The High Court recently provided clarification on a controversial decision in the Family Court regarding the court’s power to order the division of assets when a couple have separated involuntarily, due to the deteriorating health of one or both parties (Stanford & Stanford [2012] FAMCAFC 1 (19 January 2012).)
Streeterlaw Principal Mark Streeter said the High Court’s decision to overturn the Family Court of Australia’s property settlement orders mean the court must in future consider the individual needs and concerns of both parties prior to any property settlement order being made when a couple is separated due to illness.
Mr and Mrs Stanford were 87 and 89 years of age, respectively. They had both been married before and each had adult children from their first marriage. At the time of the hearing (and prior to Mrs Stanford’s death in 2011) the parties had been married for 40 years.
Both parties had current wills, which left their assets to the children of their first marriage, subject to a life tenancy of the matrimonial home in favour of Mrs Stanford. The matrimonial home, in which Mr and Mrs Stanford resided together for 37 years, was in the sole name of Mr Stanford, and had been prior to their marriage.
Mr Stanford’s son, who was acting as Mr Stanford’s case guardian, then appealed to the Full Court of the Family Court of Australia, which found that the Federal Magistrate had not sufficiently considered the effect of the orders on the husband. It ordered Mr Stanford to pay Mrs Stanford’s representatives the sum of $612,931 upon Mr Stanford’s death or the sale of the matrimonial home, whichever occurred first. It is interesting to note that the Full Court recognised that Mrs Stanford’s needs could have been met in other ways such as Spouse Maintenance.
The majority of the High Court found the following:
- While it is within the jurisdiction of the Family Court of Australia to make orders in circumstances where a marriage was still intact but the parties had involuntarily separated due to the ill health of one of the parties, they stated:
“The bare fact of separation when involuntary does not show that it is just and equitable to make a property settlement order. It does not permit a Court to disregard the rights and interests of the parties in their respective property and make whatever orders they may see to be fair and just” - It may be just and equitable to make a property settlement order when one party’s unmet needs cannot be answered by a maintenance order
- An order for Spousal Maintenance should be considered, rather than an order to alter a party’s interest in property where the marriage is intact and separation has not been voluntary.
- That Section 79(8)(b) of the Family Law Act applied. It gives the Court the power to make orders as it considers appropriate, with respect to property if the following conditions are met:
a. That it would have made an order with respect to the property if the deceased party had not died; and
b. that it is still appropriate to make an order with respect to property. - That property settlement orders between husband and wife are made for their wellbeing, and their wellbeing only. It is vital to ensure that applications seeking a property settlement order in circumstances similar to these are intended for the benefit of the parties, and not any beneficiaries to their estate.
In summary, the High Court set aside the property settlement orders made by the Full Court on the basis that it was not just and equitable to have made an order for property settlement, particularly since Mrs Stanford’s needs were adequately provided for and her nursing home fees were being paid for.
