When deciding on a property settlement matter following a relationship breakdown, there are four factors that the Court takes into consideration: the asset pool, contributions made by both persons in the relationship, future needs factors and ensuring a ‘just and equitable outcome.’ In this article, we explore how much weight should be given to initial contributions made in a relationship when decisions are being made in a property settlement.
What are initial contributions?
Initial contributions are any contributions (both financial and non-financial) that were made by either one of the parties at the start of the relationship. These financial and non-financial contributions at the time of commencement of the relationship can be made directly or indirectly “on behalf of a party to the marriage or de facto relationship and towards the purchase, maintenance or improvement of the property.”
You can learn more about initial contributions here: “Money and property: court process.”
There is no ‘strict formula’ applied when determining the weight that initial contributions have in a property settlement matter, rather it is taken on a case-by-case basis.
To give you a better understanding of the role initial contributions play in a relationship when determining a property settlement, consider the following cases:
Initial contributions in the case of Cabbell & Cabbell [2009] FamCAFC 205
In this case between a husband and wife of almost 25 years, the Court initially ruled that any assets between the couple, including property, were to be divided equally.
However, the Husband appealed the decision, imploring the Court on appeal to consider his initial contributions in the relationship, which he believed exceeded those of his Wife and had not been given the relevant emphasis by the trial judge.
In considering the initial contributions of the parties, the Court determined that at the beginning of the relationship, the Husband had a 1/7 share as an equity partner in a Legal Practice, a property with a $5,000 mortgage (and later sold for $80,000), furniture and furnishings, two vehicles and some $10,000 in savings. The wife had some $20,000 in savings and a motor vehicle. [1]
Although significant contributions were made throughout the relationship, particularly throughout the first six years of the parties’ marriage, whereby the Wife was in full-time employment both before and after the birth of their children, the Full Court took the position that the Federal Magistrate had not adequately analysed or given the relevant weight to the Husband’s initial contributions. The Court also noted that the Federal Magistrate failed to properly trace how the couple’s initial contributions were used by the parties and how they contributed to the couple’s joint financial position and culminating in the size of the asset pool at the date of the trial.
The Court also looked at the contribution of the Husband’s 1/7 equity share, which continued to generate a significant income throughout the duration of the relationship and as a result of the direct work of the Husband.
Given the above, the Full Court found that the parties’ contributions were not equal and instead held that a 5% adjustment to the Husband was appropriate in the circumstances.
Initial contributions in the case of Jabour & Jabour [2019] FamCAFC 78
In this case, the former Husband and Wife were married for 25 years and had three children. They had a significant asset pool, including a property that was valued at $10.35 million at the time of the trial, which amounted to 90% of the total asset pool, exclusive of superannuation.
Prior to the relationship, the husband acquired a 50% share in three blocks of land from his father, and which were security for a mortgage of $26,000. Eleven years after the parties began living together, the husband sold his 50% share in two of the three blocks in order to acquire the entirety of the third block of land for consideration to the value of $215,000. As a result of the rezoning of the block of land and a significant period of time passing, the property’s value increased to $10.35 million.
At first instance, the Court noted the value of the property equated to approximately 90% of the non-super asset pool and concluded that the property was a significant contribution made to the relationship and needed to be appropriately recognised. As a result, the Court awarded a property settlement of 66% to the Husband and 34% to the Wife.
However, the Wife, on appeal, argued that to accept the Husband’s approach would “ignore the miscellany or the myriad of contributions made by (her)” [2] and where the decision to sell the Husband’s share to acquire the larger block of land, was a joint decision made by both parties during their relationship.
In considering the Wife’s appeal, the Full Court concluded that:
“Whatever was the value of the property at the commencement of the relationship, its significance has been largely lost given the myriad of the contributions by each of the parties to their various business ventures, through their employment and care of the family over a long relationship, including the contributions made to the retention of the property which we have discussed above. There is no doubt that they both worked hard and over many years they both contributed to the full extent of their capacity within the roles each took within the marriage.” [3]
The Court noted the Wife’s contributions should not be overlooked in this matter, and also found that the substantial increase in the value of property was a fortunate turn of events and not as the result of the efforts of the husband and couldn’t be attributed to either party. They noted that although the property was bought into the relationship by the husband, it was “merely the springboard for the events which followed”. [4]
As a result of the above, an adjustment was made to the value of 53% to the Husband and 47% to the Wife and to ensure that the outcome was just and equitable.
Key takeaways
As stated earlier, each of these cases was determined on its facts. Although both of the above cases may seem to have similar relationship circumstances, the difference in outcomes comes down to the contributions made throughout the relationship that were then weighed against the initial contributions brought into the relationship and how and why the value of the initial contributions changed over time.
In Cabbell & Cabbell [5], the parties made significant contributions throughout the duration of the relationship, however, it was determined that without the Husband’s initial contributions to the relationship and especially his share in a legal practice which he continued to contribute to and develop, the asset pool could not have increased as significantly as it had and as such, should be given more weight.
On the other hand, in Jabour & Jabour [6], whilst the property was initially brought into the relationship by the Husband, the increase in the value of the property was not as a result of the efforts of the Husband, and therefore placing such significant weight on the growth in the value of the property, would have resulted in overstating the Husband’s contributions and at the expense of all the other contributions that each party made during the course of the relationship.
Get expert advice from an experienced family lawyer
If you are in the process of separating, or have separated from your partner, and you feel there are issues arising from an initial contribution by either you or your estranged spouse with relation to a property settlement, we are here to help.
Get in touch with one of our Sydney family lawyers on 02 9262 4003 for a confidential discussion or submit an online enquiry.
The content of this article is intended as a general guide to the subject matter. For specific legal advice about your individual circumstances, please contact our experienced lawyers.
FURTHER READING
For more on this topic, see our article on contributions made during a relationship and how the Court takes this into considerations when deciding on a settlement.
Pamela is a member of Ivy Law Group’s prominent Family Law division. She specialises in parenting, property and divorce matters.
Pamela is a strong advocate for her clients and gains great satisfaction in helping them navigate through a difficult time in their lives and achieving an outcome that resolves their dispute to the highest standard.