Property Settlement & Court Orders

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‍Property Division

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In Australia, property division after separation is governed by the Family Law Act 1975, which emphasizes a just and equitable distribution of assets and liabilities accumulated during the relationship. This applies to both married couples and de facto couples who have separated. The process typically involves identifying and valuing all assets, which can include real estate, vehicles, investments, superannuation (pensions), businesses, and personal belongings. Liabilities such as mortgages, loans, and credit card debts are also taken into account and can be adjusted if necessary.

The court considers a range of factors when determining how property should be divided, including the financial contributions made by each party (such as income, property, inheritances),non-financial contributions (such as homemaking and childcare), future needs(such as age, health, income-earning capacity, care of children), and any other relevant factors. The aim is to achieve a fair outcome based on each party's contributions and needs following the separation.

Couples are encouraged to negotiate a property settlement agreement themselves or through mediation, which can be formalized by a consent order approved by the court. If an agreement cannot be reached, either party can apply to the Family Court or Federal Circuit Court for a property order. The court may then make orders specifying how property and debts are to be divided, considering the circumstances of the case and ensuring any arrangements are practical and just for both parties involved.

The preferred approach to property division is enunciated clearly in The Marriage of Hickey [2003] FamCA 395. The four steps are as follows:

     1.     Firstly, the parties should identify and value the property, liabilities and financial resources of the parties. This is not necessarily the value of the property at the time of separation, but rather, is the value of the property at the time of the division.

     2.     Secondly, the parties should identify and assess the contributions of the parties within the meaning of s79(4)(a-c) of the Family Law Act 1975 (Cth) and determine the contribution based entitlements of the parties, as a percentage of the net value of the property of the parties.

     3.     Thirdly, the parties should identify and assess the relevant matters referred to as the ‘other factors’ in s79(4)(d-g)and s75(2) of the Family Law Act 1975 (Cth), also known as the ‘future needs’ factors.

    4.     Finally, the parties should consider the effect of the above and determine what result is just and equitable in all the circumstances.

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Property of the Parties

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Like most common law countries (that is, countries that follow the traditional English system), Australia has a distinct property regime, where being married has no effect on property acquisition. This can be compared to civil law countries, where married couples will generally have joint ownership of all property acquired after marriage. In Australia, both parties to the marriage can obtain property in their sole name, or jointly. To avoid one party leaving a marriage with an inequitable amount of property, the issue is resolved by s79 of the Family Law Act, which provides courts the ability to adjust the property rights of the parties when it is just and equitable to do so.

Section 79 of the Family Law Act distinguishes between the following:

   -         Income

   -         Property, and

   -         Financial Resources

Only ‘property’ of the parties to the marriage can be adjusted under s79 of the Family Law Act.

Property is defined in section 4 of the Family Law Act,

           ‘Property, in relation to the parties to a marriage [the same definition applies to de facto couples] or either of them – means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion’

This definition should be interpreted broadly, as in The Marriage of Duff (DL and Ej) [1977] 90-217, where the Court held that property is the most comprehensive of all terms which can be used inasmuch as it is indicative and descriptive of every possible interest which the party can have.

The most common form of ‘property’ of a marriage, is the matrimonial home. Other common types of property owned by parties to a marriage is: a business, shares, vehicles, beneficial interest ina fixed trust (however not an expectancy interest), and jewellery. Whilst anadjustment under s79 of the Family Law Act can affect any property ofthe marriage, most of the time, the focus of the courts is on the ‘biggerticket’ items. Although, sometimes arguments can occur over property as minoras the TV stereo system. Other times, there are sentimental items which havelittle value monetary value, but significant personal value to the parties.

Pets are also considered property for thepurposes of Family Law. There is no specific mention of pets in the Family LawAct 1975 (Cth). It has been shown that the court has jurisdiction over who petsshould live with: Jarvis & Weston [2007] FamCA 1339. Factors relevant thatthe court would consider in deciding who should get Katsu include, whopurchased the pet, who was the primary carer for the pet during therelationship and who the pet is registered to. The Court may take intoconsideration the positive impacts the pet has on a party’s mental wellbeing.The court does not have the jurisdiction to order any ‘sharing’ or ‘co-custody’of animals, see Davenport & Davenport (No. 2) [2020].

It should also be noted here that liabilitiesof the parties also need to be considered, including credit card debt,mortgages, car loans and others. The important factor is the net value ofthe property. That is, all of the assets of the parties minus all of theliabilities of the parties = net property of the parties. The ‘netproperty of the parties’ is colloquially known as the ‘matrimonial pool’.

