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The Illusion Of ‘Exclusion’ In Property Settlement Cases

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By Amanda Humphreys, Senior Associate, MST Lawyers

The Full Court recently granted an appeal in Holland & Holland [2017] FamCAFC 166, making it clear that it is wrong as a matter of principle to refer to any existing legal or equitable interest of the parties as  ‘excluded’, or ‘immune’ from, consideration in applications for orders pursuant to s 79.

The parties had lived together for some 17 years before separating in July 2007 and then divorcing in 2012.  They had two children, aged 14 and 17 at the time of the hearing.  The husband inherited a property in February 2011 upon the death of his brother. A mortgage encumbered the property.  The mortgage was paid out by his parents, leaving him the sole proprietor of an unencumbered property valued at $715,000 at the time of the hearing.  The balance of the parties’ assets and superannuation were valued at approximately $373,000.

The Full Court (referring to Stanford v Stanford (2012) 247 CLR 108  and Norman & Norman [2010] FamFCA 66) held that the real estate inherited by the husband after separation was not a “financial resource”.  Instead,  it was property to which he was presently entitled and therefore, required to be considered as part of the settlement under section 79 of the Family Law Act.

The Full Court expressed the view that it may have been open to the trial judge to find the inherited property should be assessed separately from the other property and that the wife should have no entitlement to a share of it after considering those matters required by section 79.  However, Her Honour had not made the required findings to support that approach.

The Full Court also found that the trial judge had made an error by not quantifying her assessment of the parties’ post-separation contributions, conflating the assessment of contributions with the assessment of section 75(2) factors.

The Full Court also confirmed, referring to Clauson and Clauson (1995) FLC 92-595 and the tendency to refer to section 75(2) factors in percentage terms, that it is the real impact in money terms which is ultimately the critical issue.

The matter was remitted for re-hearing.

This is an important reminder that all existing legal and equitable interests of parties to property must be identified and valued for the purpose of property settlement in Australia.

This case also highlights the potential question of how the Family Court would give effect to a financial agreement (prenuptial or otherwise) that provides for aspects of parties’ property to be resolved by the court upon the breakdown of a relationship while excluding other aspects of the parties’ property from consideration by the court.

For more information, please contact our Family Law team by email or call +61 3  8540 0200. We happily arrange Skype and telephone appointments for our interstate and overseas clients, accommodating time differentials where required.