financial abuse

Financial abuse hits ‘epidemic proportions’

Why is financial abuse reaching epidemic proportions in Australia? And is there hope for legal reform to the Family Court system.

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Financial abuse is a relatively new term in today’s society, yet the issue is one that has plagued many Australian women and men for years, and now it’s said to be reaching epidemic proportions.

In a recent article I wrote for Fairfax Media, I interviewed some very smart legal minds and victims of economic abuse.

What I discovered was that everyone I spoke to feels that the Family Courts system simply isn’t working for victims of financial abuse when it comes to property settlements.

This means that if you claim to have been financially abused during a relationship, and are now in or looking to start the process of dividing assets, that the Family Court doesn’t give consideration for this.

I’ve pasted excerpts from my Fairfax article below, which I hope sheds further light on financial abuse, and potentially sparks change in the legal system.

One woman, who we’ve named Emma Johnson* to protect her from her ex-partner, told me she’d had five lawyers in the past 18 months in a bitter property settlement with her ex-husband, in which she claims financial abuse has cost her several million dollars.

Johnson and her ex had about $5 million in marital assets. But she claims her former partner, and father of their three children, used sophisticated accounting tactics to waste family funds.

“I’ve spent $120,000 on lawyers,” she says. “I’m now seeking injunctions through the state court system to stop him from spending, plus I’ve hired a forensic accountant to track what’s been spent.”

Johnson’s story is a reminder that economic abuse can affect people from all walks of life.

Men are victims of financial abuse as well, but it’s less common. In 2017 researchers from RMIT found the life-time prevalence of economic abuse for women is 15.7 per cent, while for men it’s 7.1 per cent. It’s estimated that more than two million Australians have or will experience economic abuse in their life times.

Julie Kun, chief executive of the Women’s Information and Referral Exchange (WIRE), says financial abuse has reached “epidemic proportions” in Australia.

“It is an insidious form of family violence as it strips the victim of the resources to leave the relationship,” Kun says. “When they do leave, they can spend a lifetime rebuilding the financial independence and financial decision-making confidence.”

What’s unclear is whether financial abuse is getting worse in Australia, or if more victims are identifying with the issue and reporting it as a form of abuse. Some lawyers believe it is likely to be the latter.

Financial or economic abuse is included under the definition of “family violence” in the Family Law Act, which was introduced in 2012. It’s defined as behaviour where a person is coercive, deceptive or unreasonably controls another person without the second person’s consent.

Some examples include denying a person financial independence through bank accounts or threatening to withhold financial support for meeting reasonable living expenses for themselves and children. Other examples include coercing a person to relinquish control over their assets and income.

Push for legal reform

The Family Law Act makes no specific provisions for dealing with financial abuse as a factor for determining a just and equitable property settlement.

“It has definitely become more prominent over the past five years,” says Rachell Davey, Special Counsel and accredited family law specialist. “But unless financial abuse is accompanied by an associated criminal act, such as threats or acts of violence or forgery of documents for example, it is not a crime that the courts will recognise.”

But that might be about to change. The Family Law Act is under review and lawyers say given recent family surveys and an increase in economic abuse citations, submissions are likely to be made for it to be considered as a form of family violence affecting property settlements as part of amended legislation in 2019.

The current family law system is fraught with lengthy delays and is costly. A recent study by the Women’s Legal Service Victoria, titled Small Claims Large Battles, found legal costs can often exceed any benefit and alternative processes should be established to deal with cases where the asset pool is less than $100,000.

Economic abuse is generally more difficult to prove than physical violence, which makes it a hard legal argument to make without substantial evidence. This isn’t to say that a successful argument couldn’t be made in property settlements in the future.

One case with a close link to economic abuse was the 1997 Full Court case of Kennon versus Kennon. Here the Family Court of Australia judge presiding over the property settlement ruled that family violence made the victim’s contributions more “arduous” and have had a “significant adverse impact” on that party’s contributions during the marriage.

There are calls for the federal government to broaden its anti-domestic violence agenda to better recognise economic abuse and in doing so, force financial institutions to report abusive acts against another person.

“I have never had one case where the only issue is financial control, it is always part of a greater pattern of family violence,” says Rebecca Bunney, principal at Cullen Macleod Lawyers. “It usually occurs with repeated derogatory taunts, psychological abuse and social control, so the economic abuse is usually part of a package of family violence.”

A lack of financial literacy and time spent being the primary carer of children are often cited as reasons why more women claim to suffer from economic abuse than men.

“I think a lack of financial literacy is a bit too simplistic. I have clients who are professionals, so architects and physiotherapists among others, and these are intelligent, educated women,” Bunney says. “More often financial abuse seems to occur when the woman in a relationship takes a career break or isn’t working, and finds herself without financial power.”

Bunney says it’s important for victims, women or men, to start court proceedings early.

“If you had an urgent application, you might be able to get in front of the Family Court in two weeks, to get an injunction to stop a person from moving assets or spending joint funds,” Bunney says. “Without that urgency, it can take 12 weeks to have your first hearing in the Family Court, and it might be too late to stop assets or cash from being disposed of.”

Emma Johnson’s name has been changed for legal reasons.

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