Divorce and Financial Settlement: Difference in Income May Support an Adjustment in Favour of the Lesser Earning Party
July 19, 2017
Property Settlement After Separation
Property Settlement After Separation: How Does a Disparity in Earning Capacity Affect the Division of Matrimonial Property When There Is Little Property to Divide?
July 25, 2017

Divorce Settlement With Children: Do Child Support Payments Compensate the Custodial Parent for Raising Children?

Divorce Settlement With Children

Divorce Settlement With Children: Child Support Payments, the Care of Children and Their Affect Upon the Court’s Assessment of the Parties’ Financial Circumstances

One of the most often relied upon factors relating to the court’s assessment of the parties’ financial circumstances is the care of the children of the relationship. The party with the primary care of the children is ordinarily entitled to adjustment on account of that fact. Two issues often arise concerning the extent to which the custodial parent should receive an adjustment:

  1. What are the custodial parent’s financial needs expressed as a dollar amount; and
  2. Are child support payments adequate compensation?

Both of these issues were examined by the Full Court in In the Marriage of Clauson (1995) 18 Fam LR 693.

Clauson was an appeal by the wife against the trial judge’s order that the matrimonial property be divided 60%/40% in favour of the husband. One of the grounds of the wife’s appeal was that the trial judge had erred in determining the extent to which the wife should receive an adjustment under s 75(2) of the Family Law Act.

The trial judge made a 15% adjustment in favour of the wife under s 75(2). The wife was 34 years of age and in good health. Although she had the physical and mental capacity for gainful employment, he prospects were limited by:

  • The period of the parties’ cohabitation; and
  • Her ongoing care of the parties’ 4 children.

It was also found that her standard of living was materially affected as a result of the parties’ relationship breaking down.

The husband was 49 years of age and found to be in good health. He, too, had the physical and mental capacity for gainful employment. His income was approximately $220,000 p.a. Accordingly, it was unlikely that his living standards would be materially affected. In addition, the husband paid a child support to the wife in the amount of $25,000 p.a.

Divorce Settlement With Children: The Court’s Approach to the Parties’ Economic Circumstances

The Full Court allowed the wife’s appeal on the basis that the trial judge’s assessment of the parties’ future economic circumstances fell outside the range of judicial discretion. In this regard, the Full Court held that adjustments referable to the parties’ financial financial circumstances should be considered in terms of dollars rather than percentages:

“There is, we think, at times, a tendency to assess sec 75(2) factors in percentage terms without considering its real impact and we think that there is legitimacy in the views expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries. That is, it appears almost to be inevitable that the sec 75(2) factors will be assessed in a range between 10% and 20%. A number of cases would justify an assessment outside those parameters and in any event, it is the real impact in money terms which is ultimately the critical issue”.

It also went on to find that the husband’s child support payments would not fully compensate the wife for the burdens associated with raising the parties’ 4 children:

“… In addition, it should not be forgotten that the payment of child support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility and the restriction upon an independent lifestyle which the obligation to care for children usually entails…”

In view of the above, and having regard to the wife’s lack of income, the Full Court determined that the wife should receive an adjustment of $350,000. This resulted in an equal division of assets. While this outcome may appear to have favoured the husband, the Full Court held the husband’s initial financial contributions should be given substantial weight. The court’s inquiry in relation to the parties’ financial circumstances is it assist in the court in achieving a just and equitable outcome. Accordingly, it should not be regarded as a foray into social engineering.

Divorce Settlement With Children:Concluding remarks

Clauson may thought of as authority for the proposition that adjustments under s 75(2) should be determined of the basis of an appropriate dollar amount, rather than an arbitrary range of percentages. In this case, the adjustment of $350,000 in favour of the wife was made on the basis of the dollar amount she would need to raise 4 children, having regard to her limited earning capacity.

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