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Superannuation

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The definition of superannuation washistorically a difficult task. Traditional definitions of property would viewaccumulation funds as being property, but there were greater difficulties indefining whether defined benefit funds, and periodic pensions were property.This was resolved by the Famil Law Legislation Amendment (Superannuation)Act 2001 which inserted s90MC into the Family Law Act, whichprovides that for the purposes of Family Law matters, superannuation is to betreated as property.

Financial Resources

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Many individuals have sources of wealth thatwill not fit into the definition of ‘property’ within the meaning of section 4of the Family Law Act. The court may consider the ‘financial resource’but are not able to adjust it.

In Hall v Hall (2016) 257 CLR 490, theCourt explained a financial resource as follows,

           ‘asource of financial support by which a party can reasonably expect will beavailable to him or her to supply a financial need or deficiency’  

Some common examples of financial resourcesare:

     -         Familial wealth

     -         Being a beneficiary of a discretionary trust

Effectively, the court will take intoconsideration the fact that one party will have access to certain financialresources that the other will not, which will, in some circumstances, effectthe ‘percentage’ division of the assets at separation.

Understanding how a financial resource canaffect property division can be one of the most complicated areas of the FamilyLaw, with interplay between factual circumstances and complex business andtrust structures. At Bentleys, our lawyers have a thorough understanding ofbusiness and trust law and their intersection with family law, that allows themto provide accurate and useful advice when dealing with financial resources inthe family law jurisdiction.

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Valuing the Property

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Many items of property that the parties holdwill have clear and obvious values. The value of a mortgage, for example, isthe precise amount that is left due and owning. The value of the matrimonialhome however, can be more nebulous. For items of property where there is noclear value, then there are three options available to parties:

     -         Sell the property,

     -         Mutual agreement, or

     -         Value the property.

For every conceivable type of property, thereis someone out there who can professionally value it. However, most property isnot worth the cost of having it professionally valued. Even if the property’svalue is greater than the cost of the valuation, often parties’ estimation ofthe property’s value are not that far apart. Therefore, in most cases, it iseconomical for parties to simply pick a number somewhere in the middle. Forproperty that is too valuable to be simply guessed at, such as a home, anindependent sworn valuer can be appointed to provide a precise estimate ofvalue.

If the parties would prefer a cheaper optionto an independent sworn valuer, real estate agents, and sometimes the mortgaginginstitution itself, can offer what is known as a ‘curb side’ valuation free ofcharge. Whilst not as precise as an independent sworn valuation, it is oftenaccurate enough to provide a starting point for parties to discuss and agreeon.

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Financial Disclosure

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In order for parties to be able to assess thefinancial position of each other after a breakdown of a relationship, it isnecessary that parties exchange financial documents. This process is called‘full and frank financial disclosure’. Financial Disclosure requirements areoutlined in Rule 6.01 and Rule 6.06 of the Federal Circuit and Family Courtof Australia (Family Law) Rules 2021.

Financial Disclosure documents include, butare not limited to, the following, whether in Australia or internationally:

     a)      Pay slipsand employment contract

     b)      Details ofa party’s earnings

     c)      Anyinterest in property owned by the party, or owned by a legal entity fully orpartially owned or controlled by a party

     d)      Financialresources

     e)      Any Trustthat the party is a beneficiary, trustee or administrator of

     f)       Most recenttax return and notice of assessment

    g)      Bankrecords for 12 months immediately prior

    h)      If a partyhas an Australian Business Number, a copy of the last four business activitystatements

    i)       Anydocument in the party’s possession, custody or control that may assist indetermining the income, needs and financial resources of the party.

There are consequences for not providing fulland frank financial disclosure, especially when done so to conceal assets.

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Contributions

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Section 79(4)(a-c) of the Family Law Act requiresthe court to assess the financial and non-financial contributions of theparties to the marriage.

As the Full Court stated in Q & Q [1999]FamCA 1314 when explaining the relevance of contributions,

           ‘Itis a matter of assessing the contributions of all relevant kinds in each caseto arrive at an outcome which is both appropriate and just and equitable. Insome cases particular contributions may be outweighed or equalled by otherones. In other cases particular contributions may be so disproportionate toother contributions as to merit special recognition.’

When assessing contributions to a marriage,there are two approaches parties, and the court, will usually take; theasset-by-asset approach, or the global approach.

The global approach views the entirematrimonial pool collectively and considers all contributions (both financialand non-financial) and their impact on the total pool. In comparison, theasset-by-asset approach assess the various contributions of the parties to eachindividual asset of the parties. These approaches are not exclusive of eachother, some circumstances will require an asset-by-asset approach for someassets, and the global approach for others.

