Separating property after a separation is often tricky and an emotional occasion as it brings about the realisation that the relationship is really over and there’s no turning back.

In this case – the parties lived together although separated for quite some time – Wife bought land five years after parties separated their finances – Trial judge erred in holding that it was just and equitable to adjust wife’s ownership of the property in the absence of contributions by husband – Stanford wrongly applied – Contributions to other party’s child

In Zaruba [2017] FamCAFC 91 (12 May 2017) the Full Court (Bryant CJ, Thackray & Murphy JJ) heard cross-appeals against a property order made by Moncrieff J of the Family Court of Western Australia. The parties had separated their finances in 1988, maintaining that arrangement ever since (for over 30 years). They were divorced in 1996 but lived together in the parties’ home in Hilton (a suburb of Perth) until 2005. The wife gave birth to twins in 1996 to another relationship, the children living with the parties until the wife moved out with them in 2005.

In 1993 (five years after they separated their finances) the wife bought a block of land at Mindarie (an outer coastal suburb of Perth) for $74,000 provided by the wife’s friend Mr S. A home was built on the land in 2004, the wife and children moving there in 2005. The Mindarie property was worth $1 million. Moncrieff J adopted an asset by asset approach and assessed the husband’s contribution to that property as 10 per cent ($100,000).

The Full Court said (from [11]):

“The acquisition of Mindarie occurred … five years after the parties commenced living separate financial lives. It was acquired almost solely through monies provided by a friend of the wife, Mr S. The land could not have been purchased without those funds. Commencing in 2004, a home was built on the land. The wife’s mother provided $125,500 toward the construction and Mr S provided a further $146,000 or $150,000. It will be appreciated that those funds were provided, and the home constructed … 15 years after the parties separated their finances.

[12] The husband made no financial contribution to the acquisition, maintenance or preservation of the Mindarie property. As his Honour found, from 2005 the wife ‘and the children occupied the property to the exclusion of the husband’ (at [38]). The property was at all times, and remains, unencumbered. [15] His Honour determined to approach the parties’ respective cases on an ‘asset by asset’ basis. … [G]iven the unusual facts and the consequent differing nature … of the parties’ respective contributions to the property, including the different ownership of real property, such an approach is … entirely proper. [24] His Honour determined that the husband should be seen as having made a contribution to that property assessed as 10 per cent of its value (or, in dollar terms, $100,000).

[25] The non-legally trained and self-represented wife argues before this court that Mindarie is not ‘a marital asset’. That contention is misconceived; there is in fact no such thing as ‘marital assets’ – s 79 applies to the ‘property of the parties or either of them’. Yet the wife can we think be seen to be asserting that a property owned solely by her and acquired without reference to, or financial support from, the husband at a time well after they had commenced living separate financial lives should not be the subject of a s 79 order.

[26] We consider with respect that his Honour erred in the application of s 79(2) of the Act in relation to Mindarie. Having determined to approach the parties’ respective s 79 claims on an asset by asset basis, his Honour did not consider whether it was just and equitable to make any order pursuant to s 79(2) in respect of that property. …

[27] … [W]e consider it was not open to his Honour to conclude that it was just and equitable to make any order altering the wife’s interests in Mindarie …

[28] Even if s 79(2) permitted of an order being made in respect of the property just mentioned we … are unable to see any evidentiary basis for his Honour’s finding that the husband had made ‘non-financial and indirect’ contributions to Mindarie in the period between its purchase in 1993 and the wife’s departure from their shared residence in 2005. It will be recalled that the trial took place some 10 years after the latter date.

[29] In addition, despite finding that the husband had performed ‘some parental responsibilities’ for the children (who were not his biological children but with whom he claimed he had a loving and supportive relationship), we are unable to see how that should translate into the husband acquiring an interest in a property to which the wife herself made virtually no financial contribution.

[31] … [T]he wife’s acquisition, preservation, and improvement of Mindarie took place wholly without reference to the husband. Indeed … the husband only became aware of its existence well after it was purchased. His Honour found that the parties had separated their financial lives some five years prior to its purchase. The wife has, and has always had, the sole legal and equitable interest in the Mindarie property … [32] … Turning to … Stanford [[2012] HCA 52], his Honour finds that ‘both parties seek to enliven the jurisdiction of the Court to make adjustments that reflect their contributions during the course of their relationship’ and then cites [42] of the High Court’s judgment in that case.

