Common Misconceptions In Property Disputes

COMMON MISCONCEPTIONS IN PROPERTY DISPUTES

One of the main areas of focus in family law is how a couple will divide their property following a relationship breakdown. This process does not often end with both parties happy with the result however it is an important process to complete so both parties can move on with their lives and no longer be financially tied to a former spouse.

In our practice, we notice that many clients have a misunderstanding of the legal principles the Family Court will apply to property divisions and this article hopes to answer some of the main misconceptions which we have come across:

MISCONCEPTION #1: All property divisions are 50/50

While it seems logical that a couple should divide everything 50/50 after the breakdown of the marriage, this is not always the case.

When deciding a property division the Court takes the following four steps:

1. Identifying the property pool that exists between the parties
2. Assessing the financial, non-financial and homemaker contributions made by each party
3. Assessing any current and future circumstance which may require a party to receive a further adjustment.
4. Identifying the best and most effective way to divide the property as per each party’s entitlement.

Every relationship is different and that means that parties’ entitlements will be based on the specific facts of their relationship. It is important to talk to a Family Lawyer about your situation so you can gain a full understand of what your entitlements may be.

MISCONCEPTION #2: “My spouse is not entitled to Certain Assets which are mine”

Some people consider that assets owned before the relationship or bought personally are not included in a financial settlement. Unfortunately this is generally not the case.

Time and time again the Family Court has reiterated that it prefers a “global asset” approach to property settlements meaning that everything that exists at the time regardless of who bought it can be included in a property division.

There are some exceptions to this rule and it is important to talk to a lawyer about what assets can be included or excluded from a property settlement.

MISCONCEPTION #3: “I do not need to provide disclosure of my financial information”

Under the Family Law Act, any couple who are engaging in a dispute over a property settlement is legally obliged to provide full and frank disclosure of their financial position. This includes information in relation to income, assets owned, liabilities and superannuation.

If a party fails to provide their full and frank disclosure they may suffer the following consequences:

1. The Court can make adverse findings about their case and order for a greater division of property in the other party’s favour.
2. The Court may order that the party who has not provided disclosure pay the other party’s costs.
3. The Court may dismiss an Application
4. The Court may impose fines or other penalties.

MISCONCEPTION #4 You must be divorced before you finalise a property settlement

It is commonly considered that before parties are able to come to a decision about dividing their assets, they need to be formally divorced. This is not the case, a property settlement can be done at any time post separation and it is usually beneficial for parties to do so right away.

If parties wait until they are officially divorced, this will enliven the Statute of Limitations which mean that the parties only have 12 months from the date their divorce is finalised to file a Court Application seeking a division of property.

Any property settlement completed in the proper legal way will see an end of any financial relationship between the parties and an official divorce at a later date will have no bearing on their final property settlement.

MISCONCEPTION #5 De Facto Couples do not need to go through a formal property settlement

In March 2009, the Family Law Act was amended to recognise that De Facto couples had the same rights as married couples in relation to parenting and property matters. Prior to this a De Facto couple had to make an application through their relevant state and the laws in each state were different.

Following the changes, it is imperative that a De Facto couple exercises their rights and takes formal steps to finalise their property settlement. Following the breakdown of a De Facto relationship the parties have 2 years from the date of separation to file an application for a property division in the Family Court.

MISCONCEPTION #6 I need to go to Court to finalise a property settlement

While the Federal Circuit and Family Court does exist to decide disputes between parties in relation to parenting matters or property division, the Court recommends that parties only file a formal application as a last resort and included in the Court’s rules are the following mandatory pre action procedures:

1. Parties must take steps to exchange all relevant financial information and documents.
   1. Parties must take steps to attempt to settle their dispute through negotiations.
   1. Parties must take steps to attend a mediation or dispute resolution in an attempt to resolve the dispute.
   1. Parties must issue a notice of their intention to commence proceedings in circumstances where the dispute remains unresolved.

If these pre action procedures are not completed properly prior to filing an Application in the Court, parties will need to provide evidence as to why they have not been completed. If the Court finds the reasoning unacceptable, the following consequences may apply:

1. The Application is stayed or dismissed
2. The party who has failed to complete the pre action procedures could be ordered to pay the costs of the other party.

There are the following exemptions for people in relation to completing pre action procedure:

1. When the application is urgent
2. When it is not safe for a party to comply
3. When the requirement to comply with pre-action procedures would unduly prejudice the party.

It is important that legal advice is sought prior to filing an application in Court.

MISCONCEPTION #7 A verbal agreement between parties is legally binding

Unfortunately, a verbal or even written agreement signed by both parties is not considered legally binding unless it is in a proper form. The two methods for formalising a property agreement are as follows:

Application for Consent Orders

When preparing an Application for consent orders, the parties must draw up their agreement formally and complete an Application form to file in the Federal Circuit and Family Court of Australia. Once filed, the Court will assign a Judicial Officer to review the agreement and decide whether to make the orders considering whether the agreement is just and equitable.

Binding Financial Agreement

A Binding Financial Agreement is an agreement entered into between the parties which has the same effect as on order of the Court but does not require the Court’s scrutiny in the same way as an Application for Consent Orders. To properly enter into a Binding Financial Agreement, each party is required to receive independent legal advice as to their rights, entitlements and obligations under the agreement prior to signing.

MISCONCEPTION #8 Property Settlements only consider what existed at separation

As per s79(3) (a)(i) of the Family Law Act, the Court can only make orders in relation to the existing assets and liabilities in a relationship. This means that the Court can make orders in relation to a property division only about things which exist at the time an application is being considered. If parties wait to formalise their property settlement and have acquired further assets post separation, these might be included as part of any final property division.

The most famous case of this kind was Farmer v Bramley. In this case a couple separated in 1995 and in 1997, the husband purchased a winning lottery ticket netting him $5 million dollars in winnings. The wife then commenced property proceedings in the Family Court and was awarded a share of the winnings on the basis that her contributions to the relationship had assisted with putting the husband in a position to purchase the ticket.

It is important that parties finalise property matters as soon as possible to avoid any similar circumstances.

MISCONCEPTION #9 I am entitled to compensation because my partner cheated.

The Family Law system in Australia works on a “no fault” basis. This means that in cases of infidelity, there is no change to the process and the party who is cheated on is not entitled to any higher division based on that fact alone.

MISCONCEPTION #10 I don’t need a lawyer’s help with my property settlement

While it is possible to finalise a property settlement without a lawyer, people will often enter into unfavourable agreements because they lack a full understanding of their rights and entitlements under the law. This is especially detrimental if a matter is before the Court as someone who does not use a lawyer may find it difficult to understand what information and evidence they need to put before the Court to achieve the best possible outcome.

Don’t leave your financial future to chance. If you’re facing a separation or divorce, seek expert legal advice. Contact our experienced family lawyers today on 07 3209 7744 for a confidential consultation. We can help you understand your rights and develop a strategy to protect your assets.