This is a case note on a family law matter discussing involuntary separation.
It is common to hear of a property settlement order being made for couples who have voluntarily separated or are divorced, because, generally, the parties’ now separate lives warrant an alteration of property interests.
But what about where a couple has separated involuntarily, for instance where one of them is taken to a full time residential care facility? Or where one of the parties has died? Is it “just and equitable” in those circumstances to make an order?
The High Court of Australia explored these issues in the recent case of Stanford v Stanford  HCA 52.
In this case the husband and wife each had children from a previous marriage but did not have children together. The couple was married for a long time. The wife suffered a severe stroke and was later diagnosed with dementia. Accordingly, she was placed in a care facility and was therefore unable to live with her husband. The husband, however, continued to provide for her medical needs and requirements. In 2009 the wife’s daughter, as her case guardian, applied to the Family Court for orders that the matrimonial home be sold and the net proceeds be divided equally between the parties. The Magistrate decided that based on the contributions of the parties, a 57.5 / 42.5 split in favour of the husband was suitable and ordered him to pay his wife $612,931.00 within 60 days.
The husband appealed this decision to the Full Court of the Family Court but before the matter was decided the wife died. The Full Court found that the Magistrate had not properly considered the effect of the orders on the husband, that the wife did not have a need for a property settlement and that her needs could be met by maintenance. However, the Full Court decided that because of the wife’s contributions and the many years of marriage, a “moral obligation” arose which justified a property settlement order to the effect that on the death of the husband the above sum would be paid to the wife’s legal personal representatives.
Grounds of appeal
The husband again appealed this decision to the High Court arguing that:
a. A Court had no power to make orders for a property settlement because no “matrimonial cause” arose as the marriage was still “intact”;
b. Even if a court did have the power to make an order then it should not have exercised its powers in the way it did.
a. No power
The court rejected the argument that it had no power to make an order because the Family Law Act 1975 (Cth) (‘the Act’) provided the court with such a power.
The Act’s principle of “preserving and protecting the institution of marriage” (found in section 43(1)) was not inconsistent with the power in section 79 to make a property order.
Secondly, the husband argued that because the wife had died there was no longer a matrimonial cause. He submitted that those who would benefit from an order being made would be the wife’s children under her will and not the wife herself. However, section 43(1) of the Act defined “matrimonial cause” to include “proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings arising out of the marital relationship.” The proceeding arose out of a marital relationship between the parties, in relation to their marital property and so “matrimonial cause” was established.
b. Just and Equitable
The court had power to make an order for a property settlement generally even where the wife had died and where they involuntarily separated.
However, section 79(2) provided that “the court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. (emphasis added).
Section 79(4) then identifies seven matters to be taken into account when deciding what order is to be made, if any.
Thus there were two distinct questions to be decided:
- Is it just and equitable to make an order in the circumstances? (section 79(2))
- If so, what order should be made? (section 79(4))
The High Court found that both previous decisions had not made this proper distinction.
It agreed that in the first judgement, the magistrate had erred in the following ways:
- He did not consider factors that would help determine whether it was just and equitable to make an order for a property settlement;
- He did not consider whether a maintenance order would meet the wife’s needs sufficiently.
The High Court also found that in the second judgement, the Full Court in deciding that the “many years of marriage and the wife’s contributions demand that those moral obligations be discharged by an order for property settlement”, had erred in the following ways:
- It did not separately consider whether it would have made a property settlement order if the wife hadn’t died;
- It did not consider whether it was still appropriate to make an order now.
The High Court decision
The High Court addressed these matters. In doing so it took into account three fundamental propositions in the circumstances:
- Whether it is just and equitable to make a property settlement order is to be decided by identifying the existing legal and equitable interests of the individual parties at law and equity, since the power under section 79(1)(a) will have the effect of “altering the interests of the parties to the marriage in the property”; and
- Whether those rights and interests should be altered is a question that the court must answer in accordance with legal principles, including the principles of the Act. The power must not be exercised in an unprincipled fashion; and
- Whether a property settlement order is “just and equitable” is not to be answered by beginning with the assumption that one or other party has a right to have the property divided between them or has the right to an interest in marital property because of the considerations in section 79(4) only (including financial and other contributions) – the court must also separately consider section 79(2).
The court found that the “just and equitable” requirement in section 79(2) is usually more readily satisfied in situations where the husband and wife have voluntarily severed the martial relationship or are no longer living in a marital relationship. This is because the current property arrangements are usually no longer sufficient or appropriate – there can no longer be common use of the property. What order should be made by the court in such a case is determined by section 79(4) considerations.
The matter is more complicated when the parties did not separate voluntarily – mere separation is not enough to prove that it is just an equitable for the court to make an order for property settlement because common use of the property may still be possible. If both parties who have involuntarily separated are “competent”, it can usually be assumed that they will make their own consensual arrangements to decide how the property is adjusted. Even, in this situation where the wife became incompetent, it did not mean that the husband lacked the will and ability to make necessary and desirable arrangements.
The circumstances of each particular case must be considered.
Here, the High Court considered the effect that the order would have on the husband. He would be required to sell the matrimonial property he was living in, even though it was not necessary since he had already been adequately providing for the wife by setting aside money for her care and maintenance.
It was also found that there were flaws in the Full Court’s use of the word “moral” which was intended to have some wider meaning that was not supported by legal principles. The High Court emphasised that “the rights of parties must be determined according to law and not by reference to other, non-legal considerations”.
“It was not shown that, had the wife not died, it would have been just and equitable to make a property settlement order. It follows that it was not open to the Full Court to find that it was still appropriate to make an order with respect to property”.
Some points we can take from this case are:
- A court still has the power to make a marital property order even if the couple have involuntarily separated and continue to be married, and even where one party has passed away (see also section 79(8));
- Physical separation through illness or old age (while continuing to be married) does not alone provide a “just and equitable” basis for a marital property order;
- Whether it is just and equitable to make an order will largely depend on the individual circumstances;
- Only if it is just and equitable to make an order will the court go on to decide the separate question of what order is appropriate;
- The court has indicated that it will not only be looking to legal interests of the parties but their equitable interests also. So, for example, an interest in a constructive trust may also be relevant.