Keeping Property Separate Does Not Always Prevent a Property Settlement

There are many factors that can impact upon a Judge’s discretion and the High Court has reminded us that it is not possible to chart its “metes and bounds”.  Also, the High Court has reminded us it is not an excuse to dispense “palm tree justice”.

The Court must also be careful not to conflate considerations under s79(2), with considerations under s79(4).

In summary, the Full Court concluded that there must be some sort of mutuality about the existence of property in one party’s name or the other.  It cannot be assumed just because properties held in the name of one party, that therefore there was some sort of mutual assumption (expressed or implied) as to how the parties would conduct their financial affairs.

For example, there may be situations due to cultural considerations, family violence or other issues where properties are held in the name of one party or another.  Perhaps, another consideration could be whether the parties are trying to protect assets from potential creditors in the future.

The Full Court commented that in situations where it is established or agreed that parties to a marriage made a mutual informed and truly consensual decision to keep finances separate, that will not in itself inevitably lead to the conclusion that it is just and equitable to make an Order altering interest.

With all due respect, the above statement is very difficult to reconcile and although it is clearly obiter, it seems to ignore the clear propositions laid down by the High Court in Stanford.  The High Court in Stanford, laid down three fundamental propositions that must not be obscured when considering the expression “just and equitable”.  The third of those propositions is restated below:-

“Third, where the making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to various matters (including financial and other contributions) set out in s79(4).  The power to make a property settlement order must be exercised in accordance with legal principles, including the principles which the act itself lays down. 

To conclude that making an order is “just and equitable” only because of and by reference to various matters in s79(4) without a separate consideration of s79(2) would be to conflate the statutory requirements and ignore the principles laid down by the act…”

Further, the High Court stated:-

“The fundamental propositions that have been identified require that a Court have a principled [my emphasis] reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been there stated or unstated assumptions of agreements about property interests during the continuance of the marriage…”

Following on from these statements, it is suggested that in circumstances where there is a common assumption that is mutually and freely accepted by all parties, and where there is clear evidence of that common assumption that the parties wish to run separate financial lives during their marriage and keep their financial interests separate, it would be extremely difficult to envisage a set of circumstances where the Court could still find that there was a principled reasons to interfere with that freely and commonly accepted assumption.

In my view, the ongoing maintenance of this important discretion will enable the Court to distinguish between matters where an alteration of interest is necessary and others when it is not.

However, in recent times, there appears to be some discussion that Stanford does not really mean much and that in all cases, it will be just and equitable to alter interests in property.

The fact is that the power to have a property settlement has always been one to alter only since the enactment of the Family Law Act. If the Court has not worked it out already, modern relationships are extremely different and are changing rapidly.

Brett Hartley has had extensive experience in property settlement matters, especially complex matters.  If you need any advice in relation to property settlement or protecting your wealth and interests, please do not hesitate to contact Brett Hartley or our client services manager, Tyanne Su’A to discuss same.