3 Mar 2016

In general, the Family Court makes orders that bind the parties to the proceedings (being the parties to the marriage) only. However, the Court also has the power to make orders to bind third parties in particular circumstances.  A “third party” is defined in section 4 of the Act as being any party who is not a spouse party. This is quite broad, and may include relatives, friends, creditors and business associates of one or both parties to the marriage.  Under section 90AA of the Family Law Act 1975 (Cth) (“the Act”), the Court has the power to:

a) make property order under section 79 of the Act; or

b) grant an injunction under section 114 of the Act;

that alters the rights, liabilities or property interests of a third party.

 

Property Orders Binding a Third Party

The Court can make the following types of property orders to bind a third party (s90AE(1) of the Act):

a) for a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt;

b) for a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt;

c) for a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt; or

d) for a company to register a transfer of shares from one party to the marriage to the other party.

 

The Court can only make these orders if the following criteria are met (s 90AE(3) an 90AE(4) ):

a) the order is reasonably necessary or appropriate to bring about a property division between the parties;

b) it would not foreseeably result in the debt not being paid in full;

c) the third party has been given procedural fairness;

d) it is just and equitable to make the order; and

e) the order takes into account the following matters:

i) the taxation effect on the parties to the marriage;

ii) the taxation effect on the third party;

iii) the social security effect on the parties to the marriage;

iv) the third party’s administrative costs in relation to the order;

v) the capacity of a party to the marriage to repay the debt;

vi) the economic, legal or other capacity of the third party to comply with the order;

vii) any matter raised by the third party; and

viii) any other relevant matter.

Given all of the above, the Court is quite conservative in exercising its power to interfere with third party property interests.

 

Injunctions Binding a Third Party

An injunction is a particular type of order that either:

a) restrains a party from acting in a certain way; or

b) compels a party to act in a certain way.

 

Under sections 90AF(1) and 90AF(2) of the Act, the Court may make the following types of injunctions to bind a third party:

a) injunction restraining a third party from repossessing property of a party to a marriage;

b) injunction restraining a third party from starting legal proceedings against a party to a marriage; or

c) injunction directing a third party to do a thing in relation to the property of a party to the marriage.

 

Again, the Court must be satisfied that the following conditions (set out in sections 90AF(3) and 90AF(4) of the Act) are met before it makes an injunctive order binding a third party:

a) the injunction is reasonably necessary or appropriate to effect a property division between the parties;

b) it would not foreseeably result in the debt not being paid in full;

c) the third party has been given procedural fairness;

d) in all the circumstances, it is proper, just a convenient to make the injunction; and

e) the injunction takes into account the following matters:

i) the taxation effect on the parties to the marriage;

ii) the taxation effect on the third party;

iii) the social security effect on the parties to the marriage;

iv) the third party’s administrative costs in relation to the injunction;

v) the capacity of a party to the marriage to repay the debt;

vi) the economic, legal or other capacity of the third party to comply with the injunction;

vii) any matter raised by the third party; and

viii) any other relevant matter.

 

This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.

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