Post sep­a­ra­tion finan­cial contributions

The peri­od between sep­a­ra­tion and the final­i­sa­tion of a finan­cial mat­ter can be a mat­ter of days (if both par­ties agree) or years (in the Fam­i­ly Law Courts, it is cur­rent­ly esti­mat­ed that par­ties will have to wait 3 years before a defend­ed final hearing).

Gen­er­al­ly speak­ing, the val­ues of all assets and lia­bil­i­ties of the par­ties should be as up to date as pos­si­ble, although it is accept­ed that some val­ues change on a dai­ly basis and the com­mon sense approach is to have val­ues pro­vid­ed as at an agreed date post separation.

It is accept­ed that the prop­er­ty of the par­ties to be iden­ti­fied includes all prop­er­ty in exis­tence at the date of the hear­ing, whether or not it was acquired after separation.

“Once a mar­riage has been cel­e­brat­ed between the par­ties, the entire rela­tion­ship between the par­ties, whether aris­ing out of con­tri­bu­tions before, dur­ing or after the for­mal tie of mar­riage was entered into or dis­solved, falls with­in the ambit of Part VIII of the Fam­i­ly Law Act.”
- Kowal­s­ki[1]

It is pos­si­ble to make an argu­ment to the Court seek­ing to quar­an­tine post sep­a­ra­tion assets (that is, to remove them from the pool avail­able for divi­sion), but the gen­er­al approach of the Court is to include all assets in exis­tence at the time of tri­al but make adjust­ments to con­tri­bu­tions as are appropriate.

In Mack­ie[2] it was found that the wife had made no con­tri­bu­tions towards the acqui­si­tion of a lot­tery win acquired by the hus­band two years after sep­a­ra­tion and should not receive a por­tion of those winnings.

How­ev­er, in Jacob­son[3], it was found that the wife, who had con­tin­ued to pro­vide pri­ma­ry care for the par­ties’ 5 chil­dren after sep­a­ra­tion, includ­ing a sig­nif­i­cant­ly hand­i­capped child, had made a con­tri­bu­tion to the hus­band’s post sep­a­ra­tion earn­ings by virtue of her car­ing for the chil­dren. His Hon­our Lin­den­may­er J stat­ed that

“where one par­ty saves mon­ey or accu­mu­lates assets sole­ly from post-sep­a­ra­tion efforts, these will be cred­it­ed to him or her…in some cir­cum­stances, but in my view it will only be appro­pri­ate if, on all the facts of the case, the oth­er par­ty has made no con­tri­bu­tion, direct or indi­rect, towards the accu­mu­la­tion of those post-sep­a­ra­tion assets”.

In the mat­ter of Farmer & Bram­ley[4] it was held by Kay J that

“clear­ly con­tri­bu­tions made towards the acqui­si­tion of an asset by one par­ty and the lack of con­tri­bu­tions made towards its acqui­si­tion by the oth­er par­ty may weigh heav­i­ly in the exer­cise of dis­cre­tion. How­ev­er it is wrong to say that con­tri­bu­tions made under s79(4)(a), (b) or (c) before an exist­ing asset was acquired could have no bear­ing on the out­come of the proceedings.”

In that case, the hus­band received a lot­tery win 18 months after sep­a­ra­tion. There was a 14 year old child resid­ing with the wife. The tri­al judge ordered that the wife receive a por­tion of that win, based not only on the fact of her future needs by virtue of the care of the child, but also a con­tri­bu­tion gen­er­al­ly dur­ing the mar­riage. Clear­ly it is also the case that the con­tri­bu­tion made by the par­ty does not have to be a con­tri­bu­tion made direct­ly to the acqui­si­tion, improve­ment, or main­te­nance of that asset, but a con­tri­bu­tion generally.

Sim­i­lar­ly, and more recent­ly, in the mat­ter of Trask & West­lake[5] the par­ties had cohab­i­tat­ed for 13 years and were mar­ried for 11 of those. There were 4 chil­dren below the age of 18. The hus­band sub­mit­ted that he had made high­er finan­cial con­tri­bu­tions because of his high income post sep­a­ra­tion. A year after sep­a­ra­tion the hus­band had obtained new employ­ment with sig­nif­i­cant­ly bet­ter ben­e­fits. Orders were made by the tri­al judge 4 years after sep­a­ra­tion. The tri­al judge made find­ings that the par­ties had con­duct­ed their rela­tion­ship on the basis that the hus­band would pur­sue his career and the wife would be the pri­ma­ry home­mak­er and par­ent. The tri­al judge found that the wife’s sup­port in the hus­band’s ear­li­er employ­ment and con­tri­bu­tions to the wel­fare of the chil­dren led to the hus­band’s pro­mo­tions and abil­i­ty to earn his cur­rent income. The tri­al judge found that post sep­a­ra­tion con­tri­bu­tions were equal. The hus­band appealed.

The Full Court agreed that the wife’s con­tri­bu­tions did not cease on separation.

Why is this significant?

In the 3 year lead up to tri­al, things may change sig­nif­i­cant­ly. A par­ty to the pro­ceed­ings may have a busi­ness increase sig­nif­i­cant­ly in val­ue from a dis­cov­ery made short­ly after sep­a­ra­tion. Real estate val­ues may increase sig­nif­i­cant­ly on the for­mer mat­ri­mo­ni­al home in which one par­ty is resid­ing and pay­ing the mort­gage. The high­er income earn­ing par­ty may have lived fru­gal­ly and amassed sig­nif­i­cant funds from their income after sep­a­ra­tion. Par­ties need to con­sid­er not only the legal costs and time expend­ed in pur­su­ing lit­i­ga­tion, but the poten­tial oppor­tu­ni­ty cost in not set­tling the mat­ter ear­ly and being able to retain those gains for him­self or herself.

It is impor­tant to con­sid­er the fol­low­ing in each case:

1. Whether the post sep­a­ra­tion con­tri­bu­tion relates to an asset acquired from pre sep­a­ra­tion assets, whether it was from an ongo­ing con­tri­bu­tion to an exist­ing asset, or whether it was from assets whol­ly acquired after sep­a­ra­tion e.g. from income;

2. Whether the oth­er par­ty has made a con­tri­bu­tion to the asset or con­tri­bu­tions gen­er­al­ly (and this is par­tic­u­lar­ly per­ti­nent where par­ties have chil­dren together);

3. How long the par­ties have been sep­a­rat­ed; and

4. How long the par­ties were together.

There is author­i­ty that income expend­ed on rea­son­able liv­ing expens­es is not to be con­sid­ered in the com­po­si­tion of the asset pool. How­ev­er, the expens­es have to be rea­son­able in all the cir­cum­stances. If a par­ty can show that the expen­di­ture is not rea­son­able, this can be tak­en into account in the per­cent­age division.

Swaab Attor­neys can assist with your queries in rela­tion to what hap­pens post separation.