Living separate financial lives and its effect on the court’s assessment of whether it’s just and equitable to make orders for a property settlement

Living separate financial lives and its effect on the court’s assessment of whether it’s just and equitable to make orders for a property settlement.

Introduction

Sections 79(2) and 90SM(3) provide that a court must not make an order altering the parties’ interests in property unless it is “just and equitable” to do so. Insight can be gleaned from the decision in Chancellor & McCoy [2016] FCCA 53 into the factors that sway a court in favour of finding that it is not just and equitable to make such orders.

Background

This case involved a property dispute between the childless parties to a 27 year de facto relationship that had broken down. The respondent had purchased a house and registered it in her sole name roughly 1 year after the parties entered into their relationship. The parties lived in and renovated the property, with the applicant financing the renovations and the applicant assisting with the labour. For most of the relationship, the applicant paid $100-120 each fortnight to the respondent in relation to the provision of housing. In 2002, the applicant purchased a property and registered it in her sole name. The property was renovated at the respondent’s expense and the respondent assisted with her labour. At the time of trial, the applicant was 59 years of age, employed and owned net assets worth $1,698,664. The respondent was 55 years of age, retired and owned net assets of $720,391.

The Court’s Reasoning and Conclusion

Judge Turner found that the it would not be just and equitable to make orders altering the parties’ interests in property. The basis for Judge Turner’s is set out at paragraph 59 of the decision:

“I make this finding based on the following:
a) The parties conducted their affairs in such a way that neither party would or could have acquired an interest in the property owned by the other because:
i. There was no intermingling of their respective finances.
ii. The parties did not have a joint bank account.
iii. Each party acquired property in their own name with there being little exchange of the detail of these acquisitions to the other party.
iv. Each party remained responsible for their own debts.
v. Each party was able to use the remainder of their wages as they chose without explanation or accountability to the other party.
vi. There was a complete lack of joint financial decision making.
vii. There was the absence of sharing of any information with each other as to their financial situation or individual decision making.
viii. Neither party made provision for the other party in the event of their death either by way of will, beneficiary to superannuation funds or beneficiary to life insurance policies.
ix. The parties at the time of separation were unaware as to the worth of the assets acquired by each of the parties during the relationship and the decisions that had been made in respect to the acquisition of these assets.
b) Whether this separation of finances was initially a conscious decision by one party or both parties is irrelevant; what is relevant is that the parties continued to conduct their relationship without intertwining their finances consistently for some 27 years.
c) The payment of monies by Ms Chancellor to Ms McCoy of $100 to $120 per fortnight for most of the relationship, whether classified as mortgage repayment (Ms Chancellor’s terminology) or rent or board (Ms McCoy’s terminology), I find, given the small amount of payment in respect to the overall size of the pool accumulated by Ms McCoy, cannot be viewed as financial intermingling, but as financial assistance to the other party as the home owner who provided housing for the parties to live in during the entirety of the relationship.
d) As there is no evidence that the financial and non-financial contributions made by Ms Chancellor to the Property M property and the Property A property improved the value of these properties, then no equitable interest by Ms Chancellor in the properties has been established.
e) Each party had the opportunity during the relationship to financially plan for their future given their profession and employment histories.
f) There was no evidence to support that either party was hindered in their individual financial decision making during the relationship.
g) For many years Ms Chancellor appeared to be in a more advantageous position as Ms Chancellor did not own real estate or gave evidence of servicing debts; but this is not reflected in the pool of assets each party has retained since separation.
h) It is unfair for Ms McCoy, who has taken steps to maximise her future wealth, to have to share that wealth with Ms Chancellor who did not invest as wisely; especially in regard to maximising her superannuation benefits.
i) ( … )
j) Although the alteration of property interests has been denied due to it not being just and equitable for such an alteration to take place, Ms Chancellor has still been left with the significant assets accumulated by her during the relationship, consisting of two houses, several motor vehicles and superannuation.

k) Further, Ms Chancellor has the capacity, unlike Ms McCoy, to accumulate more assets, with her ability to work and her ability to contribute to her superannuation fund.”

Final Thoughts

The tenor of Judge Turner’s reasoning in relation to whether it was just and equitable in the circumstances to make property orders seems to suggest the following. Namely, the greater the degree of financial independence between the parties to a property dispute, the less likely it is that the just and equitable requirement will satisfied.