[33] There, the High Court refers to the ‘common use’ of property by the parties to a marriage and the cessation of the ‘express and implicit assumptions that underpinned the existing property arrangements’ which have been brought to an end ‘by the voluntary severance of the mutuality of the marital relationship’. It is there recognised that the assumptions arising from the marriage relationship and its mutuality which were ‘sufficient or appropriate during the continuance of their marital relationship’ are brought to an end.

[34] Importantly, it is not the event of separation marking the end of the marital relationship that is important; rather it is the end of any existing ‘express and implicit assumptions that underpinned the existing property arrangement’ which is important. Of course, that will very frequently occur upon the physical separation of the parties to the marriage, but not necessarily, as this case illustrates. [35] On no view of the evidence can it be said that any express or implicit assumptions arising from the marriage relationship underpinned the acquisition, preservation or improvement of Mindarie. Indeed, the evidence is to the contrary. And, of course, there was never any common use of Mindarie nor was there ever intended to be.

[36] To the extent there were any express assumptions, they were solely those of the wife and they were to the effect that the husband had, and would have, nothing whatsoever to do with Mindarie – something which was given expression by her having the sole legal interest in it and the husband having made no financial contribution of any kind to it.

[38] In the vast majority of cases, it will be appropriate to address the s 79(2) question by ascertaining the legal and equitable interests in property without making distinctions between individual assets. That is because the ‘express and implicit assumptions that underpinned the existing property arrangements’ can be seen to apply (to the extent and degree to which they do apply) to all of the property of the parties or either of them, including property in which the legal interests vary.

[39] However, the position is likely to be different in circumstances where, as here, the characteristics of the property and the circumstances of its acquisition, improvement and the like can be seen to differ significantly and where, as here, the parties’ relationship had taken on quite different characteristics during the period to which the s 79 inquiry is directed.

[40] We are respectfully unable to see any evidentiary foundation by which it was open to his Honour to conclude that it was just and equitable to alter the wife’s legal and equitable interest in Mindarie. [41] In that respect a sharp distinction should be drawn between that property and Hilton. There can be little doubt that common assumptions, both express and implicit, underpinned the acquisition and use of the Hilton property. It is significant that, despite the finding that the parties led separate financial lives from about 1988 onwards, the use of the Hilton property continued for another 17 years and, by 2005 when the wife and children left the property, the common use of that property had spanned some 20 years. [42] In our view his Honour erred in law in failing to consider, as s 79(2) requires, whether it was just and equitable to make an order altering the existing legal and equitable interests in the Mindarie property.

The assessment of contributions

[43] … [E]ven if his Honour was correct to consider an alteration of the wife’s interests in Mindarie, we consider that his Honour erred in his assessment of the contributions in respect of it. [44] The only direct financial contribution made by either of the parties to the acquisition of the Mindarie land and, subsequently, the construction of a home upon it, was made by the wife in 1993 in the amount of $2,000. The husband made no direct financial contribution at any time.

[45] The consequence of his Honour’s finding that monies advanced from Mr S should not be treated as a loan is that sums advanced by him were a contribution made on behalf of the wife. The same is true of the monies advanced by the wife’s mother. ( … )

[53] … [T]he authorities are clear that ‘contributions’ to non-biological children should be assessed as a factor of potential relevance under s 75(2)(o) rather than as contributions made pursuant to s 79(4)(e) … [54] … [N]ot everything a party does for the benefit of their spouse’s children should result in some monetary reward in property settlement proceedings …

[55] With great respect to his Honour it is extremely difficult to understand how the ‘performance of some parental responsibilities’ coupled with an apparent acceptance that the wife was ‘solely responsible for the financial support of the children’ should sound in an assessment with respect to Mindarie, the dollar value of which is $100,000. There is no evidence that the husband made any other indirect contribution to the Mindarie property. There is no evidence that the husband by any actions contributed to the maintenance or preservation of the property … ”

The wife’s appeal was allowed, the Full Court declaring that she held her legal and equitable interest in the Mindarie property to the exclusion of the husband.

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