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Three’s a Crowd: Third Parties in Family Law Matters

“There were three of us in the marriage… so it was a bit crowded”
Princess Diana

With modern day families, the Family Court does not only deal with parties to a relationship or parents of children but also third parties such as grandparents or step-parents.

In financial cases, complex family financial structures have led to more litigation involving third parties such as trusts, companies and creditors, or even government agencies.  

The Family Court’s power to bind third parties has increased since 2004, however this area of law is specialised. The joining or intervention of third parties must be done with due care and diligence.

There are a broad range of reasons why a third party may be, or wish to be joined to family law proceedings. These may include:

  • where they have an interest in property or an entity that forms part of the property pool;
  • where they have entered into a financial relationship with one or both of the parties;
  • where they have entered into a financial relationship with an entity that forms part of the property pool;
  • where the orders sought can only be realised by the third party;
  • where they were party to transaction designed to defeat a spouse’s claim;
  • where they need to be restrained from dealing with an asset for an order to be effective;
  • where they are a business partner of a party;
  • where they are a creditor of a party;
  • Trustee in Bankruptcy for one of the parties;
  • the Commissioner of Taxation where a party may be avoiding tax;
  • The Attorney General;
  • Child Support Registrar;
  • ASIC.

Common types of Applications involving third parties include applications seeking to bind companies or trusts associated with one of the third parties, applications for injunctions and applications for security for costs. Often third party interveners seek permission of the  Court to join proceedings so that they may assert or protect their interest in property.

The Family Law Rules provide thata party must be joined to proceedings where their rights may be directly affected by an issue in a case and where their participation as a party is necessary for the Court to determine all issues in dispute. For example, in a property settlement case adjusting the parties’ property or when an injunction is sought against a third party.

However, following the addition of Part VIIIAA to the Family Law Act in 2004, the Court’s power now extends to the alteration of the rights, liabilities or property interests of third parties in relation to property proceedings. This extends to de facto relationships.

Section 90AE allows the Court to make a section 79 order which binds a third party. Such orders may direct a third party to do something in relation to the property of a party to the marriage or, alter the rights, liabilities or property interests of a third party in relation to that marriage. Further under this section, the Court can make the following orders:

  • for a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt;
  • 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;
  • for a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt; or
  • for a company to register a transfer of shares from one party to the marriage to the other party.

The power conferred by Part VIIIAA to bind third parties is extremely wide. The Part has effect notwithstanding any other law or instrument of any kind, including any trust deed or written agreement. A third party can therefore not be in breach of any other laws, state or federal, by complying with an order under this Part. Further, the Court has a very broad discretion to alter property interests under section 79. As a result of the power’s broad scope, appellate Courts have limited the scope of its application.

Since its introduction, parties have, on occasion sought to use Part VIIIAA as a tool to increase the property pool available for division between spouses.

However, the prevailing judicial view and the clear interpretation of s90AE is that this part should only be used to divide the property pool that already exists, not to increase the property pool.

If you find yourself, either personally or as a stakeholder within a corporate entity or trust enmeshed in a family law dispute it is advisable to obtain timely, targeted and practical advice as to your rights and obligations.  

 

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