Following the breakdown of a relationship, an application for adjustment of property interests is made under Section 79 of the Family Law Act 1975 ("The Act") for married couples or section 90SM of the Family Court Act 1997 for de facto relationships.
Prior to the judgment in Stanford v Stanford  HCA 52 on 15 November 2012 (Stanford), it was common practice for a legal practitioners and the court to determine an application under s.79, using a four step approach.
The four step approach was approved by the Full Court in Hickey v Hickey and the Attorney General for the Commonwealth of Australia (Intervenor) 2003 FLC 93-143, although the approach had been established in earlier authorities.
The elements of the consistently adopted 4 step approach are:
Step 1: to identify and value the net property of the parties;
Step 2: to consider the contributions of the parties, which, broadly speaking include contributions under the sub-headings of financial, other than financial, and any contribution to the welfare of the family including in the capacity of home-maker or parent. The court will then determine what percentage should be attributed to each party's contribution;
Step 3: to consider whether there should be an adjustment in favour of either of the parties to take into account factors listed at section 75(2) of the Act, which include, inter alia, each party's age and state of health; their income, property and financial resources; their physical and mental capacity for appropriate gainful employment and whether either party has the care and control of children of the relationship under the age of 18 years. In other words, this section considers the future needs of each party; and
Step 4: to consider whether the order proposed will be "just and equitable" to both parties.
Despite the approach being "useful" but not "mandatory", it was consistently adopted when determining applications under s.79.
A less definitive approach was taken by the majority of the Full Court in Martin v Newton (2001) FLC 93-940 where Bryant CJ and Thackray J said in relation to the 4 step approach:
"....In our view there is no requirement that the justice and equity of the order, as prescribed by s 79(2), must only be considered at the fourth (and last) stage. In our view, the requirement to make an order that is just and equitable permeates the entire decision making process, and it is not impermissible to consider it at an earlier point if the particular case requires it ..."
It appears that the majority of the High Court in Stanford shared the majority view in Martin and in examination of s. 79 outlined their views on the approach to determining an application under s.79, emphasising the importance of reading and applying the actual words used in the Act.
The majority in Stanford warned against conflating the requirements of s.79(2) and s 79(4). It highlighted that applying the actual words used in the Act, the court must first consider whether it is just and equitable to make an order, rather than consider whether the Orders are just and equitable as a fourth step.
The High Court warned at paragraph 40 of its judgment that:
"To conclude that the making an order is "just and equitable" only by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act"
At first glance, the statement appears consistent with the four step approach in Hickey. However, the majority appeared to reject the notion that s 79(2) was an identifiable fourth step. They held that whether it is "just and equitable" to make an order under s 79(2) arises before the court looks at s 79(4) and not after.
Previously cases such as Hickey treated the determination under s 79(2), and whether it was just and equitable to make an order, as an identifiable fourth step. Stanford, however, confirmed that determining that an order was just and equitable was a separate and distinct requirement of s 79 and not one to be determined only as a fourth step.
It now appears following strong comments from the majority of the High Court in Stanford that the suggested approach is:
- Look at the parties' existing legal and equitable interests, being their individual interests rather than the joint property of the parties;
- Decide under s 79(2) whether it is just and equitable to make an order altering the parties existing legal and equitable interests; and
- Examine the matters in s 79(4) including factors in s 75(2).
The decision in Stanford, whilst persuasive, is not conclusive and there are those in the legal profession who consider that it will create a period of uncertainty while legal practitioners and the Family Court alike grapple with the meaning of Stanford and how to move forward in determining the approach to applications made under s 79.
It should be noted that in Stanford the parties, although physically separated as a result of the wife being placed in full time residential care and no longer being able to reside with the husband, were still in a relationship. Therefore the court had to decide whether it was just and equitable to make an order altering the property interests.
Accordingly, an application may succeed if the relationship has not irretrievably broken down and the parties, whilst physically separated, are still in a relationship.
In a situation where there is no dispute that the relationship has broken down irretrievably, and the parties are in fact separated and have made an application to alter their interests, such circumstances would usually be sufficient to establish that it is just and equitable to make an order altering the property interests.
With thanks to Loretta Care and Alison Brooks for their input and assistance with this article.
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