Less than 30% of property settlements between married couples actually go to Court

Less than 30% of property settlements between married couples actually go to Court.  The majority of couples are able to resolve their issues without commencing Court action.  However, in the event that Court action is commenced, the Family Law Act and case law of the Family Court provides the methodology to determine the entitlements of each spouse.

An Application may be commenced at any time after separation, but must be brought within 12 months after the granting of a divorce.  Special leave of the Family Court is required to commence proceedings outside this time period. 

Prior to commencing Court proceedings, certain 'Pre Action Procedures' must be complied with.  This includes making a full and frank disclosure of financial circumstances of each party and verifying it and participating in alternative dispute resolution in an attempt to reach an agreement. 

Alternate Dispute Resolution may include negotiation or mediation.  If this process fails to result in resolution, then the parties may commence court proceedings for a Court determination as to property settlement.

Methodology

The methodology undertaken by a Court to determine a property settlement involves a four-step process as follows:

Step 1 - Identify and value all assets, liabilities and financial resources of the marriage

All property assets and liabilities of both spouses are included in the asset pool available for division irrespective of when acquired or by whom.  Where the value of the property is not known, particularly real estate or an interest in a company or business, an expert valuer's opinion is usually necessary. 

Step 2 - Assess contributions made by each party to the property of the marriage. 

• Direct and indirect financial contributions: including pre-marital contributions, inheritance or gifts, compensation payments, and income applied to mortgage and general outgoings.
• Direct and indirect non-financial contributions: including a party's physical efforts to a business or to the household.
• Homemaker and parent contribution: including contributions as homemaker and caregiver to the children.  Whilst it is difficult to give an exact financial value to such contributions, they are generally recognised in a substantial way.

The assessment of contributions of each party is represented as a percentage of the net assets.  However, the assessment is not done with reference to any mathematical formula. 

Court Action

Step 3 ' Based on other factors in respect of each party, consider whether either party is entitled to receive an additional percentage of the net assets

Section 75(2) of the Family Law Act lists various factors to be taken into account in determining the adjustment of the property of the marriage to either party.  These factors include:-

The age and state of health of each of the parties;

The income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;

• Whether either party has the care of a child of the marriage who is under 18 years of age;
• Commitments of each of the parties necessary to enable them to support themselves, or a child or other person they have a duty to maintain;
• Any entitlement of either party to a social security benefit or entitlement under a superannuation fund;
• The extent to which one party has contributed to the income, earning capacity, property and financial resources of the other;
• The duration of the marriage and the extent to which it has affected the earning capacity of either party;
• Any child support payable by one party to the other and whether it is, in fact, being received;
• Any other relevant factors or circumstances. 

Step 4 - Consider how each party is to receive their entitlement and how to divide the property after applying steps 1, 2 and

A party may receive their entitlement by having a specific property of the marriage transferred to them.  Alternatively, a property may be sold and the sale proceeds divided in a proportional manner.  It is necessary to take into account any liabilities, including capital gains tax, if applicable.

Note: Property transferred between spouses through a Court order may avoid stamp duty and capital gains tax.  The retention of a property by one of the spouses will also avoid the costs of selling which ordinarily reduce the share received by each spouse.

Court Proceedings

When a party commences Court proceedings for property settlement, the early stages of the proceedings are designed to assist with settling the matter.  One of the Court events in the early stages is a Conciliation Conference, which is a form of mediation conducted in-house by the Court.

Although parties may commence Court proceedings seeking a determination of their property settlement, the matter can settle at any time.  When a matter settles, the terms of the settlement is commonly formalised by Court Order.