Couples occasionally attempt to resolve their financial affairs by means of a separation agreement – i.e., an informal agreement that sets out how matrimonial property is to be divided. This blog post will examine the issue of whether a separation agreement can be relied upon as a basis for dismissing a subsequent application for property orders. It will also examine the role that a separation agreement could play in the context of a property dispute.
Maine is a helpful reminder of the role of prior informal agreements in the context of property proceedings under the Family Law Act. In this particular case, the appellant wife had sought to overturn the trial judge’s order concerning the division of matrimonial assets under the Family Law Act. The basis of the wife’s claim was that no orders should be made under the Family Law Act given that the parties had separated for 11 years and that they had reached an informal separation agreement concerning how their jointly owned home should be dealt with.
The trial judge had erred in holding that had the wife honoured the parties’ informal separation agreement, the husband’s property application brought under the Family Law Act would have been dismissed. Apart from being mere speculation, this finding is inconsistent with the leading authorities on the role of a prior separation agreement in the context of property proceedings under the Family Law Act.
The court must determine property applications on their merits, having regard to the relevant factors set out in the Family Law Act. These factors must be considered as they exist at the time that the proceedings are initiated. They must also be considered in the context of the law in force under the Family Law Act at the time of the proceedings.
On the other hand, the relevant factors and law that existed at the time that the separation agreement was made should not be considered. Nor is the court required to consider whether the separation agreement was just and equitable in light of the relevant factors set out in the Family Law Act and law at the time the agreement was made before proceeding to determine a property application.
This is not the say that a prior informal separation agreement is always irrelevant when it comes to property settlements. Instead, a prior separation agreement should only be considered to the extent that it sheds light upon what the parties’ may have regarded as a just and equitable outcome at the time the separation agreement was entered into. This inquiry should occur in view of any changes in the composition or value of the property pool, so that the parties’ post-separation contributions may also be assessed under the Family Law Act.
Given that the role of the parties’ informal arrangement was limited in the manner described above, the correct approach consists in determining: (a) whether an order altering the parties’ legal and equitable interests in property is just and equitable in accordance with the Family Law Act and (b) if so, proceed to do so by reference to the matters enumerated in s 79(4).
Parties’ oftentimes seek to finalise their financial affairs without recourse to the legal system. This should be discouraged. An informal separation agreement does not prevent either party from initiating proceedings in the future. Accordingly, parties would be well-advised to finalise the property settlements under the relevant provisions of the Family Law Act. Otherwise, they run the risk of spending thousands of dollars on costly litigation later on, much like the parties in Maine undoubtedly would have.