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Marriage, Separation and Finances: Negative Contributions – Is There Such a Thing in Family Law Property Disputes?

Marriage, Separation and Finances:

Marriage, Separation and Finances: Family Law Property Disputes and Negative Contributions

Property disputes occasionally involve a party who either deliberately or recklessly disposes of assets in a way that reduces the value of the parties’ property. There has been some confusion as how such instances may be characterized in the context of property litigation. Should they, for instance, be characterized as a “negative contribution” under s 79(4)? Or are they more accurately characterized as a “fact or circumstance to be taken into account” under s 75(2)(o)? Does it even matter? These questions were examined in the recent Full Court decision in Bircher and Bircher and Anor [2016] FCAFC 123.

Marriage, Separation and Finances: Background

In Bircher, the appellant wife appealed property orders providing that the parties’ net assets and superannuation be divided 55/45 in favour of the wife. One of the grounds upon which the wife’s appeal was based related to the trial judge’s assessment of parties’ contributions.The trial judge found that the wife had made a so-called ‘negative contribution” to the net value of the parties’ property.

After the parties had separated, the wife continued to care for the children of the relationship. In this regard, the trial judge found that the wife should be entitled to post-separation contributions “in the order of five per cent.”

However, the wife’s post-separation contributions were offset by her negative contributions. Her negative contributions consisted in her failure to preserve the husband’s belongings, which in turn reduced the net value of the parties’ assets.

Marriage, Separation and Finances: The Full Court’s Reasoning

The Full Court held that the trial judge had erred in her finding of a negative contribution against the wife. There is longstanding authority to the effect that negative contributions have no role in the court’s assessment of the parties’ contributions. It simply has no basis in the relevant sections of the Family Law Act.

The type of conduct that might wrongly be thought of as a negative contribution may be relevant, however, under s 75(2)(o) of the Act. Section 75(2)(o) allows the court to consider “any relevant fact or circumstance” in deciding whether the adjust the parties’ respective contribution based entitlements. In Bircher, however, the trial judge found that the wife’s conduct did not fall within the scope of s 75(2)(o).

What is also interesting to note is the Full Court’s assessment of the trial judge’s approach to the wife’s post-separation contributions. The trial judge held the wife’s post-separation contributions “to be in the order of five per cent.” This, according to the Full Court, “made no sense.” Post-separation contributions cannot be five per cent, or any other per cent, for that matter. Perhaps the trial judge meant to find that because of the wife’s post-separation contribution, the parties’ contribution based assessment should be assessed at 55/45 in favour of the wife. But even if that were the case, it would seem as though the trial judge would be applying a presumption wherein the parties’ contributions should be assessed as equal. Such an approach would be incorrect. The High Court clearly articulated the proposition that in assessing the parties’ contributions, there is no presumption of equality.

Marriage, Separation and Finances: Concluding Remarks

What Bircher tells us about what might be regarded as “negative contribution” is that characterization matters. “Negative contributions” are a misnomer under s 79(4). So, characterizing conduct that diminishes the net value of the parties’ assets as such is unlikely convince a judge that a party’s contributions should be reduced accordingly. What lawyers should be doing in cases like this is predicating their submissions under s 75(2)(o) of the Act. In doing so, they can rely on the relevant conduct as a means of arguing for an adjustment of court’s notional assessment of the parties’ contribution based entitlements.