APPLICATIONS FOR DIVISION OF PROPERTY

A party to a marriage or a party to a de facto relationship can bring proceedings in the Federal Circuit and Family Court of Australia seeking a division of the property held by the parties 1. These proceedings are known as property proceedings.

RESTRICTIONS ON COMMENCING PROPERTY PROCEEDINGS

Parties to either a marriage or a de facto relationship can enter into a binding financial agreement (BFA) to protect their assets or to divide any existing assets. They can enter a BFA 2,3,4 :

  1. prior to the commencement of the relationship, commonly known as a prenuptial agreement or 'pre-nup';
  2. during the relationship; or
  3. after separation.

If parties have entered into a valid BFA, they may be unable to commence property proceedings in relation to any of the matters to which the BFA applies (such as property distribution and spousal maintenance). However, a BFA that was not entered into validly may not be binding upon the parties, so it's wise to seek legal advice to see if you are party to a binding BFA.

TIME LIMITS ON COMMENCING PROPERTY PROCEEDINGS

Parties to a Marriage

There is no requirement that married parties be divorced before commencing property proceedings; therefore, proceedings can be commenced immediately following separation.

However, once the parties have divorced, property proceedings must be commenced within 12 months from the date the divorce order took effect 5. Proceedings can only be brought after this date with court permission (leave of the Court) or consent of the parties 6.

When considering whether to allow an application initiated after the 12-month time limit has expired, the Court will consider all relevant factors, such as 7,8:

  1. whether there is any joint property of the parties, and whether the Court must act in order to end the financial relationship within the meaning of s 81 of the Family Law Act 1975 (Cth);
  2. whether a party to the marriage or a child would suffer hardship if leave is not granted; and
  3. where the parties have consented, whether such consent has been obtained by fraud and/or duress.

Parties to a De Facto Relationship

There is no minimum period to wait to commence property proceedings, so proceedings can be commenced immediately following separation. However, proceedings must be commenced 9,10,11:

  1. within two years of separation;
  2. twelve months after a BFA between the parties was set aside or found to be invalid; or
  3. when the parties consent.

Proceedings can only be brought after this date with court permission (leave of the Court) 12. When considering whether to allow an application initiated after the two-year time limit has expired (or 12-month time limit for BFAs), the Court will consider all relevant factors, such as 13,14:

  1. whether there is any joint property of the parties, and whether the Court must act in order to end the financial relationship with the meaning of s 90ST of the Family Law Act 1975 (Cth);
  2. whether a party or a child would suffer hardship if leave is not granted; and
  3. where the parties have consented, whether such consent has been obtained by fraud or unconscionable conduct.

WHAT CAN A COURT ORDER?

With property proceedings, the Court may make any order it considers appropriate, including 15,16 :

  1. altering the interests of the parties in property; or
  2. settling property in substitution for an interest in property.

COURT'S DETERMINATION OF APPROPRIATE ORDERS - FOUR/FIVE-STEP PROCESS

To determine what, if any, order should be made, the Court will generally adhere to the following four/five-step process.

  1. A court will not make a property order unless it is satisfied that in all the circumstances, it is just and equitable to make the order 17. According to Stanford v Stanford, the Court may consider it just and equitable to make an order when 18:
    1. there is no longer common use of the property by the parties;
    2. express and implicit assumptions that underpinned existing property arrangements were brought to an end by voluntary severance of the marriage or relationship; or
    3. one party's unmet needs cannot be fulfilled by a maintenance order.
      1. If the parties are separated, the just and equitable requirement will likely be easily satisfied.
  1. If the Court has determined that property adjustment orders between the parties are just and equitable, it will consider what orders should be made. To do this, the Court will identify and value the parties' property at the date of the hearing. To assist the Court, the parties must make full disclosure of their financial positions by providing the Court with all information relevant to their financial circumstances. This includes a list of assets and liabilities for each party. Where the parties cannot agree on the value of an asset, the Court may rely upon documents and expert independent valuations.
  2. The Court will then identify and assess the contributions of the parties and determine their entitlements based on their contributions 19. The Court will consider financial contributions, non-financial contributions, and contributions to the welfare of the family 20,21,22.
    1. Financial contributions include direct or indirect financial contributions made by or on behalf of a party to the marriage or relationship or a child of the marriage or relationship to acquire, conserve and/or improve any property of the parties 23.
      1. Direct financial contributions may include bringing land or property into the marriage or relationship, paying a deposit on a home, paying mortgage repayments, paying for repairs or extensions to the home, accepting gifts from relatives, and/or receiving an inheritance.
      2. Indirect financial contributions may include one party paying household expenses while the other uses their income to pay off the mortgage, one party's parents providing free accommodation, and so on.
    1. Non-financial contributions include direct or indirect non-financial contributions made by a party or on behalf of a party to the marriage or relationship or a child of the marriage or relationship to acquire, conserve and/or improve any property of the parties 24.
      1. Direct non-financial contributions may include repainting the family home, doing renovations, landscaping, and gardening.
      2. Indirect non-financial contributions may include giving up your career and staying home to raise children so your partner can contribute more to the financial assets of the relationship.
    1. Contributions to the welfare of the family include contributions made by a party to the marriage or relationship that contribute to the welfare of the family, such as contributions made in your capacity as a homemaker or a parent (such as cleaning, cooking, caring for children, and doing housework) 25. These contributions must be made personally by you and do not include contributions made on behalf of parties (for example, your parent babysitting your children will not count as your contribution) 26.

