Family Law: Property Disputes and Settlements

This first step, may appear at first instance obvious and uncontroversial. However, to identify what are the matrimonial assets, ascertain the liabilities and the value of the pool available for division between parties is, on occasions, an arduous process and it is not uncommon for matters to go to trial when the parties have not yet agreed on matters surrounding the matrimonial pool divisible between them.

On occasions, one party is not in a position to identify all the assets and liabilities and the correct information is not forthcoming from the other party. The Family Law Act and the Family Law Rules impose an obligation on each party to be candid about financial information and, on occasions, the Family Court has “punished” a party who failed to provide all relevant information by “drawing the worst possible conclusion against that party”. The Court has proceeded to make its own assumptions about the extent and value of the party’s secret assets.

On occasions, parties do not agree that they should be jointly liable to some liabilities, or a party would refuse to accept that a liability exists, typically, a loan repayable to parents.

When considering the four-steps approach, normally, the Court separates the parties’ assets and accumulated superannuation entitlements into two separate pools:

1. The superannuation pool of assets; and
2. The non-superannuation pool of assets.

The Court has power to adjust and divide between the parties their assets and their superannuation entitlements.

The next step is to make an assessment of the contributions that each party made to the marriage in different ways including financial and non-financial contributions, the contributions of a party as a wage earner, as a parent and home maker, the contributions made by others “on behalf of a party”, for example, when a party receives an inheritance, when a party’s parents or other relatives provide labour to build a home or to build extensions and so on. A party may have introduced an asset at the commencement of the marriage and there may be a dispute about the extent to which that initial contribution should be credited to that party.

Once the assessment of contributions has been completed, it is necessary to make a comparison of the financial circumstances of the parties to ascertain whether there should be an adjustment in favour of one as against the other taking into account such things as disparity in income, whether one party has the care of a child of the marriage, each of the parties’ health, ability to work and financial resources.

The fourth stage in the four-steps approach is for the Court to consider, after it has completed an analysis of the first three stages, whether justice has been achieved as between the parties or whether there should be a further adjustment in favour of one party or the other. Some critics including some judges have argued that there is no such thing as a fourth stage.

At the commencement of cohabitation they were both young and poor! Neither party has any significant assets and neither had accumulated any significant superannuation entitlements. When they had children, the wife ceased working as a teacher. The husband continued to work as a public servant. The wife returned to work part time for three days per week as a teacher when the children commenced school. The parties separated and agreed to an arrangement whereby the children live with the mother and spend every second weekend and every Wednesday overnight with the father. Five years before separation, the husband received a substantial inheritance which he applied to pay off mortgage on the former matrimonial home.

The Court would normally recognise that both parties made substantial contributions to the marriage in different ways both financial and non-financial during the period of cohabitation. The fact that they married years after they commenced cohabitation would be irrelevant in the Court’s approach to the four-steps approach. The Court must then consider whether there are any special circumstances which it must take into account and it may conclude (subject to the size of the inheritance) that the husband’s inheritance and the manner he applied it to pay off a substantial matrimonial debt is a significant factor with regard to Stage Two of the four-steps approach and, therefore, that the husband made a sixty per cent contribution.

The Court must then consider Stage Three and compare the parties’ circumstances to decide whether there should be a further adjustment taking into account that the wife no longer has the same prospects in her career as a teacher, she earns a much lesser income and has three children as dependents (even though the husband may be paying child support). Under Stage Three, the Court may make a ten to fifteen per cent adjustment in favour of the wife which would make the overall adjustment a fifty-fifty division of the assets or a fifty-five forty-five division in her favour. 4

She has a mortgage which she continues to service during cohabitation. Her partner contributes an agreed sum per week to all outgoing expenses including an agreed some for “rent”. After three years of cohabitation, the parties separate. They have no children.

Although the parties did not marry, the four-stage approach would need to be applied in the same manner than if the parties had married.

The Court approaches short marriages and short de facto relationships differently. Normally, a marriage or relationship of less than five years is considered “short” and the Court would try to place the parties in the same or similar circumstances each were before the marriage or relationship commenced to the extent that this is possible. It may all become more complicated in some circumstances for example:

1. If the parties had a child and one of them will care for the child predominantly;
2. If both parties made significant contributions even though it was a short marriage or relationship.