Marriage, Separation and Finances:
Court Order Divorce Settlement: When Is a Party’s Earning Capacity Affected by the Duration of the Parties’ Relationship and What Bearing Does It Have on the Court’s Decision?
August 1, 2017
Divorce Property Settlement Guidelines
Financial Settlement After Divorce: Dividing Property When the Asset Pool Is Small
August 3, 2017

Family Law Financial Settlement: How Does a Decline in Living Standards Post-Separation Affect the Division of Property?

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Family Law Financial Settlement: How Do Living Standards, Both Before and After Separation, Affect the Court’s Assessment?

Separation almost always lowers the parties’ respective living standards. It is very rare that the parties can continue living at the same pre-separation standard after they have separated. For that reason, the court acknowledges that same decline is expected.

There are, however, circumstances where there is a disparity in the parties’ respective post-separation living standards. This might arise when one of the parties’ greater earning capacity puts them in a position to resume their pre-separation standard of living not long after the parties separate. Such circumstances arose in Horsley & Horsley 103 FLR 186.

Horsley involved an appeal from the wife against orders that she should receive 42% of the parties’ net assets. The parties married in 1975 and separated in 1988. There were two children of the marriage – both of whom lived with the mother. Apart from an inheritance of $150,000 that the husband had received, the trial judge found that the parties’ contributions were equal. The wife’s earning capacity was approximately $15,000 p.a., whereas the husband’s was $225,000.

The wife’s principal grounds for appeal were:

  1. The trial judge did not provide adequate reasons in support of his conclusion; and
  2. The trial judge’s discretion had miscarried.

Family Law Financial Settlement: The Full Court’s Decision

The Full court allowed the wife’s appeal for the following reasons. First, it was unable to ascertain the ascertain the reasoning upon which the trial judge’s decision was based. Although the trial judge went into great detail concerning the parties’ submissions, it was unclear which submissions were accepted or rejected. There was very little discussion concerning the disparity in the parties’ respective earning capacity and living standards. This was problematic given that these factors loomed large in this particular case.

Second, the trial judge’s discretion had miscarried. The effect of the orders from which the wife appealed was that the husband and wife should receive 58% and 42% of the parties net assets, respectively. Apart from the husband’s inheritance, the Full Court affirmed the trial judge’s finding that the parties had equally contributed the matrimonial property. The wife played a significant role in terms of raising the parties’ children and performing various domestic duties. She also assisted the husband with his business operations. The husband, on the other hand, had provided the family with a home and made all relevant payments in respect of preserving it. On this basis, the Full Court determined that the husband’s overall contributions should be assessed in the range of 60-65%.

However, an appropriate adjustment for s 75(2) factors would increase the wife’s overall entitlement to 60% of the parties net assets. This finding was mainly due to the wife’s lower standard of living post-separation, whereas the husband’s lifestyle would presumably remain the same. The wife’s financial circumstances, limited by her care of the children, meant that she could only obtain ‘adequate’ accommodation. The husband, on the other hand, could more readily resume living at the parties’ pre-separation standard on account of his greater income, capital resources and borrowing capacity. For these reasons, the Full Court ordered that the wife should receive 60% of the net value of the matrimonial property.

Family Law Financial Settlement: Concluding Remarks

A standard of living that is reasonable is in the circumstances is a consideration relevant to the court’s determination regarding the division of matrimonial property. Whether a party is able to rely on this consideration in seeking an adjustment could rely upon the following. Namely, a significant disparity in the parties’ respective post-separation standards of living. In Horsley, this disparity appeared to stem from the husband’s greater earning capacity, capital resources and borrowing capacity.