The Distinction between Property and Spousal Maintenance
By Marisa Stranges, Lawyer
In the recent case of Thorpe & Stirling [2021] FedCFamC1A 86 (15 December 2021), the Full Court of the Federal Circuit and Family Court of Australia discussed the distinction between property and spousal maintenance orders.
Background
On 5 December 2014, Ms Stirling (“the wife”) and Mr Thorpe (“the husband”) entered Final Property Settlement Orders by consent and subsequently varied those orders on 15 February, 2019 also by consent (together described as “the Consent Orders”).
The net assets of the parties, as disclosed to the Registrar at the time the Consent Orders were made, totalled approximately $880,367, which included approximately $213,332 of superannuation. The major asset was a property at Suburb C (“the Suburb C property”) owned by the wife which was valued at $1,730,000 and subject to a mortgage in the sum of $1,057,028.
In addition, the husband had a financial resource available to him in the form of anticipated bonuses between $200,000 and $600,000.
The Consent Orders required the wife to sell the Suburb C property and that she receive $430,000 of the sale proceeds. This was on the basis that the husband would be guarantor and meet mortgage payments on a future loan of up to $500,000, when the wife next purchased a property. The Consent Orders provided that the husband would continue to guarantee and pay the wife’s mortgage until its loan balance was discharged in full. These financial arrangements were implemented by the parties.
In December 2019, the wife remarried. Subsequently, the husband refused to pay the mortgage, contending that the relevant paragraph of the Consent Orders was to be characterised as a spousal maintenance order and not a property settlement order. The husband’s position was based on section 82 (4) of the Family Law Act 1975 (Cth) (“the Act”). This section stipulates that “An order with respect to the maintenance of a party to a marriage ceases to have effect upon the re-marriage of the party unless in special circumstances a court having jurisdiction under this Act otherwise orders”.
The wife contended that the relevant paragraph was a property settlement order pursuant to section 79 of the Act (Alteration of property interests) and sought enforcement of it.
First Instance Decision
In November 2020, the Federal Circuit Court of Australia (as it was then known) rejected the husband’s submissions as to spousal maintenance and made a suite of enforcement orders. The husband appealed those orders.
The Appeal
The grounds of appeal raised only one question, namely “whether Order 36 is properly characterised as a property settlement order or a spousal maintenance order.”
In considering the wording of the relevant paragraph of the Consent Orders, the Full Court said:
“[20] It can also be seen that the husband’s liability under the mortgage remains until it is paid out… [T]hat liability could well exceed what the husband otherwise received under the consent orders, essentially resulting in him paying more to the wife than he received under the remaining orders.”
The Court also investigated the possibility that the order could instead be characterised as a maintenance order. In Mullane v Mullane [1983] HCA 4; (‘Mullane”) at 445, the High Court said:
“In our opinion … [section]. 79 [of the Act] on its proper construction refers only to orders which work an alteration of the legal or equitable interests in the property of the parties or either of them”.
The Full Court at [28] noted “[T]he point to be drawn … is that such orders, whatever they may be, are based on a division of the existing capital interests.”
The Full Court’s Findings (on appeal)
“[36] … [H]is Honour found … the husband’s obligations under Order 36 “were likely to be paid out of the husband’s future income stream including his receipt of any anticipated bonus payments”. Each of those was a financial resource. Each could be taken into account to justify the wife receiving a greater share of the existing property … but not … to enlarge the pool of property available for division. The continuing obligation to pay the mortgage (and to act as guarantor) is so akin to him being required to borrow funds to enlarge the property pool as to attract the same principle.”
“[37] Order 36 does not work an alteration of the interests of the parties in their property but rather creates an obligation which is separate to the division of that property.”
Ultimately, it was found that the relevant paragraph of the Consent Orders was in fact a maintenance order. Therefore, that order ceased upon the wife’s remarriage. The husband’s appeal was allowed and the enforcement orders were set aside.
Conclusion
Section 79 of the Act does not empower the Court to make an order in relation to property which does not exist at the time the parties enter a final property settlement.
Where a party is likely to provide financial support to the other party from a future income stream or a financial resource, same is akin to maintenance rather than a property order, and should be correctly characterised as such in Consent Orders or other similar settlement documents.
If you or someone you know is going through a separation, we recommend you seek legal advice from MST Lawyers’ highly experienced Family Law Team. You can contact our team on (03) 8540-0200 or at familylaw@mst.com.au
