family & wills lawyers | business advisory & accountants

Stanford: High Court Family Law Decision

The issue of property settlement between married and de facto parties is complex and technical.  A High Court decision has now made this more the case.

If you are 40 something and one of your parents (or both) have re-partnered and you are wondering about the effect this may have on your inheritance, then read on.

If you think a property settlement cannot happen whilst you are not separated, think again.

Generally speaking, the Court cannot make a property settlement order unless it is satisfied that, in all the circumstances, it is ‘just and equitable’ to do so. The case of Stanford v Stanford [2012] HCA 52 has highlighted the importance of carefully considering this term.

The husband and wife were married for over 40 years.  Both parties had been previously married and had adult children.  The family home was registered in the husband’s sole name. During the relationship, they each made Wills basically leaving their estates to the children of their first marriage, except that the husband, in his Will, also left the home subject to a life tenancy in favour of the wife.  You would assume these arrangements to protect your inheritance would be sufficient – but they are not.

In December 2008, the wife suffered a stroke and was admitted into full time residential care.  The wife also developed dementia and did not return to live with the husband.  However, the parties never formally ended their relationship.  The husband put some money into a bank account to provide for the wife’s medical needs/costs.

At first instance, the Magistrate divided the assets as to 57.5% to the husband and 42.5% to the wife.   The wife’s care guardian (the wife’s daughter from her first marriage) had commenced the proceedings.  The husband appealed to the Full Court but after the Appeal was heard, and before Judgement was handed down, the wife died.  The Full Court subsequently allowed the Appeal and set aside the Magistrate’s decision on the grounds that the Magistrate had not sufficiently considered the effect of the Orders on the husband and “the fact that this was an intact marriage” in considering what was ‘just and equitable’.

At the request of both parties (now in essence the executor of the wife’s estate – still her daughter – and the husband), the Full Court re-exercised discretion and ordered that on the husband’s death, the sum which had been fixed by the Magistrate as representing the value of 42.5% of the marital property to be paid to the wife’s personal representatives (the wife’s children of her first marriage in fact).

The husband appealed the property settlement orders made by the Full Court on two grounds. Firstly that there was no power to make the property settlement orders because this was an intact marriage’ and that, upon the wife’s death, the only persons to benefit would be the wife’s children of a different marriage. The second ground of appeal was that even if the Court had the power to make the orders, it should not have done so.

The High Court confirmed the existing law in relation to the continuation of property settlement proceedings after the death of a party (if proceedings have already been commenced) and so the husband’s first ground of appeal was rejected.  However, the High Court accepted the second appeal ground and set aside the property orders, resulting in the husband retaining all of the assets in his name.

The wife’s daughter from her first marriage in effect received nothing.

The possible implication of Stanford is that property settlement matters may need to be dealt with in the following way:

1. The first step is to identify the existing legal and equitable rights of the parties in their property.

2. The second step involves ascertaining whether it is ‘just and equitable’ to make an order to alter those interests.  The question presented by what it ‘just and equitable’ is whether the existing rights and interests should be altered.  In most cases, the just and equitable requirement is readily satisfied as the parties are no longer living in a marital relationship and are no longer sharing common property.  In Stanford, the husband was the sole proprietor of the home and the parties had not actually ended their relationship.  Accordingly, in the circumstances of this case, the High Court was reluctant to alter the existing interests in property.

3. Once the Court has concluded that it is just and equitable to make a property settlement order, it should then proceed to take the other steps associated with property settlement being the assessment of each party’s contributions and a consideration of the financial resources, means and needs of the parties and other relevant matters.

Stanford confirms that although the Court has a very broad power to make orders in relation to property settlement (whether the parties are separated or not), “it is not a power that is to be exercised according to an unguided judicial discretion” and the Court cannot simply disregard each party’s interest in their property.  It also brings to the fore the importance of considering “just and equitable” as a stand alone consideration before making a property settlement order.

For family law advice contact Farrar Gesini Dunn 6257 6477 www.fgd.com.au