Husband’s Business Suddenly Gains Value Post Settlement – What’s a Wife to do?

$93 million dollars! The Age today made headlines with this splashy article about an-going legal battle that was brought before the Family Court of Australia. The parties have been given the pseudonyms of Mr and Ms Wills, and you can read their case here http://www.austlii.edu.au/au/cases/cth/FamCA/2017/183.html

In this case, the parties were married for 35 years before they split. On 27 April 2015, their property dispute was finalised where the wife received a division of assets worth $15 million. The Wife has then filed an application for this agreement to be disregarded, claiming that the Husband had failed to disclose relevant information relating to an interest in a business which later resulted in him receiving $93 million.

As it appears to have turned out, on 1 May 2015 the Husband was said to have “determined to take the initial steps to the making of an Initial Public Offering (IPO)” for the business. Their property dispute was finalised on 27 April 2015.

Having not seen the full details of the case, it is hard to say exactly who said what, knew what and when, and so we cannot comment definitely on what will happen. But there may be some value in looking at cases where the property ‘pool’ consisted mainly of lottery winnings (bought by the husband), as in the case of Elford v Elford [2016] Fam CAFC.

In Elford the Appeal Judge upheld the trial judge’s decision that the winnings were not a joint endeavour but rather recognised that the husband made the sole contribution to the winnings – therefore dismissing the wife’s appeal to a greater share in the property pool.

The question then is whether the wife receives any entitlement to the $93 million.

Only an experienced lawyer such as one from our family law team would be able to navigate you through complex scenarios such as the above – we are contactable on 03 9614 7111 or otherwise out of office hours on melbourne@nevettford.com.au

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Two asset pools might not be better than one

Most family law property matters approach the division of parties’ assets by adding everything together into one ‘pool’ of assets and then dividing up the total value of that pool. However in certain circumstances, a Court may take a different approach where the facts support departing from the usual system.

One such case was the matter of Arthur and Arthur (http://www.austlii.edu.au/au/cases/cth/FamCA/2016/324.htm) , decided by Judge Rees in Sydney in May 2016. In that case, Ms Arthur was due to receive a sizeable - $535,000 – inheritance from her mother’s estate, her mother having passed away after the Arthurs’ marriage had broken down. The rest of the assets totalled approximately $800,000, meaning that this inheritance would have been a very significant factor in working out each party’s contributions, if it was included.

 

However Judge Rees determined that the inheritance should be kept separately and that Ms Arthur would be considered to have contributed 100% to that pool of assets, and that she should simply keep the inheritance. This was a practical way to deal with the matter, but had the effect of producing a note-worthy result in the rest of the assets.

 

Mr Arthur’s family had provided significant support to the parties during their relationship, transferring as much as 75% of a house to them without really expecting any payment back. In addition, the parties were allowed to live rent-free in the property for many years even though it was owned by family members of Mr Arthur.

 

Mr Arthur earnt significantly more than Ms Arthur, who had significant obligations as a carer and whose employment prospects were uncertain. Nevertheless, Mr Arthur received 80% of the non-inheritance asset pool. This is a high percentage of assets on a pool of this size, and Ms Arthur did not receive a larger percentage because she was going to have the benefit of the very large inheritance she had received and was going to retain, meaning the inheritance was a double-edged sword for her.

 

What does this mean for parties contemplating a separation? Look after your parents!

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Superannuation – Cap and Trade

The federal government in its May 2016 Budget indicated that it intended to make changes to the superannuation system that would limit the amount of contributions people would be able to make above and beyond their compulsory employer contribution, which may affect those engaging in a family law property settlement.

 

The proposed change highlights the difficulty that separated parties may have in re-earning superannuation post-separation.

This is particularly the case where one party decides not to take any superannuation so that they can retain another item, for example the family home. 

 

It is important to note however that the family law system has taken some pre-emptive action in this regard a number of years ago.

Cases that go to Court and are decided by a Judge will now often have superannuation earnt during a relationship split between parties.

This has the effect of ensuring that both parties are put in a position where they can save for retirement, even if it means some short term difficulty with property.

 

With that said, it is still entirely possible for parties to organise and come to an agreement between themselves to arrange their assets how they like.

The government’s proposed changes to how superannuation work should be fully considered by your family lawyer and incorporated into your family law settlement.

You can call our experienced lawyers to discuss your situation and whether you might be affected by the changes on 03 9614 7111.

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How do you divide property when a relationship breaks down? Consider the family law four step!

It is with regularity that family lawyers are buttonholed at social events to provide some impromptu advice to someone going through a property division.

What is consistent through these conversations is how little many people understand of the process, how much people cobble together their own solutions based on what is ‘fair’, and how infrequently lawyers are consulted at an early stage to provide some guidance and frameworks for discussions between parties.

 

I can recall a matter that was brought to me where the parties had been spending an inordinate amount of time dividing and ascribing value to each and every item of furniture or household appliance and dividing these in a way that was reflective with their respective incomes; but had no idea that they might be entitled to some of each others’ superannuation, a significant oversight that would have resulted in one party missing out on almost $100,000 of superannuation.

 

So what is the broad overview of the process that family lawyers will apply?

1. Identify your assets, liabilities and superannuation as at present. This is commonly called the ‘asset pool’
2. Identify what contributions were made into the relationship, including both financial and non-financial contributions. This will mean knowing what you had at the beginning, what you had at the end, and how you got between those points.
3. Identify what your and your partner’s future needs are – whether they relate to income disparity, care of children, ill-health and medical costs, or your age.
4. Determine whether it is just and equitable to proceed with any alteration of your existing legal rights at all, as well as whether the final result as determined by the above 3 steps results in an outcome that is just and equitable and also practical.

These steps are simple in some senses but as with everything, the devil is in the detail of the implementation and the ‘edge cases’.

Consulting a family lawyer early for guidance to inform your discussions, identify any problematic issues and define your expectations is one of the most sensible investments of your money post separation you can make.

Call our family law team on 03 9614 7111 or email Melbourne@nevettford.com.au.

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