No presumption of equality in family law property settlements

It is common for separated parties to be anxious about their property settlement and the assets they are likely to retain when the separation-dust settles.

This is only natural given that family law is often poorly understood, which is reflected in an abundance of inaccurate statements often heralded as fact by those in the wider community.

One of the most common of these is the belief that the act of marriage automatically entitles each party to an equal distribution of their combined property in the event of separation.

Not only is this belief erroneous, but it is potentially damaging for parties who hold an unrealistic view as to their likely property settlement entitlement.

Pursuant to section 79(4) of the Family Law Act 1975, the court will take into account the following factors when considering the contributions of each party to a property settlement:

• the financial contributions made directly or indirectly on behalf of a party, for example, income, inheritances, investments etc.;
• the non-financial contributions made directly or indirectly on behalf of a party to the acquisition, conservation or improvement of property, for example, any renovation works undertaken to property owned by the parties; and
• the contributions made by a party in their capacity as parent or homemaker.

No particular factor is given priority according to section 79(4); meaning that, for example, a party who is the breadwinner and is employed full time during the marriage will not necessarily be found to have made a greater contribution than the other party, who was a stay at home parent to the parties’ children.

Often, over the course of a long marriage where the parties have both made significant contributions but in different ways, the courts will find that their overall contributions are equal.

However, the leading High Court case of Mallet v Mallet [1984] 156 CLR 605 confirmed, many years ago now, there is no presumption of equality as a starting point in respect of contributions.  Each matter is to be determined upon consideration of the unique and particular circumstances of the case.

A perfect illustration of the approach taken by the courts can be found in the recent decision by his Honour Federal Magistrate Baumann in Stiller & Power [2011] FMCAfam 996 (19 September 2011).

In that case, the parties married in 1991 when they were both about 54 years of age. The husband owned an unencumbered property, along with superannuation entitlements, a motor vehicle and some furniture and contents. The wife owned three properties, two of which were encumbered, a business and premises, a yacht, funds in her bank account, jewellery and personal effects.

Throughout the marriage the parties maintained separate residences and would invoice each other for expenses purchased on the other’s behalf. His Honour viewed their arrangement as:

… of a business nature and hardly normal communication between two loving adults sharing a joint passion and endeavour.

Unfortunately for the husband, he made a number of poor financial decisions during the marriage and his financial position went backwards. The wife, on the other hand, continued to accumulate assets.
At the time of the trial, the husband’s assets had dwindled to approximately $315,000 while the wife’s assets had increased to approximately $3,900,000.

His Honour found that the parties did not mix finances and neither made any direct financial contribution to the property of the other. The husband’s position, which was that he made significant non-financial contributions, was not accepted.

As the parties generally maintained separate residences there were no significant homemaker contributions, although, given that any time together (other than on holidays) usually occurred at the wife’s home, his Honour viewed her contribution in that regard as greater.

The husband sought a 50/50 division of the net property pool. The wife sought for each party to retain the property in their respective possession and control.

In light of his Honour’s findings in terms of contributions, and in the absence of any relevant future needs factors, he ordered that the parties retain the property in their possession – which effectively divided the pool 93% to 7% in the wife’s favour.

Such an outcome might seem grossly unfair given that the parties were married for approximately 18 years and as the wife’s assets had increased while the husband’s had diminished.

However, the husband’s failure to satisfy his Honour that he made any real contribution towards the wife’s property, or to the marriage at all, meant that he was never going to retain a share of her assets irrespective of the duration of their marriage.

There is no doubt that if the parties had lived together on a genuine domestic basis and intermingled their finances, at least to some degree, the outcome would have been considerably different.

It is important for parties who are considering separating from their spouse, or have already separated, to obtain independent legal advice from an experienced family law solicitor as to their likely property settlement entitlement.

At Cooper Grace Ward we have a very experienced and professional family law workgroup dedicated to helping clients through this difficult time.

For further information please contact Craig Turvey of Cooper Grace Ward’s Family Law team via +61 7 3231 2569 or [email protected].