Where one party has unreasonably disposed of an asset of value by squandering or dissipating it, the Court views this as notional property. This notional property is added back into the asset pool where the loss is borne by the squanderer/dissipator/disposer. This can include instances where one party has:

  • physically damaged property;
  • failed to preserve assets;
  • incurred financial penalties; and/or
  • dissipated through addictions (such as gambling).
  1. The Court will then consider other relevant matters that determine whether an adjustment should be made to the contribution-based entitlements of one or both parties established during Step 3, and, if so, the extent of that adjustment. Relevant matters the Court may consider include 27,28,29:
    1. each party's earning capacity;
    2. any other order affecting a party to the marriage or relationship or a child of the marriage or relationship; and
    3. child support a party has provided, is to provide, or might be liable to provide.
      1. There is no automatic right to maintenance, but the Court will also consider spousal maintenance, subject to a number of factors such as 30:
    1. the age and health of each party;
    2. the income, property and financial resources of each party;
    3. the capacity of each party for gainful employment;
    4. whether either party has the care of children under the age of 18;
    5. a party's contribution to the other party's income, earning capacity, property and/or financial resources; and
    6. the duration of the marriage/relationship and its effect on the earning capacity of the party seeking spousal maintenance.
  1. Finally, the Court will consider the effects of the proposed orders to determine whether they will create a result that is overall just and equitable between the parties. The just and equitable requirement therefore permeates the entire process 31.

REFERENCES

1Family Law Act 1975 ss 79, 90SM.

2Family Law Act 1975 ss 90B, 90UB.

3Family Law Act 1975 ss 90C, 90UC.

4Family Law Act 1975 ss 90D, 90UD.

5Family Law Act 1975 s 44(3).

6Family Law Act 1975 s 44(3).

7Family Law Act 1975 s 44(4).

8Family Law Act 1975 ss 44(3AA).

9Family Law Act 1975 s 44(5)(a)(i).

10Family Law Act 1975 s 44(5)(a)(ii).

11Family Law Act 1975 s 44(5)(b).

12Family Law Act 1975 s 44(6).

13Family Law Act 1975 s 44(6)(a).

14Family Law Act 1975 s 44(5A).

15Family Law Act 1975 ss 79(1)(a), 90SM(1)(a).

16Family Law Act 1975 ss 79(1)(c), 90SM91)(c).

17Family Law Act 1975 ss 79(2), 90SM(3).

18[2012] FamCAFC 1.

19Family Law Act 1975 ss 79(4), 90SM(4).

20Family Law Act 1975 ss 79(4)(a), 90SM(4)(a).

21Family Law Act 1975 ss 79(4)(b), 90SM(4)(b).

22Family Law Act 1975 ss 79(4)(c), 90SM(4)(c).

23Family Law Act 1975 ss 79(4)(a), 90SM(4)(a), 90SM(4)(a)(i).

24Family Law Act 1975 ss 79(4)(b), 90SM(4)(b), 90SM(4)(b)(i).

25Family Law Act 1975 ss 79(4)(c), 90SM(4)(c).

26AB v ZB [2002] FamCA 1178.

27Family Law Act 1975 ss 79(4)(d), 90SM(4)(d).

28Family Law Act 1975 ss 79(4)(f), 90SM(4)(f).

29Family Law Act 1975 ss 79(4)(g), 90SM(4)(g).

30Family Law Act 1975 ss 75(2), 90SF(2)-(3).

31Family Law Act 1975 ss 79(2), 90SM(3).