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Foundations series: Understanding Property Settlements in Family Law

Property settlements are a critical aspect of family law, which involves dividing assets and liabilities
acquired during the marriage or de facto relationship. This division can be complex, often requiring a
comprehensive understanding of legal principles and how they are applied by the courts.

What is a Property Settlement?

A property settlement is the formal division of property and financial resources between two parties
following the breakdown of their relationship. It can encompass:

  • Real estate (homes, investment properties)
  • Superannuation
  • Bank accounts
  • Investments and businesses
  • Debts (loans, credit cards, mortgages)

How are Property Settlements Determined?

In Australia family law property settlements are guided by the principles set out in the Family Law Act
1975. The law aims to ensure that property is divided in a way that is just and equitable, and this is
done through a four-step process:

  1. Identifying and valuing the assets: This includes all assets, liabilities, and superannuation. Accurate valuations are critical.
  2. Assessing contributions: This covers both financial and non-financial contributions made by each party during the relationship.
  3. Considering future needs: The court takes into account factors like age, health, financial resources, and caregiving responsibilities
  4. Reaching a just and equitable outcome: Based on the above factors, the court determines a fair division of assets, which may not necessarily be an equal division but one that reflects fairness.

Leading cases in Family Law Property Settlements

In the area of family law property settlements in Australia, several landmark cases have shaped the
legal principles and application of the Family Law Act 1975. Here are some of the most significant and
leading cases in this area:

Kowaliw & Kowaliw (1981) FLC 91-092

This case has is considered the leading case for determining ‘waste’ in matrimonial disputes. In this
case the Court held that, as a general principle, financial losses incurred by parties should be shared
by them unless one of the parties has embarked upon a course of conduct designed to reduce or
minimise the value of matrimonial assets, or where one of the parties has acted recklessly, negligently
or wantonly with matrimonial assets resulting in their minimised value.

Kennon v Kennon [1997] FamCA 27

The court was called to consider whether a parties violent behaviour is a matter for consideration in
assessing the parties respective contributions. In this case the court found that, due to the damage
the husband’s violence had inflicted on the wife, the wife was entitled to an increased share of the
property pool pursuant to Section 79 of the Act.

Kennon v Spry [2008] HCA 56

This case concerned the distribution of assets held in a discretionary trust in the context of a family
law dispute, confirming that assets held in a discretionary trust were property of the parties to the
marriage.

Edgar& Faines [2009] FamCAFC 22

Explores the Courts approach in short marriages with no children. In this case, the Court endorsed
the approach to reinstate the parties to a three-year marriage with their respective pre-marital
financial positions, with an adjustment to allow for money paid by the husband towards the wife’s
house, holidays and other joint expenses

Thorne v Kennedy [2017] HCA 49

Thorne v Kennedy is a landmark decision involving the validity of prenuptial and postnuptial
agreements. The High Court ruled that a prenuptial agreement could be set aside if one party was
under duress or had insufficient legal advice. The Court’s judgment emphasised the importance of
ensuring that agreements were entered into voluntarily, with full understanding, and not under
pressure

Factors that May Influence Property Settlements

In addition to the principles set out above, the following factors can influence the court’s approach to
property settlements:

  1. Length of the relationship: Longer relationships may result in a more equal distribution of assets, due to the weight of any initial contributions eroding over time.
  2. Care of children: The party primarily responsible for the care of children may receive an adjustment in their favour due to the need to support dependents.
  3. Health and age of the parties: The court may adjust settlements to reflect any disparities in health or age, particularly if one party has a greater need for financial support
  4. Financial resources and earning capacities: Differences in income potential and
    financial resources between the parties can influence the division.

For those navigating property settlements, seeking expert legal advice is crucial to understanding how
the principles in the caselaw above apply to your specific circumstances, to ensure that you achieve a
fair resolution.

Disclaimer: This article is for general informational purposes only and should not be considered legal advice. If you’re dealing with a property settlement, it’s recommended that you seek advice from a qualified lawyer to understand your specific circumstances.

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