Dividing Property – Without a Divorce

June 4, 2013

Unfortunately, unforeseen situations can impact our lives or the lives of those we love. When a person suffers a serious medical condition that no longer permits them to live at home with their spouse, is it possible to obtain a court order to divide the assets that have accumulated over the duration of the relationship even though there is no separation or divorce?

The High Court has recently taken a fundamentally different approach to property division and confirmed its power to divide property where the marriage has not broken down.

In Stanford & Stanford [2012] HCA 52, children of an elderly couple initiated proceedings for a division of their parents’ property.

Both the husband and wife had been married previously, and the children were all from the former marriages. The couple had chosen to make their wills in favour of each of their own children, excluding the step-children. Their assets included a house valued at $1.5 million that was in the husband’s name only.

When the wife suffered a stroke, she was no longer able to live with her husband and moved into full-time residential care. He deposited $46,186.46 into an account for her day-to-day needs.

One of the wife’s daughters acted as her case guardian and applied to the Family Court of Western Australia for an order to sell the matrimonial home and divide the net proceeds between the husband and wife. Unfortunately the wife passed away during the proceedings. However her daughter continued as her legal representative.

The High Court had to decide whether the proposed order was ‘just and equitable’. The Court outlined some scenarios where such an order would be considered just and equitable, such as where there will no longer be common use of property by husband and wife; where the property arrangements were subject to the express or implicit assumption of the parties that those arrangements were appropriate for the continuance of the marriage, and could be adjusted easily if their needs changed; or in cases where the parties have not voluntarily separated, or separated at all, where there is a demonstrated need of one party that cannot be met by maintenance.

The husband argued that no orders could be made because the marriage was intact, or, because the true beneficiaries of any order would be the children of the deceased wife.

The Full Court of the Family Court of Australia disagreed with the original decision of the magistrate who made orders that the wife be granted $612,931. The Full Court made an order that upon the husband’s death, $612,931 was to be paid to the wife’s legal representatives. The High Court overturned the order, finding it failed to consider whether the property settlement would have been “just and equitable” if the wife was still alive.

The High Court ruled that there might however be circumstances when married couples separate involuntarily, in which a property settlement order is capable of being made by the courts. It must be noted however that mere physical separation, when involuntary, does not without more show that it is just and equitable to make a property settlement order.

Children are also able to apply for orders on behalf of their parent(s) with an intention of increasing the pool of assets that they are expected to inherit.

For family law advice, please contact Simon Clinch and for estate planning advice, please contact Martin Reilly of our office on 9870 9870.

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