When does property settlements not get divided?

In some cases, the Family Court would not allow a division of assets also known as a property settlement between separating spouses. The Court may refuse to approve a settlement even if the parties have reached an agreement.  The reason?  It could be on the grounds that it is not just and equitable to so do.

The Full Court decision in Paxton & Paxton[1] is an important one because it gives us insight into when the Court will refuse to make an order on the grounds that it would not be just and equitable.

 The law – Alteration of property interests

Under the Family Law Act (“the Act”), the Court has the power to alter the interests of parties in property settlement proceedings. In particular, s 79(2) of the Act provides that the Court shall not make an order for property settlement unless it is satisfied that in all the circumstances, it is just and equitable to do so. Thus, the Court can refuse to make an order in circumstances where it would not be just and equitable.

The Story

 In 1983 Mr and Ms Paxton were married for a total of 31 years before they divorced in 2014. They were separated for 10 years before the divorce and Ms Paxton remained in the matrimonial home which was jointly owned by the parties as joint tenants.  Leading up to their divorce in 2014, Mr Paxton left the marriage in 2004 and commenced living with his de facto partner.

In 2014, Mr Paxton filed an application seeking orders for the division of assets between him and Ms Paxton. Mr Paxton died in 2015, well before the hearing date which was set down for 2016. The parties had earlier agreed that the matrimonial home would be sold and Mr Paxton’s brother was granted probate over the deceased’s estate. He was also substituted in place of his deceased brother in the proceedings as his legal representative (the executor).

The question before the Court was whether it was just and equitable that the former matrimonial home be sold?

The Decision

The Court had to consider all the circumstances before it held that it was not just and equitable to make an order for the matrimonial home to be sold.  

Judge Wilson referred to the High Court’s decision in Stanford v Stanford and particularly their Honours observations about 79(8)(b) of the Act.  Section 79(8)(b) provides that where one of the parties in the proceedings dies, the Court’s determination of whether an order is just and equitable is twofold:

  1. The Court must consider whether it would have made the order if the party was not deceased. That is, the Court needs to be satisfied that it is just and equitable to make a property settlement order and;
  2. Whether it is still appropriate to make the order despite the death of Mr Paxton.

The Court noted that it is important that both requirements are met separately because the ‘effect of altering property interests is predicated upon the court being satisfied that in all the circumstances it is just and equitable to make the order’ (at [41]) (emphasis added).

Ms Paxton was now, pursuant to the doctrine of survivorship, the sole surviving joint proprietor and held 100% of the legal interest in the former matrimonial home. In her situation, Ms Paxton was of ill-health, financially destitute and had few employment prospects. She also had under her care, an adult child from the marriage who was mentally infirm and lived with her. The sale of the home which Ms Paxton had lived in for over 30 years would therefore have occasioned her considerable hardship (at [6]).

The Court found that Mr Paxton’s brother who was the executor of his deceased brother’s estate had not demonstrated that it was just and equitable to make an order dividing the interests of Ms Paxton and the late Mr Paxton.

The executor was also unable to show that his late brother’s needs were not being met prior to his death or that they now required addressing (at [65]). The Court found that it would not have been just and equitable to order a sale of the home even if Mr Paxton had not died. There was no material difference in circumstances of the husband and wife between the husband’s permanent departure from the home and the date of his death (at [67]).

Lessons

The importance of this case is that it affirmed the High Court’s approach to s 79 of the Family Law Act in Stanford v Stanford. The Court in this case stressed that the approach in Stanford is the correct one. That is, the requirement that an order be just and equitable is a separate and distinct aspect of s 79. The consideration of s 79(2) as a separate aspect is important to ensuring that orders in property settlements are ultimately just and equitable in all the circumstances.

For more information regarding the division of assets in property settlements post-separation

Please contact our client engagement team on (07) 3252 0011 to arrange an appointment with one of our experienced Family Lawyers today.

Footnotes

 

[1] [2016] FCCA 1689

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