Pursuant to s79 of the Family Law Act (1975) (Cth) (“Act”), the Family Court has the power to make orders as to the alteration of interests in property and the distribution of assets between the parties in the breakdown of a marriage. To do so, the Court will assess both financial and non-financial contributions made by both parties (s79(4)).
But how will a Court assess contributions regarding a property that one party acquired before the marriage? What if for reasons beyond the parties’ efforts, that property significantly increased in value throughout the course of the marriage?
These questions were explored in the recent case of Jabour & Jabour [2019]. At first instance, the Court assessed the contributions at 66:34 in favour of the husband. This disparity was a consequence of the Court finding that a certain pre-marital asset was a significant contribution by the husband. On appeal, the Full Court of the Family Court (FamCAFC) had a broader look at the totality of the financial and non-financial contributions of both parties and assessed the contributions at 53:47.
The key background facts of the case were as follows:
- The parties met in 1988, married in 1991, and permanently separated in 2015.
- Prior to meeting his wife, the husband had acquired a half interest in 3 properties from his father, being two 30-acre blocks and one 44-acre block (Property A).
- In 1998, the husband and the co-owner of the land agreed to divide the two 30-acre blocks between them.
- In 2001, the husband sold his 30-acre block for $215,000. Half of the net proceeds were used for family purposes, and the other half were used to acquire the co-owner’s interest in Property A.
- In 2010, Property A was re-zoned from non-urban land into an urban growth zone, which meant the land could be used for residential purposes and caused a significant increase to its value.
- At the time of the hearing, Property A was worth more than $10 million.
Primary judge’s findings:
The primary judge found that the parties’ contributions throughout the marriage were equal. However, the primary judge determined that the husband’s contribution of Property A into the marriage, was significant and ought to be recognised. At first instance, the judge assessed the husband’s contribution at 66% and the wife’s contribution at 34%, and divided the parties’ non-superannuation assets in this proportion.
FamCAFC:
On appeal, the wife submitted that the primary judge had erred in “seeking a nexus between contributions and a particular item of property when assessing contributions holistically over a long marriage.” For several reasons, the Court agreed.
In assessing the husband’s contribution, the primary judge emphasised that “without the husband’s initial interest in the original [Property A], the parties would not have had the opportunity to use some of the proceeds of the sale of the 30 acre lot to purchase the remaining half share in the 44 acre lot at all.”
However, the FamCAFC found that the primary judge had overlooked other key considerations, in particular the parties’ decision making in dealing with their financial affairs. The Court considered:
- That both parties decided not to put all the proceeds of sale of the 30-acre block towards family purposes, which enabled the husband to gain sole ownership of Property A.
- Both parties also became aware of the potential rezoning and decided to delay the sale of Property A in anticipation of a greater sale price.
- During the period of the delay, both parties lived a ‘modest lifestyle’.
Furthermore, the FamCAFC found that the primary judge’s assessment had the effect of minimising the “myriad of other contributions that were made in the course of a long marriage during which both parties worked very hard and raised a family,” whereby the wife assumed the role of primary caregiver and homemaker. Therefore, the significance of the property’s value prior to the relationship was lost, given that they “both contributed to the full extent of their capacity within the roles each took within the marriage.” Indeed, the Court sought to consider Property A as one of the myriad of contributions to take into account, where throughout the relationship, the parties contributions to this asset were of precisely the “same nature and extent that each made in their respective agreed roles and spheres” (quoting Hurst & Hurst (2018) FLC 93-851; [2018] FamCAFC 146).
The Court also crystallised the principle that where there is a sudden increase in an asset’s value, for reasons “unrelated” to the parties’ efforts, that increase is considered a contribution by both (or even neither of the parties). Therefore, the fortuitous increase in value due to the council’s re-zoning was not something to which the husband had a greater claim.
As a result, the Court then re-assessed the contributions to be 53:47 in favour of the Husband.
Again, under similar circumstances in Barnell & Barnell [2020] FamCAFC 102, the Court confirmed that they will not ‘quarantine’ a pre-marital contribution, but consider it as part of the “myriad of contributions” in a long marriage with two children. In this case, the FamCAFC found that the primary judge, who found that a certain pre-marital asset gave rise to a 25% differential between the parties’ contributions in favour of the husband, erred in according “a subsidiary role to the wife’s contributions”, and remitted the case for a re-hearing.
If you are going through a separation or divorce and have any queries how your contributions might be assessed, contact our solicitors today.