Prior informal agreements are not a basis for dismissing a property application

Introduction

Maine is a helpful reminder of the role of prior informal agreements in the context of property proceedings.  In this particular case, the appellant wife had sought to overturn the trial judge’s order concerning the division of matrimonial assets.  The basis of the wife’s claim was that no orders should be made given that the parties had separated for 11 years and that they had reached an informal agreement concerning how their jointly owned home should be dealt with.

The Full Court’s Decision

The trial judge had erred in holding that had the wife honoured the parties’ informal agreement, the husband’s property application would have been dismissed.  Apart from being mere speculation, this finding is inconsistent with the leading authorities on the role of prior informal agreements in the context of property proceedings.

The court must determine property applications on their merits, having regard to the relevant factors set out in the Family Law Act.  These factors must be considered as they exist at the time that the proceedings are initiated.  They must also be considered in the context of the law in force at the time of the proceedings.

On the other hand, the relevant factors and law that existed at the time that the agreement was made should not be considered.  Nor is the court required to consider whether the informal agreement was just and equitable in light of the relevant factors and law at the time the agreement was made before proceeding to determine a property application.

This is not the say that prior informal agreements are irrelevant.  Instead, earlier agreements should only be considered to the extent that they shed light upon what the parties’ may have regarded as a just and equitable outcome at the time the agreement was entered into.  This inquiry should occur in view of any changes in the composition or value of the property pool, so that the parties’ post-separation contributions may also be assessed.

Given that the role of the parties’ informal arrangement was limited in the manner described above, the correct approach consists in determining: (a) whether an order altering the parties’ legal and equitable interests in property is just and equitable and (b) if so, proceed to do so by reference to the matters enumerated in s 79(4).

Concluding Remarks

Parties’ oftentimes seek to finalise their financial affairs without recourse to the legal system.  The problem with this approach is that it can be ineffectual.  Handshake agreements between husband’s and wives’ simply do not preclude either party from initiating proceedings in the future.  Accordingly, parties would be well-advised to finalise the financial settlements through the appropriate legal mechanism.  Otherwise, they run the risk of spending thousands of dollars on costly litigation later on, much like the parties in Maine undoubtedly would have.