Resolving a property division dispute in family court

Until November 2012 when the High Court of Australia delivered a decision known as Stanford & Stanford[1], the generally long accepted law was that the Family Court would follow a four step process under section 79(4) of the Family Law Act 1975 (Cth) (Act) when assessing a property division dispute.

Those steps required the Family Court to:

1. Identify all the property in which each party has a legal or equitable interest (i.e. all assets, liability and superannuation owned by either party, whether held in their personal name or through a corporate or trust structure) and assign a value to that property.  To speed up this process, it is often useful to obtain a free appraisal of any real estate and online valuation of any vehicles in either party’s possession at the beginning of the property settlement process.
2. Consider sections 79(4)(a)-(c) and assess each party's financial and non-financial contributions to the acquisition, conservation or improvement to their various items of property, including contributions as homemaker and parent and make a preliminary percentage division based on "contributions" only.  This step involves identifying the assets, liabilities and superannuation each party had when they first commenced living together, and what financial and non-financial (cooking, cleaning, parenting and the like) contributions has each party has made to the assets, liabilities and superannuation of the parties since that time.  The Family Court will usually represent each party’s contributions as a percentage of the parties’ current assets, liabilities and superannuation.
3. Consider sections 79(4)(d)-(g) which will include an assessment of "the section 75(2) factors" as required under section 79(4)(e) and make a finding whether any adjustment to the preliminary division made under step 2 is necessary.  This step involves identifying the future needs of each party, and deciding whether the percentage of the assets, liabilities and superannuation that each party would receive if their contributions alone were taken into account is sufficient when those future needs are taken into account.  The Family Court may adjust the percentage division from step 2 at this time.
4. Consider the effect of the findings at steps 2 and 3 and make an order that is just and equitable in all the circumstances - section 79(2).

The High Court in Stanford said that before the Family Court can consider making any order at all, it must be satisfied that it would be just and equitable to do so, and therefore must decide whether it is “just and equitable” to make any orders adjusting the ownership of that property which is identified.  In most cases, this threshold issue will be easily met merely by the fact of the parties' separation - which often means they cannot continue to use their common property or rely on their existing joint financial relationship.  If the Family Court finds that it is just and equitable to intervene, it may then consider the four steps referred to above in order to determine the dispute.

The Family Court has indicated that the following circumstances may mean that it is not just and equitable to make any orders where:

• the couple have not actually separated;
• the couple have involuntarily separated (i.e. due to the physical illness of one party);
• there has been a longstanding informal agreement regarding the division of assets, liabilities and superannuation that both parties have acted in accordance with for a substantial period (at least 10 years); and
• the contributions of each party are such that no transfer of property between the parties is appropriate.

Lavan Legal comment

Whilst the steps taken by the Family Court appear to be relatively straightforward, not all property settlements are simple.  Issues such as inheritances, complex corporate and trust structures and the needs of children can affect the way the four step process applies to your individual case.  In various cases each step may bring up all sorts of challenges.  Even the first step of “identifying and valuing” the property can be a difficult and drawn out process particularly when there is a dispute about valuations and when a party has failed to provide disclosure.   

Even in the event parties reach an agreement with respect to property settlement and have avoided the need for the Family Court to determine an outcome, any consent orders entered into by the parties must be deemed “just and equitable” by the Family Court.