!

NOTICE ALERT IN LIGHT OF COVID-19

WHAT WE PROPOSE AND HOW WE CAN ASSIST

At Watson & Watson our clients come first. Please be assured of our continued dedicated services to all current and new clients.

As we have done in the past, we will continue to offer alternative conferencing methods ie video conferencing, skype or telephone conferences. Reviewing of all documentation provided to us prior to any initial conference will be all inclusive of our set fee. Do not hesitate to contact Shereen Da Gloria on (02) 9221 6011 should you have any concerns.

I had the Assets before we met? Do I get to keep my Assets? - Consideration of Initial Contributions in Family Law Property/Financial Settlements Depends on the facts – One Recent Case

02/12/2021

In other articles on the Watson & Watson website, we discuss how the Family Courts decide how to divide property between separated or divorced people.  One of the major components of that decision making process is the requirement that the Federal Circuit and Family Court of Australia (which now replaces the Family Court of Australia and the Federal Circuit Court) consider the contributions made by each party to the marriage or relationship to the acquisition, maintenance and improvement of the matrimonial property. 

The Court also considers whether or not there should be an adjustment in favour of one party or both parties in relation to the factors set out in Section 75(2) of the Act. 

The Federal Circuit and Family Court of Australia will attempt to reach an outcome that is fair and equitable. The same principles apply to married people, people in de facto relationships and same sex marriages and relationships.

What are Contributions?

Section 79 of the Family Law Act (Cth) contains the definition of what constitutes a contribution. There can be more than one kind of contribution and contributions do not necessarily have to be made at the same time.  One critical kind of contribution will be the direct financial contribution of money or assets acquired or brought in at the beginning of or during the relationship or marriage.

Contributions can be direct financial contributions, indirect financial contributions or contributions to the care and welfare of the family constituted by the husband or wife, mother or father and children. The various types of contributions that can be made are discussed in other articles on the Watson & Watson website.

In this article, we discuss how the initial contributions of one or both of the parties to a marriage or relationship will be treated by the Federal Circuit and Family Court of Australia at the time of final property division.

When can contributions be made?

  1. Contributions can be made are the commencement of the relationship or marriage.
  2. Contributions can be made during the relationship or marriage.
  3. Contributions can continue to be made after separation or Divorce and can continue up until final settlement.

What is an initial contribution?

In many cases that come before the Courts, the parties to a relationship or marriage will not have significant assets at the commencement of the relationship and will acquire assets over time. Often each party will contribute to the growth of assets and their contribution may be different but will be taken into account.

In some cases, one party or both parties to a relationship or marriage may have assets and bring these into the relationship or marriage. These are known as initial contributions and depending upon the contributions and the extent of those by each party, they can be significant and have an effect on the outcome of a property division that may take place many years later.

The party who made the greater initial contribution will want to receive the benefit of that greater contribution.  The Courts always recognise the contribution and give appropriate “weight” to such contributions however when they have been made years before, the Judge will give less weight in deciding the case.  Each case will be determined on its own facts.

Watson & Watson provide advice to husband who had made significant financial contributions - One recent case

Watson & Watson were recently consulted by the husband following his separation from his wife after a long marriage.  He and his wife had divorced and needed to divide their property.

Prior to meeting his wife (and prior to marriage), the husband had acquired significant valuable assets and had brought those assets into the marriage. The assets included more than one piece of real estate and a large share portfolio.  Prior to meeting his wife, the husband had also received two substantial inheritances.  Some of the real estate received by way of inheritance was retained by the husband and also brought into the marriage.  During the marriage the real estate was sold and the sale proceeds were used to purchase land and to build the matrimonial home on the land.

During the marriage the husband received another substantial inheritance and retained the property that had been inherited.  All these properties were in the husband’s sole name.

The husband’s question to Watson & Watson was “will I get credit for what I had and brought into the marriage and for the money and property that I inherited during the marriage?”

Watson & Watson’s Advice

  1. There are numerous cases on how the Family Court and Federal Circuit Court of Australia will deal with disproportionate contributions at the beginning of a marriage however the way in which the Court deals with this question, varies from case to case. 

    The Courts have said that the initial disparity of contributions may be “eroded” over time.  This is by reason that after the commencement of the relationship, both parties will make contributions during the course of the relationship though those contributions may be different types for example, whilst the husband may continue to be the superior income earner (as in the case referred to above) the wife may be the superior homemaker/carer for the children.  Each case will vary on its own facts and merits. 
  2. The Federal Circuit and Family Court of Australia have discussed the importance of initial contributions as being the basis for the parties’ acquisition of subsequent properties. 

    The issue of increased value of initially contributed property has been vexed.  On balance the Courts focus on the value of the initial contribution at the conclusion of the relationship rather than its value at the commencement of the relationship.

Overview

Watson & Watson have acted in many cases involving unequal initial contributions through either inheritance or personal effort.

The many cases decided on the issue of the value to be attributed to initial contributions are varied.  We can extract some conclusions:

  1. Each case is to be determined on its own facts.
  2. The length of the relationship in issue will be significant and there will be an examination of how the initial contribution was used during the relationship.  In short marriages or relationships, the likelihood that the value of initial contribution will be eroded or discounted by the passing of time is less of a risk. 
  3. The Courts will not look at initial contributions in isolation but will look at the various and different forms of the contributions made by each of the parties during the course of the relationship.
  4. The same principles apply to cases involving modest value of combined property at the time of the resolution or determination by the Court as apply to cases in which the net assets are highly valued.
  5. The Courts will give attention to whether the increase in value of the property brought into the marriage or relationship as an initial contribution is simply a result of the market’s performance, as opposed to contributions which have been made by each of the parties or both, by their individual personal contributions that increased the value of the property.

In the above case

Watson & Watson advised the husband that in all the circumstances, his initial contributions were very significant and would be likely to result in the Court considering him to have made the superior contributions and accordingly, that the division of property would not be equal and that the husband would receive a larger share of the existing property.  The erosion of the contributions over time would result in a situation where the husband may have his share of the division of property reduced by reason of the contributions that the wife did make during the marriage. 

The matter was resolved on favourable terms to the husband.

If you have separated or propose to separate and are proposing to enter into financial/property discussions with your estranged spouse or de facto partner, our experienced Senior Family Law Solicitors can assess your circumstances and advise  and assist you in achieving a fair and equitable financial settlement.  Please contact Richard Watson Senior Family Law Solicitor or his Personal Assistant Shereen Da Gloria to discuss your matter and seek appropriate advice.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.

Related Cases & Articles

Personal Experienced Professional Affordable

Phone 02 9221 6011

Send us your enquiry
Book an appointment Request a quote Send your question
Online enquiry form

Watson & Watson are always available to provide expert legal advice and answer any questions you may have.

All enquiries received will be responded to within 24 hours.

Call: 02 9221 6011