All too often separating couples believe there is an entitlement to 50% of the money and assets. Unfortunately this is a rarely correct assumption.
When a marriage or relationship comes to an end, there are a number of matters that need to be considered, with one of the biggest issues related to how property is to be dealt with. Property matters can be dealt with privately (by agreement) or a party can apply to the Court for orders; if the Court issues such an order, it must be satisfied that it is just and equitable to do so and to assist the Court, and the parties, there is a process that will be undertaken.
The Family Law Act 1975 sets out the general principles the court considers when deciding financial disputes after the breakdown of a marriage (see Sections 79(4) and 75(2)) or a de facto relationship (see Sections 90SM(4) and 90SF(3)). The general principles are the same, regardless of whether the parties were in a marriage or a de facto relationship, and are based on:
- working out what you’ve got and what you owe, that is your assets and debts and what they are worth
- looking at the direct financial contributions by each party to the marriage or de facto relationship such as wage and salary earnings
- looking at indirect financial contributions by each party such as gifts and inheritances from families
- looking at the non-financial contributions to the marriage or de facto relationship such as caring for children and homemaking, and
- future requirements – a court will take into account things like age, health, financial resources, care of children and ability to earn.
Your settlement will invariably be different from others you may have heard about. The way your assets and debts will be shared between you and your former spouse will depend on the individual circumstances of your relationship, how and when assets and money were acquired, who contributed to the family wealth and how that came about.
The just and equitable threshold
The courts rely on, what is coined as, the four step process based on s 79(4) of the Family Law Act 1975 (Cth) (the Act) which provides guidance as to how the court should apply a “just and equitable settlement”. However, with the 2012 decision in Stanford (the High Court decision in Stanford v Stanford (2012) 247 CLR 108; HCA 52), there is now a threshold question that also needs to be raised before the application of the four step process.
The High Court in Stanford recognised for the first time that the Court shall not make a property settlement order unless it is satisfied that it is “just and equitable” to do so. The Court came to this conclusion because it recognised that property orders can potentially modify legal and/or equitable rights to property, and potentially have an impact on third parties.
In Stanford, the Court outlined three fundamental propositions that must not be obscured, which were:
- consideration whether it is just and equitable to make a property settlement order by identifying according to ordinary common law, and equitable principles, the existing legal and equitable interests of the parties;
- in relation to property settlement, there is no special right to a settlement that arises from family law;
- when determining what is just and equitable, the court isn’t exclusively reliant on s 79(4) of the Act, but rather, the surrounding circumstances of the parties.
Stanford did not alter the four step process as stated in s 79(4) of the Act, but rather, it makes it a condition that when applying the process for a property order, any orders made must be just and equitable as between the parties.
The four step process briefly encompasses the following:
- The identification and valuing of all assets and liabilities which form the global pool of property subject to settlement.
- Assessing the financial and non-financial contributions of the parties to the assets and financial circumstances of the family. Non-financial contributions such as caring for the children to name one example are relevant. Finally, there will be some assessment of negative contributions, which can include matters such as family violence or substance abuse issues and gambling.
- Consideration of the future needs and resources of the relevant parties.
- The answers relating to the first three steps and the consequences of any relevant orders that may be made taking into account the fairness, and the surrounding circumstances of the relevant case.
For the purposes of the first step, step 1 if you like, you will need to prepare, in consultation with your family lawyer, the following:
- a Chronology of all major events and the relevant date, with a summary of the nature of the event and the evidence by which you will prove that event;
- a list of all major assets and an estimate of their value (this is usually coined as the “Property Pool“);
- a list of your Pre-Separation and Post-Separation Expenses;
- a list of companies and trusts that you and your former spouse have, or may have, an interest in (as either directors or shareholders).
Step 1 is one of the most important steps in matrimonial proceedings – the chronology. Sometimes this is an easy thing to do and sometimes it is not, and this largely depends on the length of the relationship, the type and nature of employment and business and of course the children; their age and their future needs. The more assets and liabilities you have, jointly and alone, the more time consuming it can be to properly document and work out. You must remember that not all contributions to a relationship are equal and not all contributions are monetary, so whilst the information is important and informative, it is not always determinative of the end result, on its face. It is the combination of all steps that allow your family lawyer to give a predicted result.
Step 2 is an important step. This step records the starting position of the parties at the time the relationship commenced and cohabitation began, and progresses through the relationship to separation. To assist in recording your initial contribution and that of your former spouse, you should fill in a list of all major assets and an estimate of their value as at the time you met and or started cohabitation. Your Chronology should set our sufficient information about your non-financial contributions, so include major events such as retiring from the work force to raise children, and at some stage, tell your family lawyers about what you did during that time, for example, washing ironing and cleaning are non-financial contributions, as are accompanying your former spouse at meals and other functions.
Step 3 is very important because it allows your family lawyer to assess your immediate needs, further assess whether any spousal maintenance is required and consider an application for that purpose.
Step 4, is largely done by your family lawyer, usually in conjunction with a reputable barrister who specialises in Family Law, because it is an academic exercise based on the information provided in the first 3 steps. This is ultimately the most important exercise, because it allows you and your lawyer to consider what is to be requested of your former spouse and the steps are to be taken in Court, if that is required.
The next step
Want to know more ? Contact us to discuss your particular matter further.
We are required to provide you with what are known as “Prescribed Information” when considering commencing Property related proceedings. You can access these forms below and will be required to acknowledge that you have received these forms shortly after providing initial instructions to your family lawyer:
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The meaning of some words has a special meaning when you’re involved in Family Court or matrimonial matters. The Family Court publishes a useful publication called “Legal Words Used in Court“. You can access that resource here.