No hard or fast rule when it comes to division of assets

It is a common occurrence that one party to a marriage or relationship makes a significantly higher financial contribution either prior or during the relationship. Many people are often under a mistaken belief that in a relatively short relationship, a split will mean both parties take away with them whatever they brought to the relationship originally. Conversely, it is often believed that in any relationship split, there will be an equal division of all assets. Both assertions are wrong.

Streeterlaw Family Law specialist Simone Green said it’s important everyone knows that the division of assets in a divorce or relationship split is always dependent on the facts.

“There is no hard or fast rule that applies in the Family Courts when it comes to the division of assets,” she said. “The length of the relationship, what each party brought to the relationship, what each contributed during the relationship and also the earning potential of each party are all factors to be considered, as the recent case of Crawford and Ruskin found.”

The Family Courts have the task of applying the Family Law Act 1975 legislation to the assessment of the parties’ contributions to a relationship, including financial and non-financial contributions.

Case facts of Crawford & Ruskin [2013]

The Family Court recently decided a case involving a de facto couple who had been together for eight years – Crawford & Ruskin [2013] FamCA 493. The facts of their situation were that the de facto husband had substantial assets prior to the commencement of the relationship, including a business. The de facto wife entered the relationship with three children of her own and only a small amount of cash left from her previous property settlement. She assumed the role of homemaker and the carer of her own children, and there was some argument that she performed a very minor clerical role in the de facto husband’s business. During the relationship, the de facto husband’s taxable income from his business totalled more than $2 million, averaging at around $200,000 per year. The husband provided financial support for his de facto wife and her children.

The asset pool was split 82 / 18 per cent in the de facto husband’s favour.

Included in the asset pool was a sum of money constituted as debts owed to the de facto husband’s business, despite there being no guarantee of these debts being paid back and no discount being given for potential taxation. Arguments arose as to whether debts owed to the business should be treated as an asset or a future income stream. Despite expressing her own view that the debts should be more correctly treated as an income stream, the judge applied the Full Court authority from In The Marriage of Mitchell 19 Fam LR 44, which required her to include them into the class of assets.

In applying the legislation, the Court recognised the substantial initial contributions of the de facto husband and his significant income earned during the relationship and the fact that the de facto wife had made a very small contribution to the business (but having little impact on its income).

The Court awarded the de facto husband 85 per cent on contributions but then made a further adjustment of 3 per cent to the de facto wife on the basis of her future needs. This had an overall effect of splitting the asset pool to 82 / 18 per cent in the de facto husband’s favour. Despite the fact that there was a significant difference in the parties’ income after separation, the Court found that the de facto wife’s income-earning ability was underutilised in that she could obtain higher paying employment if she chose to do so.