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Property Settlement After Separation: How Does a Disparity in Earning Capacity Affect the Division of Matrimonial Property When There Is Little Property to Divide?

Property Settlement After Separation

Property Settlement After Separation: The Implications of a Disparity in Income When There is Barely Enough Property to Achieve Justice Between the Parties

High-earning, asset-poor people present unique challenges to the court in determining a just division of matrimonial property – especially when the other party’s earning capacity is substantially lower. On the one hand, the low value of the parties’ net assets is insufficient to achieve justice between the parties. But on the other hand, both parties have contributed to the minimal amount of wealth they have accumulated during their relationship. Best v Best (1993) 116 FLR 343 is a case wherein the Full Court was faced with this particular dilemma.

The parties had married in 1975 and had four children. The wife had been unemployed since 1976 or 1977 so that she could commit herself to raising the parties’ children. Her husband, on the other hand, was a partner at Mallesons Stephen Jaques, prominent national law firm. From 1989-1991, the husband earned approximately $450,000 p.a.

The parties’ relationship ended in 1991. At the time of trial, their net assets were valued at $108,197. The wife commenced proceedings in 1992 and sought both property orders and a child support departure order. In relation to the property dispute, it was ordered that the value of the parties’ assets should be divied 70%-30% in favour of the wife. This order was appealed by the wife. The basis for the wife’s appeal was that the percentage division of assets did not fall within the range of judicial discretion.

Property Settlement After Separation: The Full Court’s Decision

A property order that would deprive one of the parties of any significant share of assets – especially given the contributions of both parties – is unusual. But that was the tact taken by the Full Court. Specifically, the Full Court ordered that the wife should receive 100% of the matrimonial property.

The wife did not have the earning capacity to overcome the parties’ relatively low net wealth. She had singificant responsibilities with regard to caring for the parties’ 4 children and limited financial means. This was compounded by the fact her professional skills as a qualified nurse were obsolete at the time of the hearing. And updating her skills was impractical given her parenting commitments.

The husband, on the other hand, had the “…capacity to steadily earn his way out of the financial position…” in which the parties had found themselves. He had earned a very substantial income of a number of years and was likely to sustain his earning capacity into the future. Accordingly, given the relatively low net value of the parties assets, the Full Court ordered that the wife receive 100% of the property.

Property Settlement After Separation: Concluding Remarks

What Best highlights is the significance of disparities in both income and parenting responsibilties in cases where there is relatively little matrimonial property. In this case, the amount of net assets available for distribution could hardly been seen as sufficient to do justice bewteen parties – even if 100% of it were transferred to the wife. And since the husband was fully capable of improving his financial circumstances over time, it would seem that the Full Court’s decision to transfer 100% of the parties net wealth to the wife was entirely justifiable.