In most legal proceedings, parties may come across the term “undertaking”. This can sometimes cause confusion between whether or not an undertaking has as much weight as an order or an injunction issued by the Family Court.
An undertaking is a promise to the Family Court. It is as binding as an order of the Court. Where a person gives an undertaking that they will take, or refrain from taking a certain action, the Family Court will require that person to take that action as if the Family Court itself had ordered and compelled the person to take the action.
A breach of an undertaking is treated by the Family Court the same as a breach of an order.
In the recent Family Court case of Bain & Bain (deceased) [2017] Fam CAFC 80 (3 May 2017) the issue of undertakings was examined in great detail.
The trial judge found the husband, Mr Bain guilty of contempt of an undertaking accepted by the Family Court. On 9 August 2016 Her Honour sentenced Mr Bain to six months imprisonment.
In response, the husband challenged the contempt finding and appealed the contempt finding and the order imposing a sentence. The imprisonment sentence was stayed pending an outcome of the appeal.
By way of background, the husband and wife were married in 1985 and had two adult children. They separated in 2009 and divorced in 2010.
The wife died of cancer in 2014. However in March 1996, the husband and wife had taken out life insurance, each insuring the life of the other. Relevantly, the policy over the wife’s life provided that on her death, the husband would receive a payment of $457,786.
In March 2010, the husband commenced property settlement proceedings against the wife. On 12 November 2013, the wife sought an order that the husband transfer his interest in the life policy over her life to her and that she transfer to him her interest in the life policy over the husband’s life to him. The husband opposed the application submitting that the policies had been taken out by the parties so that in the event of the death of one of them the policy would provide a source of funds with which to meet joint liabilities. He deposed in his affidavit that:
"In the event of that [sic] I receive any benefit under the life insurance component of my Personal Protection Portfolio, I am willing to undertake to the Court to hold any payment I might receive in the [X] Lawyers Trust Account pending any further order of the Court."
The husband did not attend the hearing but was represented by Counsel who submitted that the wife’s application be dismissed on it’s merits but if the Family Court was otherwise minded to accede to the wife’s application and order a transfer of the polity to her then he would preserve the asset by the giving of an undertaking.
On 12 December 2013, the trial judge delivered reasons and made the following order:
"Upon the Wife’s application made to the Court and upon hearing Counsel appearing for the Applicant wife and Counsel appearing for the Respondent husband and upon the Court having reserved the decision and upon the Undertaking of the husband to hold any payment received by him under the life insurance component into his solicitors’ trust account pending further order of the Court the wife’s interim application for the transfer of the MLC life policy be dismissed."
Following the wife’s death in 2014, the husband received the payment under the terms of the insurance policy. However he did not pay the money into his solicitors' trust account in compliance with the noted undertaking but, rather, expended all of the funds in the payment of debts owed jointly by him and the wife. The husband ascertained that he was not made aware by his solicitor that this undertaking existed.
The legal personal representatives lodged an application alleging that the husband was in contempt of Court for failing to comply with the undertaking noted in the order dated 12 December 2013.
The husband’s application to amend the orders pursuant to the slip rule and to remove the words “and upon the undertaking of the husband to hold any payment received by him under the life insurance” was dismissed.
The trial judge found the contempt application proved beyond reasonable doubt and adjourned the consideration of penalty consequent on that finding to 25 July 2016.
On 9 August, the trial judge sentenced the husband to a period of 6 months imprisonment. In addition he was ordered to pay costs.
The husband then appealed the orders dismissing the two applications and the finding of contempt proved and as to penalty.
After extensive review of the trial judge's decision, the Full Court determined that the trial judge's determination of the husband’s guilt was flawed and the appeal would be allowed. It followed of course that the sentence imposed was also to be set aside and same for the order of costs.
The matter was re-exercised before the Full Court. The Full Court was not satisfied beyond a reasonable doubt that the husband knew at the time he disbursed the funds that he was bound by an undertaking accepted by the Court that he would hold the funds in his solicitors trust account pending further orders by the Family Court. Therefore the application for contempt brought by the wife’s legal personal representatives was dismissed.
Lavan comment
Undertakings can be in writing or provided orally to the Court by the litigant or by their legal representative. Providing an undertaking to the Court is not something that should be taken lightly or done on a whim. There are serious consequences including the possibility of imprisonment if an undertaking is breached.