The vast majority of separations will involvethe global approach. The court is free to choose whichever approach it prefers,based on which approach is more ‘convenient’ in the circumstances. For furtherexamination on the differences between the Asset-by-Asset approach, and theglobal approach, and in which circumstances the court may prefer the formerapproach, read the High Court of Australia decision in Norbis v Norbis (1986)161 CLR 513, 523-524. If you would like to better understand how these differentapproaches may affect your property division, contact Bentleys for a fullunderstanding of the current law.

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Financial Contributions

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Financialcontributions can be difficult to precisely define. This is especially the casewhere parties to the marriage are both employed and are utilising a jointaccount for their expenses. Other types of financial contributions can beeasier to identify, such as windfall gains, from lottery wins, inheritances,and others. It is also often reasonably straightforward to identify thefinancial contribution a party made at the commencement of a relationship. Thatis, what property each party commenced the relationship with. The Australiancourt makes no specific distinction between property obtained prior tomarriage, and property obtained during. However, any assets brought into themarriage will be considered a direct financial contribution to the marriage.Likewise, any liabilities brought into the marriage will be considered a direct‘negative’ contribution to the marriage.

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Non-Financial Contributions

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Non-financialcontributions are any contributions that do not have any direct financialimpact on the property of the parties. This could include traditionalhome-making tasks, raising and caring for children, providing love and support,amongst a range of other tasks that the court would view as worthy ofrecognition when assessing contributions to the marriage.  

TheCourt has stated, in In the marriage of Ferrero [1993] FLC 92-335, thefollowing, which neatly explains the current understanding of the Family Courtwhen viewing homemakers’ contributions, at [79,579],

           ‘…Parliament had not providedthat a wife’s homemaker contribution and the husband’s financial contributionare deemed to be equal. It is equally true to say that the Parliament has notprovided that they cannot or may not be equal. It is a matter of evaluatingthose contributions in the individual case but against an evolving social andlegislative background… There is also, we think, an evolving social backgroundwhich gives greater emphasis to the equality and partnership concepts in amarriage and, no doubt, this evolutionary process will continue.’

Thereis of course, still an acknowledgement that one party may fill their role to anexceptional standard that warrants additional attention, in the decision, theCourt said,

           ‘The case law has establishedhowever that there may be special factors, such as the homemaker havingperformed her responsibilities without the assistance of her frequently absenthusband or the breadwinner having applied outstanding entrepreneurial skill tothe building up of a business, which justify the court considering thatcontribution to be above the normal range…’

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Weight of Contributions and Length of Relationship

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The length of the marriage can be seen to beof considerable importance in the assessment of contributions. In Waters andJurek [(1995) FLC 92-635, at 82,379] Fogarty J, in the context of s79(4)(e) of the Act, said:

‘Whenthe marriage ends, especially where that marriage has been a long one, onecannot separate the parties as individuals from the people they became in thecontext of the marriage relationship, and the allocation of roles, duties andresponsibilities which it entailed.’

In other words, the longer the marriage, theless ‘weight’ the court will place on contributions, noting that each partywill file a particular role, and that this role may not result in a directfinancial contribution. This is most easily seen in a family where one partywill continue to work, whilst the other party stays at home and fills thehome-maker role. The court has expressed a desire to view the income generatingrole as just as important as the home-maker role in most circumstances.

Comparatively, in the opposite context, being that of a relatively shortrelationship, the Full Court in Figgins & Figgins [2002] FamCA 688; (2002) FLC 93-122 at 89,301 [129] stated that:

‘In cases... involving short marriages and a substantial imbalance of financialcontribution, equality of division is again likely to producesubstantial injustice. Its value as a starting point is therefore highlyquestionable.’

Understandingwhat the court considers a ‘short’ or ‘long’ relationship can be difficult. Asa general rule of thumb, a ‘short’ relationship is less than five years, and along relationship is one longer than ten years.

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Wastage, FamilyViolence, and Property Division

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For themost part, conduct of the parties to a marriage is not considered relevant tothe division of property. That is, the marital behaviour is not of itselfrelevant to applications under section 79 of the Family Law Act. Thereare however exceptions to this general rule. The two main circumstances whereconduct of the parties will be relevant to property division are as follows:

     -         Wastage

     -         FamilyViolence

Wastage isoften considered a ‘negative’ contribution and can be defined as a financialloss caused by the conduct of one of the parties, where the loss should notfairly be borne by them both equally. Some common examples of wastage aregambling, excessive spending, disposal of assets for below their market value, and,occasionally, drug addiction resulting in a significant loss of money.

