Property Division in the Wake of Relation Breakdown

Gurpal Singh is the principal lawyer of Melbourne law firm, Saundh Singh & Smith Lawyers

The Family Law Act 1975 provides for the division of the property between the parties to the relationship. We will briefly consider as to what constitutes the property, the principles applicable for the division and the judicial restraint to be exercised by the courts while determining the division of property issues.

The first requirement would be identifying and valuing the financial resources, assets, and liabilities. The timing of acquisition of such asset or resource at the first stage is not relevant. To simplify the assets would include but not limited to immovable property owned jointly or independently including the foreign held property; Superannuation; Business interests; Trust interests; Investments; jewellery; Cars; Antiques/arts; inheritance, Money in Banks or otherwise, Pets. At the same time, liabilities such as debts, mortgages, loans, tax liabilities and stamp duty obligations whether held jointly or individually will be deducted. The valuation of assets especially of the business interests can be quite complex and on occasions require the involvement of forensic accountants.

Once the pool is established, the next step requires the assessment of the contributions made by the parties during their relationship. The contributions are direct and indirect financial contributions to the property of the parties AND direct and indirect non-financial contributions to the properties of the parties. Arguably, each party to the case would claim higher contribution than the other partner and it may be so found in the particular cases where the relationship was short and there were no children or in a case AND where one of the parties entered into the relationship with considerably more assets than the other party AND where one of the parties made a substantial contribution by way of inheritance, gift from the family or compensation award.

The next issue is to determine the future needs of each of the parties while looking into the age and state of health of each of the parties; income property and financial resources of each party and their capacity to have gainfully employed; care of the child of the relationship under the age of 18 years; commitments necessary to enable a party to support self or any other person the party is obligated to maintain; eligibility of the party for a pension superannuation; standard of living reasonable in the circumstances; the extent to which the earning capacity of a party has been affected by the relationship, and in case living with someone the financial circumstances of their household.

The most important aspect for the court is to be satisfied that it is just and equitable to alter the property rights of the parties. The competent court is governed by the principle of judicial restraint. The Australian family law jurisprudence does not recognise community of property. The present approach is that the court should not begin from an assumption that a couple’s property rights are or should be different from the state of legal and equitable title. The fact that there was a justification for altering the property rights does not imply appropriate recourse in every case. Many couples have joint legal title to the home, bank accounts and other assets other than superannuation that are owned equally. Prior to 2012, the Australian family property law rested upon an unspoken assumption that the state of title was almost entirely irrelevant to the division of property on separation and the court should simply look at the pool of assets and divide in accordance with percentages determined by an exercise of judicial discretion. However, Post 2012 (Stanford case) the court had to consider in every case whether it was just and equitable to make any alteration of the property rights before determining the extent of such an adjustment. In the context of property and maintenance proceedings, the court is required to determine the parties’ respective financial position as a consequence of the court’s contribution-based assessment of their respective shares and if any further adjustment is needed.

In another case, the court held proceeds of lottery win of more than half a million dollar during cohabitation being not an asset which should be altered in favour of the other party and allowed the win to be retained by the party who bought the ticket. This emanated from relying on the principle of no community property in Australia.

By Gurpal Singh

Read more from Gurpal Singh:

Surrogacy and Parentage

Pre-nuptial (prenups) Binding Financial Agreements

Family Law – parallel proceedings in Australia and India

Non-human children of the family – Separation predicament

Spousal Maintenance – Interim and/or Urgent