The purpose of this article on separation and property settlement is just to give you a bit of an idea as to how the Courts approach property settlement. Immediately after separation, some people think it is should be a 50-50 split of property and are puzzled when the Court makes an Order that splits the property, say, 70-30 or 80-20 or somewhere different to that. The purpose of this article is to give you an insight into how the Courts approach it and so that you can understand the basis upon which your property settlement might be decided or negotiated upon separation.
The basis of the power of the Court to make Orders about property of the parties and arrange for the transfer of property from one to the other is to be found in section 79 of the Family Law Act.
The four step approach that has evolved through the years since the beginning of the Family Law Act (1975) is as follows:
1. Ascertain the Asset Pool
This means that the Court or the Solicitor acting for you will need to work out exactly what is the Net value of the things that are owned by you, your partner and jointly. This is calculated both as at the time of separation, and at the time of trial or division of property post separation. Sometimes we find people arguing that this item or that item is not a “matrimonial asset” but the Family Court does not distinguish between things that belong to one person or jointly; all possessions are in effect “matrimonial assets” so any argument about things that shouldn’t be included is essentially a waste of time. However, where there is an item that has clearly been one person’s property from before the relationship through until after separation, the Court will consider dealing with that asset in a different way. It remains, however, a matrimonial asset for the purposes of the Act. Also, Superannuation is now property under the Family Law Act and that must be valued. Your solicitor will usually send a Superannuation Information Form to have the superannuation valued as at the date of separation and as at the date of settling property or at the date of your property Court hearing.
2. Assessing the Contributions of the Parties
Section 79(4) of the Act requires the Court to look at the contributions that each party made (both financially and non-financially) before and during the marriage and post separation. There are a plethora of cases that talk about how an initial major cash contribution is to be treated, particularly when that contribution has been made very early in a long marriage. It is not the case that people simply get a reimbursement of money that they put in but, instead, it is counted as a percentage of contributions. So, we look at the contributions at the beginning of the marriage (or cohabitation) and if you each had nothing then your contributions are probably 50%-50% whereas, if one person had a significant cash asset and the other party had nothing, then the contributions might be closer to 90-10 or even 100-0 at the start. This is only at the commencement of the relationship. The Court then looks at contributions throughout the Marriage and not just the financial contributions so a major cash contribution could be offset through the Marriage could be offset by the efforts of the other party. For example, in working side-by-side with the person who had the initial cash contribution to improve that asset and grow their assets or through parenting or support of the party with the cash contribution at the commencement. The longer the Marriage, the more the opportunity for the non-cash-contributing partner to even up (so to speak) and begin to come closer to matching the initial cash contribution. It is difficult, in fact I can not tell you a definite formula that would help you work out how much of that initial contribution would be still regarded in the contributor’s favour because it depends on many factors such as the length of the relationship, the use to which those funds were put or that asset was put and the conduct of the parties during the marriage. I think that this is probably one of the big areas of dispute. Valuations of property can always be attained by valuers and so forth and mostly parties agree on that eventually but contributions and how those contributions should be treated is still an area of rich debate between Lawyers and parties and often requires a judge to make the decision where parties hold firmly to their views.
3. Future Needs
This is found in Section 75(2) of the Act where the Court has to consider that the effect on the parties if they simply divided the property on the basis of contributions in accordance with step 2 above. It may be, for instance, that parties are found to have contributed on the basis of, say, 70% in favour of one party (let’s say the husband) and 30% by the wife. If the wife has other issues that would make such a distribution seem unfair then they are covered in s75(2). Sometimes the Husband has the issues that are covered under s75(2). The factors are things like the comparative ages of the parties, whether or not either of them has the care of a child under the age of 18. The extent to which one or other party supported the other in the obtaining of qualifications that enable them to earn money at a greater rate post-separation than they otherwise would have and whether or not any of them is in receipt of a pension. The Court looks at all of these “future needs” issues and adjusts the percentage to the parties on that basis. For instance, in the example I gave above, if the Wife was disabled and unable to work and had two children in her care, then she could expect an adjustment in her favour. The percentage of the adjustment has to be looked at in real terms so that the wife is properly compensated in this case. Therefore if the property pool was, say, $5,000.000.00 an adjustment of 10% would give her an extra $500,000.00 which might be considered by the Court sufficient to assist her with her future needs. If the asset pool was only $500,000.00 then an extra 10% is only $50,000.00 which may not be considered a sufficient adjustment in real cash terms to assist the wife. In such a case, the adjustment might be more like 20% or more (I hope you can see how tricky property settlement actually is and why you can never really seem to get a straight answer when you ask someone what you can expect to get). All of the steps above are contingent on different factors and the actual circumstances of your particular case.
4. Just and Equitable
In this fourth and final step, the judges look at the effect of the Orders that they are considering making and, essentially, work out proportions of Superannuation (which usually can’t be accessed for some time) and property assets. They consider, for instance, if a person has a capacity to borrow or not. They look at what is needed to provide each person with a reasonable lifestyle post-separation with a distribution of the assets. It would, for instance, be clearly not just nor equitable to give a man who has an earning capacity of only, say, $20,000.00 a year (and therefore no borrowing capacity) superannuation assets only so that he is essentially rendered homeless and in difficult circumstances until his retirement when he would, presumably, have the bonanza of his superannuation. The Court tends to give the person with the greater earning capacity (and therefore the greater borrowing capacity) at least enough to enable them to get started with perhaps the purchase of a new home and so forth but also tends to be to make sure that those with no borrowing capacity get a sufficient share of the current property assets to give themselves a fresh start as well.
I hope this little explanation of the four step process with all of its generalisations is of some assistance in just giving you a rough idea of how property settlement is undertaken in the Family Law Courts.
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