Can I vary final property orders?
When a person comes to see us during their first meeting and we ask “why are you here?” the most common answer is “I want to get on with my life” and their priorities are “finality” of the matter and “certainty” about their future. Varying property orders after they are made final is certainly not something they contemplate.
- A party is dishonest and fails to tell the other party about assets and information that were relevant and significant to the outcome of the matter?
- Circumstances have arisen since the making of the orders that make it no longer practical to carry out the agreement reached?
- A party defaults in carrying out an obligation pursuant to a final property order?
- Exceptional circumstances have arisen since the making of the order, with respect to a child of the relationship, such that the party caring for the child will suffer hardship if the agreement is not varied?
In these circumstances it is possible for the agreement to be varied or set aside so that the disadvantaged party can re-open all or part of the property settlement, pursuant to section 79A Family Law Act 1975.
If you are defaulting on property orders, you are at risk of an application by the disadvantaged party to set aside the orders and replace them with new orders more favourable to them, and you may be required to pay your ex’s legal costs of the application if you are found to have defaulted on the property orders without a good reason.
Varying Property Orders – Theoretical Case Study
Say Mr and Mrs Smith entered into final property Orders on 1 February 2018. Those orders provide, among other things, for Mrs Smith to act as agent to sell shares in a company XYZ Electronics, controlled by Mr Smith, and to be exclusively entitled to the profits of sale of those shares, or otherwise, in the absence of sale, that Mrs Smith be at liberty to transfer those shares into her sole name. At the time of the orders being made, those shares were understood by both parties to be valued at approximately $200,000.
A few months after the Orders are made, Mr Smith sells 98% of his shares in the company XYZ Electronics to ABC Electrical Services and XYZ Electronics. Mr Smith remains a shareholder of XYZ Electronics but the value of Mr Smith’s shares in XYZ Electronics is reduced to $4,000.
The original orders provided that Mr Smith was prohibited from dealing with his shares in XYZ Electronics in such a way that would diminish the value of those shares.
As a result, Ms Smith will receive $196,000 less than what she was entitled to pursuant to the property Orders entered into on 1 February 2018.
Ms Smith has the right to file an application seeking a variation to the original orders to reflect the diminution of the value of the shares under section s79A(b) and (c) given the change in the nature of the property subject to the original orders.
In order for Mrs Smith to be successful in her application to vary the original orders she would need to prove to the Court that (a) Mr Smith has defaulted in carrying out an obligation imposed upon him by the original orders and (b) in the circumstances that have arisen as a result of Mr Smith’s default, it is just and equitable to vary the original order and make a new order.
Mrs Smith would need to provide evidence to the Court that the shares in Mr Smith’s name have diminished in value as a result of Mr Smith’s conduct in selling 98% of those shares.
If Mrs Smith is able to produce such evidence, it is likely she would be successful in her application to vary the original orders and a Court would find as follows:
- After final property orders were made, Mr Smith sold 98% of his shares in XYZ Electonics;
- Mr Smith has defaulted in carrying out an obligation pursuant to the original orders, that he not deal with his interest in XYZ Electronics;
- As a result of Mr Smith’s conduct and through no fault of Mrs Smith, the value of the shares held in XYZ Electronics has been diminished;
- It is just and equitable in the circumstances for the court to vary the original orders so as to remedy that situation and avoid a miscarriage of justice to Mrs Smith.
The precise variation of the orders would depend on all the circumstances of the case.
Varying Property Orders – Real Case Study: Gaudry & Gaudry  FMCA fam 452
In Gaudry and Gaudry, the Wife filed an application seeking to set aside an earlier property order made in August 2002, where the Husband had demolished a residence on the property to be sold after the orders had been made, the effect of which being that the property had reduced in value by $35,000.
Federal Magistrate Scarlett found that the evidence established that the residence on the property had been demolished at the instigation of the Husband and as a consequence, the property had decreased in value from $110,000 to $75,000, to the detriment of the Wife.
The Court accordingly varied the original orders pursuant to section 79A Family Law Act 1975 so that when the property was sold a figure equivalent to 60% of the lost $35,000 was paid to the Wife prior to the remainder being distributed pursuant to the original orders.
Moral of the story – Varying property orders is your right where the other party is in default
Petrie Family Law expert Courtney Barton of Barton Family Lawyers says:
“It is regrettably a common scenario that we see parties defaulting on property orders. If you foreshadow difficulties complying with your property order you should seek an urgent extension of time to comply to avoid further litigation and legal fees. Otherwise, you may find yourself the respondent in an application for enforcement of, or setting aside of those orders. You may also be at risk of having to pay the legal costs of the other party’s application, particularly if you do not urgently remedy your default. If you are disadvantaged as a result of your ex partner defaulting on property orders you should seek urgent legal advice with respect to enforcement or a variation of those orders, to secure the amount to which you were originally entitled to. ”
If you are in need of advice to formalise your property settlement or advice with respect to a party defaulting on property orders, please contact us today to book a reduced rate initial consultation with one of our family law experts to have a confidential discussion about your individual circumstances and you will receive tailored advice and a strategic plan which will save you money and financial stress.
For more information on defaulting on property orders read our article ‘Defaulting on Property Orders is Dangerous.’