The Principles of Property Settlement - The Four Steps
If the two parties cannot reach an agreement to divide their property and other financial resources when they separate, they can make an application to the court to make an order on their behalf. Section 79 of the Family Law Act 1975 gives the court the power to make orders that would change the parties interests in their property.
In the Marriage of Hickey (2003) 30 Fam LR 355, the court highlighted that the preferred approach in making such an order involves four interrelated steps:
First, the court makes identities and values the parties’ property, liabilities, and financial resources at the date of the hearing.
Second, the court considers the parties’ financial contributions as well as any contribution made in the capacity of homemaker or parent for the welfare of the family.
Third, the court assesses the future needs of both parties, considering a range of factors such as:
The age and health
Their earning capacity
Whether either party has care of the children
If they receive any pension, allowance, or benefits
Fourth, the court considers if the effects of their findings would be just and equitable in all the circumstances of the case.
What is ‘Just and Equitable’?
The High Court provided instructive guidance about what is ‘just and equitable’ in the case of Stanford v Stanford [2012] HCA 52. In this case, the husband and wife had lived together for 30 years, and only separated involuntarily when the wife had to be moved into a facility that could care for her. The property settlement application was made by the wife’s daughter as the wife’s personal legal representative. The respondent was not the appellant’s daughter. Although the wife had not wished to seek any division in the matrimonial property, the High Court made it clear that as the proceedings were commenced between married individuals and were concerned with marital property, the court would have the jurisdiction to hear such proceedings under section 79.
At the first instance, the magistrates determined a 57.5/42.5 split in favour of the husband, which would result in the husband selling his home. As the wife died before the appeal was finalised, the High Court agreed that the relevant question would be if it would have been ‘just and equitable’ to alter the interests in the property while she was still alive.
The High Court emphasised that as the separation was involuntary and the wife’s needs were being met, it would not be just and equitable to make an order to split the husband and wife’s interests as it would force the husband to sell his house.
In making its decision, the High Court also emphasised that before exercising its discretion under the provision, the courts should first consider if there is a “principled reason for interfering with the existing legal and equitable interests of the parties to the Marriage”. It seems that the court was implying that the Court’s should first consider if it would be just and equitable to interfere at all. However, the court did note that in most cases, the just and equitable requirement would be satisfied “by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship.”
Accordingly, although most cases utilise the four-step process to determine a party’s entitlement under section 79, it’s use might not always be appropriate, and the court decides each case on its own facts.
