Maybe, but not necessarily. Family law is an area of law which affects many people, so it is commonplace for clients to have heard anecdotes from friends or family members about their family law property settlement. Every case turns on its own facts and some family law matters are more complicated than others. Property Orders, whether they are recorded in Consent Orders or made by a Judge, must be “just and equitable.”
The steps in a family law property settlement are:
1. Should the Court make an order altering the property interests of the parties?
The High Court has made clear in the case of Stanford v Stanford, the bare fact of physical separation does not mean that it will be just and equitable for the Court to interfere with the parties’ property interests and make an Order. In that case, the Wife was an elderly woman who relocated to an aged care facility. Her children sought the sale of the former home to pay for her care costs. The Court held that it did not have jurisdiction to make an order dividing the property in those circumstances.
Crucially, the Court does not have power to make an Order to alter the interests of parties in the property unless it is satisfied in all the circumstances of the case that it is just and equitable to do so. In other words, the court cannot make orders for property division unless, on the evidence before it, the orders are fair.\
2. Ascertain the matrimonial pool to be divided.
The matrimonial pool is a term used by family lawyers to describe the assets, liabilities and superannuation interests of parties to a family law matter. For example:
- Real property (the matrimonial home, investment properties)
- Businesses (including any assets and liabilities of the business)
- Bank accounts
- Shares or other investments
- Motor vehicles, boats, planes
- Household contents
- Life insurance policies which can be cashed in
- Sale proceeds
- Leased property
- Home loan
- Credit cards
- Chattel mortgages (e.g. car loan/lease)
- Personal loan
- Guarantees if the debt has crystallised
- Tax debts (e.g. Capital Gains Tax, Income Tax)
- Accumulation interests
- Defined benefit
- Self-managed super
- What is the structure, who is the corporate trustee, any property owned by the Trustee
Parties must undergo a process called financial disclosure. In fact, parties have an obligation to provide full and frank disclosure under rule 13.04 of the Family Law Rules. Once this process is complete and each party has had the opportunity to look at the other’s financial documents and is satisfied there is nothing remaining to be provided, a balance sheet can be drawn up. The correct figure to use in the balance sheet is the value at the date of the document not the value at the date of separation. If the parties do not agree on values, and this commonly happens with real property, unique or special vehicles and businesses, the property will have to be valued.
3. Assessment of financial and non-financial contribution to the assets.
The next step is to look at the various contributions each of party made at each stage of the relationship: the initial contributions when the parties started living together, during the relationship and post-separation.
The types of contributions are:
- Financial contributions to acquisition, conservation or improvement of property: for example savings applied to a deposit, income applied to a mortgage, income applied to household groceries and bills, any gifts, inheritances or redundancy payments received by either party
- Non-financial contributions to acquisition, conservation or improvement of property: for example, undertaking improvements to property such as landscaping, repainting, household repairs and maintenance and renovations including project management, liaising with designers, architects and tradespeople.
- Contributions by a party to the welfare of the family including homemaker parent: for example taking children to and from school and extracurricular activities, helping with homework, preparing meals for them, taking maternity/paternity leave to care for them, caring for them when they are sick, cleaning, laundry, gardening and other household tasks.
The first two can be either direct (by the parties) or indirect (by relatives or friends of a party). However, for homemaker parent contributions, the contribution must be made by a party.
We first look at the assets, liabilities and superannuation each of the parties brought into the relationship at the time of cohabitation. If initial contributions are disputed, evidence may be required such as copies of settlement adjustment sheets from conveyancing transactions, contracts for sale, rental ledgers, superannuation statements, cheque butts, bank statements. However, there is a principle that the significance of initial contributions diminishes over time. The longer the relationship, the less weight to be placed on the initial contribution.
The court will look at how the parties handled their finances during the relationship including whether the incomes were pooled in a joint account or kept separate, whether property was purchased jointly and if so, how it was funded. The correct approach is to assess the myriad of contributions at all stages of the relationship. There does not need to be a nexus between a certain asset and a contribution of a party. For example, if party A brings an investment property into the relationship but party B makes significant contributions as homemaker parent and applies their income towards household groceries and mortgage repayments towards the family home, it is not correct to say that the investment property should be quarantined for party A. A global assessment of all the contributions party A and party B made is required.
4. Future needs
Under the Family Law Act, a party who has future needs may be entitled to an adjustment. For example, some relevant factors are:
- Age & state of health of the parties;
- Income, property and financial resources of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
- Whether either party has care or control of child of the relationship under 18 years of age;
- Commitments of each party necessary to support themselves and a child or other person they have a duty to maintain;
- Responsibilities of either party to support any other person
- The duration of relationship and extent to which it has affected earning capacity
- The need to protect a party wishing to continue in their role as parent
- If a party is cohabitating with another person, the financial circumstances of the cohabitation.
- Any child support a party has provided/is to provide/might be liable to provide for a child of marriage
If the asset pool is small, the future needs adjustment should be higher.
The application of these principles to the facts of each property matter can result in vastly different outcomes and different minds can draw different conclusions. Negotiations between spouse parties can often add another complicating factor. If an agreement is reached which is not just and equitable in all the circumstances of the case and submitted to the Court in an Application for Consent Orders, the Registrar of the Family Court of Australia will not make the Orders. It is important to understand the principles and see a lawyer experienced in family law so that the right questions can be asked and the correct strategy employed to reach a settlement which can be successfully recorded in Consent Orders.