Global or Asset-by-Asset?
In family law property disputes the asset pool available to the Court for division between the parties is typically made up of assets that have been acquired by either or both of the parties before, during and after cohabitation.
The Court has a wide discretion as to how it will approach the question of what should be included in or excluded from the asset pool. So what then is the appropriate approach?
In the High Court decision of Norbis v. Norbis (1986) 161 CLR 513, the Court observed early on that the most convenient approach in the majority of cases will be a ‘global’ approach. In other words, the Court will group all of the parties’ assets and liabilities into a single combined pool and divide it according to the traditional four-step (or now five-step, since Stanford) process.
However, the Court in Norbis also made the point that there may be circumstances where it will be appropriate to depart from the ‘global’ approach and to adopt what is known as an ‘asset-by-asset’ approach. This is where the Court effectively splits the asset pool into separate pools or quarantines (isolates) certain assets from the rest of the asset pool and makes an individual assessment as to the respective contributions made by each party towards these separate pools or particular assets.
Whether it is appropriate for the Court to adopt a 'global' or 'asset-by-asset' approach will depend on the individual facts of each case. Below are some examples of cases where these issues have been considered by the Family Law Courts.
Long Periods of Separation
In the case of Zalewski v. Zalewski [2005] FamCA 996, the Full Court of the Family Court of Australia affirmed the trial Judge’s ‘global’ approach despite there being a long period of separation. This was a matter where the parties separated in 1994 and the Wife initiated proceedings for property settlement some 8 years later in 2002.
During this period of separation, the Husband experienced success in his company’s ventures, which substantially increased the asset pool. The trial Judge ultimately included the Husband’s post-separation assets in the asset pool, as the company’s success was considered to be as a result of the Husband's skills being acquired during the course of the marriage.
Finn J in Zalewski commented that the trial Judge adopted what was, in his view, essentially a ‘global’ approach to the asset pool and that he was entitled to do so. However, his Honour did make the comment that there were a significant number of cases coming before the Court where there had been long periods of separation, during which the parties had built up substantial new assets or incurred substantial new liabilities; for these types of cases, Finn J observed that, although ultimately the trial judge retains a discretion as to which approach to take, it may be more useful to assess contributions to property on an ‘asset-by-asset’ basis.
In the more recent case of Scott & Scott [2016] FCCA 1659, the parties’ relationship lasted some 36 years during which they worked together to purchase, conserve and improve a matrimonial home together. The period of separation was for some 30 years before property settlement proceedings were initiated, during which there were patterns of contributions to the matrimonial home. In circumstances where the only significant asset of the relationship was the former matrimonial home, the Court adopted an asset-by-asset approach and isolated the former matrimonial home from other assets.
Treatment of Inheritances
In the case of Miller v. Miller [2014] FamCA 591, the Court considered it to be appropriate in the circumstances of that case to include in the asset pool a large inheritance received by the Husband late in the marriage and assessed this inheritance as being a significant financial contribution on his part given the inheritance represented a significant portion of the overall asset pool.
But what about a significant inheritance received after the breakdown of the relationship?
In the case of Calvin & McTier [2017] FamCAFC 125, the Husband received a large inheritance after the relationship had ended, so he sought to exclude it entirely from the asset pool. The Court, in the circumstances, however, included this in the asset pool and adopted a 'global' approach, similar to the approach adopted in Miller, and assessed it as being a significant financial contribution by the Husband to the totality of the asset pool.
The Full Court in Calvin & McTier observed that the Court retains the discretion as to how to approach assets acquired after separation. In this case, the Full Court enunciated that it was open to the trial Magistrate to include the inheritance in the asset pool for division or deal with it separately, and that the trial Magistrate was not obligated to follow either approach.
Departing from the 'global' approach, in the case of Bishop v. Bishop [2013] FamCAFC 138, the Court adopted an 'asset-by-asset' approach and isolated the inheritance received by the Wife late in the marriage, thereby creating two pools and assessed the parties’ respective contributions to each pool accordingly. The Court adopted this approach in circumstances where the inheritance was received by the Wife late in the marriage and had been effectively quarantined by the Wife since her receipt from the parties’ dealings. The inheritance was ‘quarantined’ from the remainder of the asset pool.
Treatment of Superannuation
In the case of Coghlan & Coghlan [2005] FamCA 429, the Full Court upheld the trial judge’s 'two-pool' approach in separating the parties' superannuation entitlements from the parties' non-superannuation assets. This was because the parties were members of a defined benefit superannuation scheme, whereby the Husband was already receiving a fortnightly superannuation pension. As the pension was to continue being a fortnightly pension benefit that can could not be converted into a lump sum despite being valued as a lump sum, the trial Judge was of the view that there was an ‘air of artificiality’ that distinguished it from the other assets and proceeded to separate it from the asset pool.
In the case of Coventry & McNamee [2011] FamCAFC 123, the Court isolated the Husband’s superannuation interest and assessed the parties’ respective contributions to the Husband’s superannuation entitlements. The Husband had accumulated substantial superannuation entitlements post separation. Notwithstanding the 'two-pool' approach adopted by the Court, the Court found that by virtue of the Wife’s caring for the children during the marriage the Husband was able to study, improve his qualifications and advance his career; the Husband's salary increased as did his superannuation entitlements, and he continued to enjoy the benefit of this post separation. As such, the Wife received a superannuation split from the Husband’s superannuation interest, despite the Husband arguing that the Wife's contributions should be confined only to that portion of his superannuation interests accumulated during cohabitation.
If you need assistance or advice regarding family law property settlements, please feel free to contact us.
Eugene Gramelis
Principal Lawyer
Gramelis Attorneys