Post separation financial contributions
The period between separation and the finalisation of a financial matter can be a matter of days (if both parties agree) or years (in the Family Law Courts, it is currently estimated that parties will have to wait 3 years before a defended final hearing).
Generally speaking, the values of all assets and liabilities of the parties should be as up to date as possible, although it is accepted that some values change on a daily basis and the common sense approach is to have values provided as at an agreed date post separation.
It is accepted that the property of the parties to be identified includes all property in existence at the date of the hearing, whether or not it was acquired after separation.
“Once a marriage has been celebrated between the parties, the entire relationship between the parties, whether arising out of contributions before, during or after the formal tie of marriage was entered into or dissolved, falls within the ambit of Part VIII of the Family Law Act.”
It is possible to make an argument to the Court seeking to quarantine post separation assets (that is, to remove them from the pool available for division), but the general approach of the Court is to include all assets in existence at the time of trial but make adjustments to contributions as are appropriate.
In Mackie it was found that the wife had made no contributions towards the acquisition of a lottery win acquired by the husband two years after separation and should not receive a portion of those winnings.
However, in Jacobson, it was found that the wife, who had continued to provide primary care for the parties’ 5 children after separation, including a significantly handicapped child, had made a contribution to the husband’s post separation earnings by virtue of her caring for the children. His Honour Lindenmayer J stated that
“where one party saves money or accumulates assets solely from post-separation efforts, these will be credited to him or her…in some circumstances, but in my view it will only be appropriate if, on all the facts of the case, the other party has made no contribution, direct or indirect, towards the accumulation of those post-separation assets”.
In the matter of Farmer & Bramley it was held by Kay J that
“clearly contributions made towards the acquisition of an asset by one party and the lack of contributions made towards its acquisition by the other party may weigh heavily in the exercise of discretion. However it is wrong to say that contributions made under s79(4)(a), (b) or © before an existing asset was acquired could have no bearing on the outcome of the proceedings.”
In that case, the husband received a lottery win 18 months after separation. There was a 14 year old child residing with the wife. The trial judge ordered that the wife receive a portion of that win, based not only on the fact of her future needs by virtue of the care of the child, but also a contribution generally during the marriage. Clearly it is also the case that the contribution made by the party does not have to be a contribution made directly to the acquisition, improvement, or maintenance of that asset, but a contribution generally.
Similarly, and more recently, in the matter of Trask & Westlake the parties had cohabitated for 13 years and were married for 11 of those. There were 4 children below the age of 18. The husband submitted that he had made higher financial contributions because of his high income post separation. A year after separation the husband had obtained new employment with significantly better benefits. Orders were made by the trial judge 4 years after separation. The trial judge made findings that the parties had conducted their relationship on the basis that the husband would pursue his career and the wife would be the primary homemaker and parent. The trial judge found that the wife’s support in the husband’s earlier employment and contributions to the welfare of the children led to the husband’s promotions and ability to earn his current income. The trial judge found that post separation contributions were equal. The husband appealed.
The Full Court agreed that the wife’s contributions did not cease on separation.
Why is this significant?
In the 3 year lead up to trial, things may change significantly. A party to the proceedings may have a business increase significantly in value from a discovery made shortly after separation. Real estate values may increase significantly on the former matrimonial home in which one party is residing and paying the mortgage. The higher income earning party may have lived frugally and amassed significant funds from their income after separation. Parties need to consider not only the legal costs and time expended in pursuing litigation, but the potential opportunity cost in not settling the matter early and being able to retain those gains for himself or herself.
It is important to consider the following in each case:
Whether the post separation contribution relates to an asset acquired from pre separation assets, whether it was from an ongoing contribution to an existing asset, or whether it was from assets wholly acquired after separation e.g. from income;
Whether the other party has made a contribution to the asset or contributions generally (and this is particularly pertinent where parties have children together);
How long the parties have been separated; and
How long the parties were together.
There is authority that income expended on reasonable living expenses is not to be considered in the composition of the asset pool. However, the expenses have to be reasonable in all the circumstances. If a party can show that the expenditure is not reasonable, this can be taken into account in the percentage division.
Swaab Attorneys can assist with your queries in relation to what happens post separation.