Post separation contributions in property settlements

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It is often the case that the financial position of parties when they separate will be different to when property settlement orders are made. If parties come into possession of significant assets post separation, they may feel aggrieved that these assets will be shared at property settlement. The Family Court of Australia’s decision in Trask & Westlake[1] was an appeal against a property settlement order that was made 4 years post separation. In the years following the parties’ separation, the husband commenced new employment from which he earned $9 million. He appealed the order contending that it was not just and equitable for the $9 million he had received post separation to be subject to the property settlement order. The Court dismissed the appeal and held that post-separation contributions do not cease upon separation but rather they continue until settlement is reached. The decision illustrates what happens to post-separation contributions in property settlements and particularly when they are postponed.

The Story

The parties lived together for 13 years and were married for 11 years of them. They have four children to the relationship aged 9, 11, 13 and 15. During the relationship the husband was the sole breadwinner and the wife was the primary homemaker and carer of the four children. Following the couples’ separation in 2009, the husband commenced new employment and received between 2010 and 2012 a total taxable income of $9 million which included a significant retrenchment package. The husband was unemployed at the time of the trial.

At trial, Aldridge J assessed the contributions of the parties taking into account the $9 million that was accrued by the husband post separation. His Honour assessed the contributions of each party as equal and made the prescribed adjustment in favour of the wife so entitling her to 60% and the husband to 40% in the property pool.  His Honour reasoned that the husband had a significantly greater capacity to earn a significantly higher income than the wife did. The husband appealed.

The Issue on Appeal

  1. Was it just and equitable that the wife’s post-separation contribution was assessed as equal to the husband’s?
  2. Was the trial judge wrong in finding that the husband had capacity to earn a significantly higher income than the wife?

The Decision

The Assessment of “Post-Separation Contributions”

The husband argued that given the significance of his financial contributions, it was not just and equitable that the wife’s post-separation contribution as homemaker was assessed as equal to his. The husband cited the growing independence of the children, his absence from the household and the substantial period for which they had already been separated as reasons for this assertion. Counsel for the husband relied on the decision in Gollings & Scott[2] where the Court referred to there being ‘no further obligation upon a party to continue to accumulate assets during the post separation period’ so that a party is ‘in a sense free to do with his income as he please[s].’[3] It was also argued that post separation, parties should be entitled to ‘get on with his or her life independent of the other.’

The Court explained that whilst the husband’s calculations of the total value of the property represented by his post-separation cash injections could be a ‘useful measuring stick’, assessment remains a ‘matter of judgment and not of computation.’[4] The Court rejected the husband’s submission and held that in no way do homemaker contributions cease upon parties’ separating. Merely because her contribution was not ‘susceptible to a dollar calculation’ did not render it less important than the husband’s contribution as the sole breadwinner. Therefore the Court considered there to be no error in the trial judge’s assessment.

The Husband’s Income-Earning Capacity

The husband contended that the trial judge was wrong in finding that he had a greater capacity to earn a significant income than the wife did. The Court also rejected this argument. Whilst holding a Bachelor’s Degree in applied science, the wife had not had the opportunity to develop her career. It was also unlikely that her earning capacity in such a role would be anywhere near as high as the husband’s. Another very significant factor was that the predominant care of the youngest child would also fall to the wife ‘for a considerable time in the future.’ On the other hand, the husband had demonstrated in previous positions he had held that he had the ‘capacity to generate a very high income’. Thus again the Court considered there to be no error in the trial judge’s assessment.

Whilst anyone of the Judges on appeal may have made a different assessment at trial, the Court held that the trial judge had not made any errors of law in his assessment and therefore the primary decision was upheld.

Lessons

A number of lessons can be drawn from this case. Most obvious are the risks associated with postponing property settlements. For the husband in this case, his decision to postpone the settlement meant that the $9 million he had incurred post separation was subject to the property settlement order. That is why in most instances it is advisable that property settlements are resolved as soon as possible.

Another important take away from this case is that whilst calculations of financial contributions are useful, the Court reserves the right to exercise discretion in making an order. The Court’s judgment is particularly important when the Court must consider non-financial contributions like the wife’s contributions as homemaker and carer of the children. The mere fact that non-financial contributions cannot be calculated to a dollar value does not mean they are any less important to the Court’s assessment. The reason that the husband was able to earn such a significant income was because the wife took on the important role of homemaker and primary carer of their children.

For more information regarding the post separation contributions in property settlements

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[1] [2015] FamCAFC 160.

[2] (2007) FLC 93-319.

[3] Ibid [81].

[4] Marriage of Garret (1984) FLC 91-539.