The ‘rule’for determining whether wastage will be considered was enunciated by the courtin the case of Kowaliw [1981] FLC 91-092,

           ‘As a statement of generalprinciple, I am firmly of the view that financial losses incurred by parties oreither of them in the course of the marriage whether such losses result from ajoint or several liability, should be shared by them (although not necessarilyequally) except in the following circumstances:

     a)      Where one of the parties has embarked upon a courseof conduct designed to reduce or minimise the effective value or worth ofmatrimonial assets or

     b)      Where one of the parties has acted recklessly,negligently or wantonly with matrimonial assets, the overall effect of whichhas reduced or minimised their value.’ (emphasis added)

It isimportant to note that the above was only put forward by the court as aguideline. However, it has been later followed by the Full Court who statedthey had ‘no reason to depart’ from it, see Browne v Green [1999] FLC92-873.

Familyviolence is a scourge on the community but only has a limitedimpact on property division. As outlined by the Court in Kennon & Kennon(1997) FLC 92-757, family violence experienced during a marriage will onlyaffect property distribution where a party’s contributions were made morearduous, or more onerous, because of the violence suffered.

In Martell & Martell (2023) 66 Fam LR650 Aldridge J held at [24] “The focus is not on the

conduct per se, but on its effects oncontributions.”

In Martell, Aldridge J continued at [25-26]that:

        ‘The threshold for recognition istherefore met by conduct which has a discernible effect on the contributions ofthe other party such that it should be recognised in determining the respectivecontributions of the parties ….  Theeffect of the conduct must be such that a greater weight should be given to thecontributions.”

Recently in Gormley & Gormley (No.4) [2023] FedCFamC1G, an application of the relevant principle, Campton Jsaid of the evidence as to family violence and whether the wife in that casehad established that the contributions were rendered more onerous by any familyviolence occasioned by the husband the following at [238]:

        ‘Even if I were able to make findingsas to the incidents of family violence alleged by the wife, there was adeficiency in the evidence as to how those incidents impacted upon the wife’scontributions. I am not satisfied that the wife has discharged her evidentiaryburden to establish that her contributions were rendered more onerous by anyfamily violence occasioned by the husband.’

An adjustment in property matters is suchcommonly referred to as a ‘Kennon adjustment’ and requires significantevidence, of both family violence, and its impact on contributions made. This is an area where the lawyers at Bentleys have extensive experience, on bothsides of the argument, which allows us to approach these issues with knowledge,and sensitivity.  

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FutureNeeds

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The nextproperty adjustment factor that needs to be considered by parties’ is ‘futureneeds’, also known as s75(2) factors, which are required to be considered insection 79 by section 79(4)(e).

In Petrellis& Petrellis [2023] FedCFamC1A at [69] McClelland DCJ said:  

Theappropriate approach in considering relevant s 75(2) [s.90SF(3)] factors isto:  

     -         firstly, determine what factors should be taken into account pursuant to s 75(2) [s.90SF(3)], without any consideration at all at that stage of the amount (if any)that should be ordered;  

     -         secondly, when all of these factors have been determined, it is then appropriate todetermine what weight should be given to each of them, including the outcome ofthe Court’s analysis undertaken pursuant to ss 79(4)(a), (b) and (c) [ss.90SM(4)(a), (b) and (c)].  

Futureneeds can be broken down into two broad categories, those that relate tochildren, and those that relate to income.

For income, there will traditionally be an adjustment in favour of the lower earningspouse. Disparity in income earning capacities is a common basis for anadjustment in property division. This comes from an understanding that due tothe division of roles in a marriage, one party will have had the opportunity tofocus more on their career, resulting in a higher income earning capacity. Itis important to note, that earning capacity is separate from what a person is currentlyearning. The court is more interested in how much the individual has thecapacity to earn. This may arise where one party is working full time, and theother only working part time at the time of separation, but could work more.

The otherfactors impacting income are health and age of the parties. An individual closeto retirement age has less earning capacity than a 26-year-old. Likewise, anindividual with persistent health issues will have greater future needs.

S75(2) alsoconsiders the impact that raising children has on one’s future needs. It considersboth that the cost of raising children is often greater than the monies paid inchild support, and the limitations it places on obtaining full time employment.The adjustment warranted for children will depend on a range of factors, withthe main ones being the number of children, their ages, and any special needs.

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Just and Equitable

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The finalconsideration a court will make, is whether the adjustment is ‘fair and reasonable’ and ‘just and equitable’. That is, in all the circumstances, is the proposed adjustment fair. This is a highly subjective area, which allows a judge to exercise discretion. Whilst this can create uncertainty around what decision a judge may make, it ensures that no unique circumstance is not taken into account.

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