Australia: Can a former spouse be entitled to a share of their ex-partner's family business?

On 20 October 2015 the Queensland Court of Appeal awarded an ex-daughter-in-law a sum equivalent to 17.5% of the net value of a rural property owned by her former husband's parents and a family farming enterprise owned by a trust controlled by the parents and ex-husband.

The decision in Nolan v Nolan [2015] QCA 199 confirms that a former spouse may be entitled to a substantial interest in a family's business, which can be awarded outside of the Family Court's jurisdiction.

Background facts

Tony and Donna Nolan were married for 18 years.

Tony's parents, Brian and Majella, owned a successful family farming enterprise, which they had managed for over 50 years.

The major asset of the farming enterprise was a property known as 'Kitcombe', which was purchased by Brian and Majella in 1985 from their own resources. To operate the farm, Brian and Majella established the 'BK & MA Nolan & Son Partnership'.

Tony and Donna lived on Kitcombe throughout their marriage, working on the farm and assisting in the management of the business.

Two years into their marriage, Donna and Tony were each made one-quarter partners in the BK & MA Nolan & Son Partnership.

In 2004, the BK & MA Nolan & Son Partnership ceased conducting the business and was replaced by the B&M Trust, of which the company Nolan & Son Pty Ltd was the trustee. Donna and Tony were made equal shareholders of the company with Brian and Majella.

Tony and Donna separated in 2009, and in 2010 Donna commenced proceedings in the Supreme Court of Queensland against Tony, Brian, Majella and the company Nolan & Son Pty Ltd. Donna sought financial compensation for the contributions she had made to the farming enterprise during her marriage to Tony.

Tony then instituted Family Court proceedings seeking final property orders; specifically, Tony sought a declaration that Donna did not have any interest in the farming property. The Family Court adjourned the matter pending the decision of Supreme Court.

Supreme Court decision

The Supreme Court found that Donna, Tony, Brian and Majella had worked together to build the farming enterprise and, in doing so, the parties were engaged in a common endeavour that resulted in a constructive trust.

The trial judge found that Donna had made a number of financial contributions to the enterprise, including:

  • carrying out physical work on the farm;
  • undertaking administrative tasks, such as invoicing and performing banking for the business;
  • contributing her income from her employment with the Local Council, which assisted the farming enterprise to continue operating during a drought; and
  • assuming the responsibility of being a co-borrower and guarantor in relation to chattel mortgages for farm machinery and vehicles.

Donna also made a number of non-financial contributions to the enterprise by way of support for Tony, including:

  • caring for Tony and Donna's children; and
  • carrying out extensive domestic duties.

The Court found it would be unjust if Donna were not compensated for her contributions to the farming enterprise.

Ultimately, the Court ordered that Donna be paid a sum equivalent to 25% of the net value of Kitcombe and the farming business.

Approximately $70,000 was then deducted from the sum Donna received in recognition of the fact that Donna had continued to live at Kitcombe rent-free for approximately 4 ˝ years after she and Tony separated.

Court of Appeal decision

Tony, Brian, Majella and Nolan & Son Pty Ltd appealed against the decision; the question being, 'what constitutes an appropriate division of the property?'

The Court of Appeal found that the trial judge did not give sufficient weight to the fact that Kitcombe was acquired by Brian and Majella from their own resources.

Donna made no financial contribution to the purchase of Kitcombe, and the Court found that Brian and Majella should be entitled to 30% of the net assets of the farming enterprise to reflect their substantial initial contribution to the acquisition of the property.

The Court then found that the respective contributions of the parties were otherwise equal; therefore, the remaining 70% of the assets should be equally divided between Brian, Majella, Tony and Donna.

On that basis, the Court found that Donna should be awarded a sum equivalent to 17.5% of the net value of the assets of the farming enterprise.

Alternative to Family Court proceedings

It is important to remember that property matters can be initiated in the Supreme Court and orders may be made on grounds other than those set out in the Family Law Act 1975 (Cth).

Whether you wish to protect your family's interests or you seek fair compensation for your contributions to a business, Cooper Grace Ward's family law team can explain the processes available to you and how best to proceed.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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