exercising its jurisdiction to make property division orders between Mr and Mrs Street has jurisdiction to hear from third party creditors of the marriage, such as Ms McDonald.

The matters which the Family Court will consider in determining whether Ms McDonald is a third-party creditor of the marriage and therefore owed money from the matrimonial asset pool may be vastly different from those matters that the Supreme Court will have considered in determining a breach of contract matter. 

The importance of procedural fairness

In a recent appeal the Family Court spoke about the fundamental importance of procedural fairness to the law and more broadly to the community.

The case of Manotis & Manotis and Others [2014] was an appeal from a decision by Justice Moncrieff.

The husband appealed the decision of Justice Moncrieff, relying in part on an argument that he had not been provided with procedural fairness by the Judge.

The Appeal Court acknowledged the frustration that Justice Moncrieff "understandably felt in dealing with the dispute which remained unresolved nearly 5 years after the substantive orders had been made. We acknowledge also the difficulty associated with the husband seeking to rely upon an affidavit, which although not of great length, attached a very large number of documents, many of which were seemingly of little or no relevance. We also accept that the affidavit contained much objectionable material. Finally we accept that His Honour was entitled to entertain suspicions about the Deed of Settlement."

The Appeal Court went on to say "notwithstanding all of this, His Honour's obligation was to determine the issue according to law and to afford procedural fairness. With great respect, we consider the transcript reveals that His Honour approached the matter having predetermined the outcome; acted as prosecutor on behalf of the solicitors and failed to afford a proper opportunity to any of the parties to present their case."

The Appeal Court upheld the husband's appeal. 

The Appeal Court concluded by addressing the importance of procedural fairness.

The Court said: "it is important to keep in mind that the process followed in every case not only has an impact on the litigants in that case but it also has wider ramifications." The Appeal Court quoted from the decision of NAAF v Minister for Immigration and Multicultural and Indigenous Affairs [2004] where Justice Kirby said: "if the law requires a particular course to be followed, the failure to observe proper procedures itself amounts to a legal defect in the performance of the task conferred by law as the law requires. In this sense, the invalidating element is not the disappointment but the anterior failure to conform to the law. That failure is, in a sense, a legal wrong against the whole community."

The Court also quoted from Justice Rich in Cameron v Cole [1944]: "it is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case. If this principle be not observed, the person affected is entitled, ex debito justitiae, to have any determination which affects him set aside."

The Appeal Court concluded "the hearing in the present manner was attended by such procedural unfairness that the only proper order was to discharge all of the orders."

'Special contributions' concept "a terrible mistake"

Earlier in the year I wrote a post on the case of Kane & Kane, a big money property division case that made the headlines when the adjustment that had been made in favour of the husband for "special contributions" by the trial judge was overturned by the Appeal Court: http://lawyerfamily.blogspot.com.au/2014/01/special-contributions.html. Now another "special contribution" case has wound its way through the appeals process: Hoffman & Hoffman 2014 FamCAFC 92.

On 11 January 2013 Federal Magistrate Brewster made property division orders between Mr and Mrs Hoffman in relation to their 36 year marriage. His Honour divided the property and superannuation of about $10,000,000 between the parties equally.

Mr Hoffman appealed those Orders.

Mr Hoffman, who represented himself at the Appeal, argued that the Federal Magistrate erred in law by failing to have regard to his "special contributions" to the marriage or alternatively that the Federal Magistrate failed to place sufficient weight on his "special contributions".

In the first instance decision Federal Magistrate Brewster found that there was "nothing unusual about the parties contributions during their relationship. They commenced their relationship a long time ago. Each brought property into the relationship.… The difference in the values of these properties is no longer relevant. During a long marriage they each earned income.… The parties raised four children."

His Honour then went on to say "where the court is dealing with a situation where there is a long marriage with children and where the parties have made contributions in different spheres it is usually inappropriate to give greater weight to one party's contribution than those of the other…. There have been exceptions to this approach however. These have been in what have been called "big money" cases. In cases in the past where the parties have acquired a very substantial fortune and this has been due to the particular skills of the husband (in all the cases of which I'm aware it has been the husband) then adjustment has sometimes been made to reflect what is often termed the "special contribution" he has made."

Mr Hoffman had argued that the couple's asset should be split 70:30 in his favour in recognition of his "skill" and "entrepreneurial flair"- in particular in relation to selecting, maintaining and trading shares.

His Honour rejected the husband's assertion that he should be given an adjustment based upon his "special contributions".

Indeed the Judge went on to say that "… I do not accept the principal (if it be a principle) of special contributions". His Honour reviewed the decision of the High Court in Mallet v Mallet [1984] and said that the decision "need not and should not be followed" as the decision is "infected by gender bias" and "the zeitgeist in 1984 when Mallet was decided was vastly different to the zeitgeist today".

The Appeal Court (constituted by Deputy Chief Justice John Faulks, Justice Peter Murphy and Justice Garry Watts) said "to the extent that His Honour's judgement is to the effect that there is no binding rule of law relating to "special contributions" His Honour is, in our view, correct." The Appeal Court went on to say "we do not consider that there is any "legitimate guideline" of "special contributions" or any such guideline pertaining to particular contributions containing "special" factors or features…"

Indeed the Appeal Court said "we consider that the true position is, with respect, put correctly and succinctly by Justice O'Ryan in D & D [2005]: "… The notion of special contribution has all been a terrible mistake… What I have to do is identify and assess the contributions made by each of the parties without any presumption of entitlement."

The Appeal Court dismissed the husband's appeal and ordered that he pay the costs of the wife for the appeal.

Child Support Inquiry

On 27 March 2014 the Minister for Social Services asked the Standing Committee on Social Policy and Legal Affairs to inquire into and report on Child Support.

The Committee is to look into:

• the methods used by Child Support to collect payments in arrears and manage overpayments;
• whether the child support system is flexible enough to accommodate the changing circumstances of families;
• the alignment of the child support and family assistance frameworks;
• linkages between Family Court decisions and Child Support's policies and processes; and
• how the scheme could provide better outcomes for high conflict families.

The Committee is to also report on:

• the methodology for calculating payments and the adequacy of current compliance and enforcement powers for the management of child support payments;
• the effectiveness of mediation and counselling arrangements as part of family assistance frameworks; and
• ensuring that children in high conflict families are best provided for under the child support scheme.

The Committee called for submissions - due to be filed by 4 July 2014. And a variety of organisations - including Relationships Australia, the Law Society of NSW, Victorian Legal Aid, the Law Council of Australia, Dads in Distress and the National Council of Single Mothers and their Children - have made public submissions to the Committee.

Additionally, the Committee has created an online questionnaire for individuals to complete: https://www.research.net/s/CSPquestionnaire.  According to the Chair of the Committee, MP George Christensen "We want to hear from individuals about their experiences, and that is why we have created a comprehensive online questionnaire ... This kind of information will be crucial to our understanding of how the program operates in reality".

The Committee has also been holding hearings in many Australian cities, including an up-coming one in Newcastle on 21 July 2014. These hearings are open to the public.

The Committee is expected to table its report in early 2015.