Have you separated but never formalised a property settlement?

Many couples who separate today come to a mutual agreement on how to divide their property, however many do not take the steps to legally formalise these agreements. Unfortunately things can change over time, amicable couples can become uncivil and an individual’s financial situation can significantly change for better or worse.

In Australia, the Family Law system is set up to provide time frames for couples to apply to the Courts for formal property orders. For married couples, Section 44(3) of the Family Law Act 1975 provides that parties have 12 months from the date of divorce to bring an application for property orders to the Courts. For de facto couples, Section 44(5) of the Family Law Act 1975 requires the filing of any application with 24 months of the date of separation.

However, the lapsing of these time frames does not automatically protect a person from a future application for property orders by an ex-partner. A party can seek and obtain leave from the Court to file an application for property orders outside the above time frames. Section 44(4) of the Family Law Act 1975 establishes that the Court can grant leave if the Court is satisfied that hardship would be caused to the party if leave was not granted.

This is an area of law, both locally and internationally, that has had gained attention recently due to some high profile cases.

Earlier this year, there was a very high profile case where the United Kingdom Supreme Court granted leave for an ex-wife to have her application for property orders to be heard by the Family Court more then 18 years after her divorce. In this case, Wyatt v Vince [2015], Ms Wyatt and Mr Vince were married in 1981, separated in 1984 and there was one child of the marriage. The couple divorced in 1992. Ms Wyatt raised the child of the marriage, along with a three children she had from other relationships. Ms Wyatt has remained in a very modest financial situation and has been reliant on Government pensions and support from her family. On the other hand, Mr Vince has become a multimillionaire from a green energy company he started in the 1990’s, after their divorce.

This decision by the Supreme Court does not guarantee that Ms Wyatt will ‘win’ a property settlement, in fact the Supreme Court’s judgement highlighted that her application will face ‘formidable difficulties’. What this case does is it allows Ms Wyatt the opportunity to have her application to the Court for a lump sum and for interim periodical payments heard.

The case of Wyatt v Vince may have established a precedent in the United Kingdom that creates an avenue for cases where one party is significantly in a worse financial position then the other. The wealthier party may find it cheaper and more efficient to settle rather then run the matter to hearing. Thus the financially worse off party may receive a financial gain from pursuing an application that may have ‘formidable difficulties’.

In Australia in the 2012 case of Ordway & Ordway [2012], an ex-wife successfully sought leave from the Court to proceed with her application for property proceedings 26 years after her divorce was decreed. The Judge in this matter established that the ex-wife would have been in hardship if the leave were not granted. In this case the parties had an informal financial agreement, and this was a factor that was considered and relied on by the Judge when making his decision to grant the leave.

Last year the Family Court of Australia made a decision in the case of Montano & Kinross (2014) to grant leave to a de facto ex-wife after she failed to lodge an application for proceedings within 24 months of separation. The de facto wife in fact lodged her application 47 months after the date of separation. The significance of this case is that the Full Court established that the appropriate way to consider applications for leave is by considering all of the relevant factors in a global approach.

What these cases do is highlight the importance of parties legally formalising their property settlement to protect themselves in the future. It is clear from these cases that a lapse of legislative time frames is not enough to protect a person’s financial interests.

The only guaranteed way of ceasing the financial relationship with an ex-partner and protecting oneself from future claims, is by getting property orders completed. This can be done by Consent, where both parties agree, or through a Court Judgement. The reality is no one knows what their future holds and it is always possible that someone might start a multimillion dollar business, win the lottery, or received an inheritance. This could be enough for an ex-partner to want to commence proceedings so they can try to change their own financial position.

For further information, please contact our Family Law Team