FAMILY COURT REACHES INTO THE COMMERCIAL WORLD

There have been some recent major changes to Family Law legislation giving the Family Court and the Federal Magistrates’ Court far expanded jurisdiction. Late last year new legislation came in which totally changed the position of creditors in Family Law proceedings. Under the new law a creditor has the right to intervene in Family Law proceedings to make sure their debt is now paid. On the other hand, a husband or wife in the Family Law proceedings also have the right to ask the Court to absolve them from a debt and to make the other party 100% liable. We expect that the Court will hear emphatic arguments from banks which will be resisting this sort of Order. However the Order might be more easily obtained in the case of family loans. In the common scenario when a father lends his son and daughter-in-law money to buy a house, the Court could make an Order that the debt be solely the responsibility of the son into the future and absolve the daughter-in-law from responsibility.

Companies and trusts are also part of the new legislation. Parties to a marriage often have property tied up in company or trust structures and also have outsiders who are trustees, directors or shareholders. The Family Court will now have power to order those third parties to transfer assets to a party to the marriage even if they don’t want to. Those third parties will become part of the Family Law proceedings.

The other big change in the commercial world which now impacts on the Family Court and Federal Magistrates’ Court is in the area of bankruptcy. The Family Court will have the power to make Orders under the Bankruptcy Act as well as under Family Law. A non bankrupt spouse will be able to apply in the Family Court for an Order that the trustee in bankruptcy pay spouse maintenance or property from assets of the bankrupt spouse which have already vested in the trustee in bankruptcy. There is even a possibility that a happily married spouse could use these provisions to apply for money from the trustee in bankruptcy pursuant to the Family Law Act; note that, technically, there is no necessity that a couple actually be separated before they commence proceedings for spouse maintenance or property settlement. There will be interesting times ahead in the Family Law property jurisdiction and highly experienced Family lawyers are required to handle these matters properly.

Stephen Winspear  Partner, Family Law