Financial Injunctions in Family Law: Preserving the Assets

17 February 2020
Paul Lewis, Partner, Sydney

In some circumstances, a party (that is, a spouse or third party intervener) may be required to prevent or restrict another party from acting in ways that may reduce the assets available for division under a final property settlement.  In these circumstances, an injunction may be a potent and effective remedy to preserve the asset pool and prevent one party unilaterally dealing with marital property.

In family law disputes, circumstances occasionally give rise to the need for financial injunctions to prevent one party from acting in ways that would harm the other party’s rights or entitlements.

A Court will grant an interim or ”interlocutory” injunction where there is a serious question to be tried and the ‘balance of convenience’ favours the applicant. The claim must not be frivolous and there must exist a real risk that the applicant would suffer damage if the injunction is not granted.[1]

Examples of financial injunctions include:

  • restraining a party from dealing with real estate owned by the parties to the marriage or either of them (eg, attempting to sell the property or increase a mortgage secured on it);
  • restraining a company from embarking upon novel or high-risk business activities other than in the ordinary course of business; or
  • restraining a party from disposing of superannuation entitlements, shares or funds held in a bank or other investment account.

The Court derives its power to make injunctions under Section 114(1) of the Family Law Act 1975 (Cth) (“the Act”).[2] Where the Court makes an interlocutory injunction, the injunction must relate to the main proceedings (eg, property settlement and/ or spousal maintenance), it must be just or convenient for the injunction to be made, and it can be made conditionally or unconditionally as the Court considers proper.

There is usually a requirement for the granting of an injunction, that the applicant provide an undertaking as to damages. This involves the applicant undertaking to compensate the party whom the interlocutory injunction is made against, if that other party suffers any loss or damage as a result of the interim injunction.[3]

Injunctions may be necessary to preserve assets at the start of a property case. They are made when the Court is satisfied that unless the injunction is made, there is a risk that any anticipated orders in favour of the applicant may be defeated or diminished. The following criteria must be satisfied before a Court will grant an injunction:

    1. the applicant must have a basis for a claim under the Family Law Act (eg, property settlement or spousal maintenance);
    2. there must be objective evidence presented to establish a risk, threat or an intention to dispose of or dissipate assets, and;
    3. the terms of the injunction must be tailored to the circumstances and be no more than is necessary to protect the applicant.

In some cases where urgent injunctive relief is sought and there is a high level of risk to the applicant’s claim, it may not be appropriate to afford the respondent the usual procedural fairness that involves the application for the injunction being served and listed for hearing at short notice. In these relatively rare but important situations, the application is made on ”an ex parte basis”, meaning ”in the absence of the other party.”

Subject to the court being satisfied that the evidence meets the legal criteria for the grant of an injunction and other requirements set out in the court Rules,[4] the injunctive orders may be made in the absence of the respondent on an ex parte basis. If so, the applicant is required to serve a copy of the temporary ex parte orders and all of his or her filed Court documents on the other party (or parties) promptly and the Court typically sets a further hearing date within two or three weeks.

Please contact any of the Partners in our Family and Relationships Law Team if we can be of assistance in providing advice about financial injunctions or other remedies available.

 


Authored by:

Paul Lewis, Partner
Katherine Evans, Associate

 

 


[1] The House of Lords case, American Cyanomid v Ethicom Limited [1975] AC 396 is a seminal authority for these general principles.

[2] Section 114(1) of the Family Law Act 1975 (Cth) extends to an injunction for the personal protection of a party to a marriage, an injunction relating to the use or occupancy of the matrimonial home and an injunction in relation to the property of a party to a marriage, among other potential orders.

[3] See Blueseas Investments Pty Ltd v Mitchell and McGillivray [1999] FLC 92-856, a Family Court of Australia case involving injunctions and third parties.

[4] See Family Law Rules 2004 (Cth) – Rule 5.12 Application Without Notice.

 

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

Get in touch