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Family Law

Reopening property settlements – is it possible?

By November 5, 2019February 23rd, 2024No Comments

A recent case in the family courts demonstrates the difficulty in reopening property settlements, after a wife attempted to have the courts reconsider her final property settlement due to the fact that a property was later sold at a much higher price than its previously mutually agreed value. However, in what circumstances might reopening property settlements be possible?

In the case of Kendrick & Barnwell [court pseudonyms], a couple had agreed on a property’s valuation made by a single expert, and it was listed in their balance sheet at a value of $1,175,000. However, the husband had later sold the property for $1,500,000. When the wife learnt of this she applied to reopen the proceedings, arguing the difference in the figures represented “a significant impact on justice and equity”—in other words the husband would “pocket a considerable bonus” on what the court had intended in the settlement.

But the husband argued that he was “barely better off” selling the property at the higher price, after taking into account costs of sale, an increased mortgage debt payout (which had increased from the debt in the trial balance sheet), the cost of renovations after valuation, and the Capital Gains Tax his accountant advised he would have to pay. The husband, who was himself a real estate agent, was able to depose to research he had undertaken on the values of the nine other properties that the wife had interests in, and he argued if her application was successful, then he too should also be allowed to introduce updated valuation evidence relating to the other properties as well as the wife’s business.

A property settlement is the way property is formally divided after a couple separates, and it can be formalised without necessarily also applying for a divorce. During the course of a property settlement, the value of assets and debts of each party are agreed, an assessment is made of how contributions were made by each party (financial and non-financial) and of any relevant factors which may affect the parties’ future needs, and the courts will also decide if the ultimate outcome is “just and equitable” before making the settlement legally binding.

A final property settlement is a Final Order of the Court and is binding on both parties. It can either be achieved through a written agreement between the spouses which is filed in the court (a Consent Order), or the court can decide the property settlement terms in the absence of the couple’s agreement at the end of their proceedings.

The aim of the settlement is to create fairness, certainty and finality, to protect assets acquired after separation, and to take into account issues such as stamp duty and capital gains tax advantages.

When is reopening property settlements possible?

Where a party does attempt to reopen a property settlement, such an application is commonly referred to as a “section 79A Application”, falling under section 79A of the Family Law Act. This sets out the grounds for when a final property settlement can be set aside and new, more appropriate orders made.

Courts have a discretionary power to review, correct or alter judgments at any time until court orders have been “perfected”. This discretion is guided by the interests of justice, both for the individuals involved, and because it is in the public interest to ensure the finality of litigation. The key question the courts will try to determine in section 79A applications for reopening property settlements is: would the court be more able to do justice if the application was granted?

The grounds set out in section 79A cover situations where there has been a potential miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose), or the giving of false evidence.

Failure to disclose information (such as hiding an asset) is often used as a basis for applications under section 79A, but the failure to disclose needs to have been material, to the point where the final property settlement is unjust. It’s important to understand that a spouse must have been diligent in pursuing the truth from the other party. For example, in a case where one party failed to pursue a valuation of a business and it was later discovered that the business was worth a significant amount of money, the courts rejected the application because the value of the business should have been pursued prior to consent orders being signed and lodged.

If one party felt forced or pressured to sign an agreement, this can fall into the category of “duress”, but often this is extremely difficult to prove. Courts have required more than a sense of constant harassment to be proven—usually it is necessary for a litigant to actually fear for their life if they do not sign what the other party asked them to sign.

Other potential bases for reopening property settlements under section 79A include situations where circumstances arise that make orders impractical to fulfill, or where a party doesn’t comply with an order and this creates new circumstances where the order should be varied or set aside or a new order made, or where new exceptional circumstances have arisen (such as related to the welfare of a child, or if an order creates hardship. A further possible reason is if both parties agree to set the settlement aside (by consent).

What if the trial is over but judgment has been reserved?

After a trial, it can take many months for the court to deliver its judgment and orders. During that time, new evidence could be discovered which, if introduced into court, might potentially influence the judge’s decision. If a party wants to reopen the proceedings to introduce this new evidence, they will still need to prove that the further evidence is so material or significant that the interests of justice demand its admission. In addition:

  • the further evidence needs to be likely to affect the outcome of the proceedings;
  • the further evidence could not reasonably have been obtained earlier (and the courts will question why the evidence was not called at the hearing, and consider if this was deliberate and strategic); and
  • the other party must also not suffer prejudice due to the late admission of the new evidence. (Prejudice to the other party might be perceived to occur due to the “strain of litigation”–that is, prolonged stressful litigation is accepted to place a strain on litigants).

How is property valued?

Parties can come to an agreement on the value of a property. If there is no agreement, parties can obtain some market appraisals from real estate agents as a starting point, to get a better ‘feel’ for the market.

Parties can also instruct a registered property valuer to prepare a formal valuation report.

What about changing property values?

The value of a property is usually accepted as its value at the “date of hearing”, and it’s true that this is a somewhat arbitrary date. The property value may have changed between the actual date of valuation and the date of hearing, and it’s certainly unrealistic to argue that real property values are ever static. But parties clearly can’t relitigate every time the value of their assets changes. The courts therefore make an assumption (unless there is evidence otherwise) that values are fixed at a certain date, and the courts deliberately ignore the economic or other circumstances that may exist which influence property values.

The case law shows that the mere change in value of a property after a trial concludes, or the ‘actual’ sale price of a property, is not enough to successfully make a section 79A application, even when applicants have tried to argue that the changing value of a property caused by impacts such as drought or the Global Financial Crisis, constitutes material “new evidence”.

What is more, if a party seeks to raise the issue of the current value of an asset, it would be hard to argue against reassessing the current value of all the parties’ assets, as they too would have likely had a change in value. Case law has been clear that this would not be in the interests of justice, and the case of Kendrick & Barnwell referred to herein reaffirms that.

In some situations, however, leave has been granted in cases where a liquidator and receiver were appointed in respect of property after the conclusion of a trial, or where a party sought to reopen proceedings to bring in evidence of a terminal medical condition and changed financial circumstances.

Unfortunately, applications to set aside final property orders are often unsuccessful and it is therefore vital to obtain legal advice first if considering attempting to make a section 79A application, to ensure such action would be commercial–the danger is that if the application fails, you could be liable for the other party’s legal costs as well as your own.

If you need assistance with a property settlement or other family law matter, please contact Canberra family lawyer Cristina Huesch or one of our other experienced solicitors here at Alliance Legal Services on (02) 6223 2400.

Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please contact Alliance Legal Services.

You can read the case referred to above here.

You can also read the Family Court’s guidance on property settlement here.

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