The Family Law Act (or Family Court Act for unmarried couples) is a large piece of legislation.
The core sections of note are:
Married Persons (Family Law Act)
Section 72 Spouse Maintenance
Unmarried Persons (Family Court Act)
Section 205 ZC
For many years the Courts distilled from Section 79 (Section 205 ZG Family Court Act for unmarried persons) an apparently simple approach to the process of dividing property namely:
- Identify and value the net property of the parties;
- Assess the contributions of the parties both financial and non-financial;
- Consider various factors listed in Section 75 (2) such as capacity for employment, health, earning capacity. Importantly here note Section 75(2) (o) which states that the Court can consider “any fact or circumstance which, in the opinion of the Court, the justice of the case requires to be taken into account”.
- Consider whether any orders proposed are “just and equitable”.
Although the above process provided a framework within which to work the so called four step process was never more than a procedural guide. For example, how does one assess contributions? What is just and equitable? For the layperson the four step approach shed little light on how their case might be determined by the Court.
In 2012, an unusual West Australian case came before the High Court, Stanford v Stanford  HCA 52. This outcome of this case altered the process of case evaluation but, as I will explain, did not make the process of guessing the result of any matter any easier.
In Stanford the husband and wife were elderly. They had been married for 37 years. It was a second marriage for each of them. The wife was admitted to residential care due to health issues related to a stroke so the couple became involuntarily separated. The husband continued to provide financial support. The wife, by case guardian (a daughter from her first marriage), applied to the Court for the sale of the family home which was held in the husband’s name. When the matter proceeded to trial an order was made for the sale of the home and division of the proceeds of sale.
The husband then appealed to the Full Court (i.e. three appeal Judges). Before judgment the wife died. In the Family Court legal proceedings can be carried on by an executor after the death of a party. This is what happened here. The Full Court ruled that instead of the home being sold a payment should be made to the wife’s estate. The husband then appealed to the High Court.
The High Court upheld the husband’s appeal and dismissed the application by the wife’s executor. The Court said that the bare fact of separation, involuntary as it was in this case, did not justify altering the existing property interests of the parties.
It is interesting to see how three courts came to three very different versions of what was just and equitable. The High Court said that the Court cannot make any order unless it is just and equitable to do so:
It will be recalled that s 79(2) provides that “[t]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”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
The Court then gave its consideration to what the term “just and equitable” meant:
The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. And while the power given by s 79 is not “to be exercised in accordance with fixed rules”, nevertheless, three fundamental propositions must not be obscured.
At the risk of over quoting it is at this point that the Court made some observations above the process that the Family Court should undertake:
First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing (my emphasis) legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property” (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests(my emphasis), the court is satisfied that it is just and equitable to make a property settlement order.
Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs “as [the judge] thinks fit”, in any question between husband and wife as to the title to or possession of property, is a power which “rests upon the law and not upon judicial discretion”. And as four members of this Court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong:
“The judge called upon to decide proceedings of that kind is not entitled to do what has been described as ‘palm tree justice’. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Actitself lays down”.
Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties’ rights to or interest in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that “[c]ommunity of ownership arising from marriage has no place in the common law”. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. The question presented by s 79 is whether those rights and interests should be altered.
Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”. To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
Summary on the Four Step Approach
The Stanford case is authority for the proposition that it is necessary for the Court in each case to consider whether it is just and equitable to make any order for division of property. What the court may not do is assume that an order for division of property is an inevitability.
Incidentally, the reference in Stanford to dividing the existing legal and equitable interests of the parties has also altered the way in which the Family Court does business. Previously it was not uncommon (for some Judges more than others) to include in the asset pool “notional” assets such as money spent or wasted by one of the parties. Then the “wasted” asset would be allocated to the wasteful party. That approach has fallen into disrepute as a result of Stanford. However, questions of wastage or premature distribution can still be considered under Section 75(2)(o) of the Family Law Act.
So, in summary, what do we have here? One, a Court must first reflect on whether there should be any alteration to the existing property rights of the parties. Two, if it is found that there should be an alteration then each of the matters in the four step test need to be considered. In considering those matters the Court should be guided by law, not palm tree justice.
Understanding all of this information does give the layperson a rough guide as to how the Court approaches the task of dividing property but still leaves the layperson in much the same position as before: puzzlement as to likely outcomes.