Who sees the benefit of an increase in property value during a relationship?

In the recent case of Jabour & Jabour [2019] FamCAFC 78, the Full Court of the Family Court of Australia set aside orders made by the Trial Judge who, in assessing contributions awarded the husband 66% of the net non-superannuation property and the wife 34% of that property.

The parties married in 1991 and separated in May 2015. The husband had owned a property prior to commencing a relationship with the wife. When the husband was 12 years old, he acquired a half interest in three blocks of land from his father. After the marriage, two of the blocks had been divided between the husband and the other co-owner and the net proceeds from this sale were used for family purposes and also to buy-out the co-owner’s interest in the third block of 44 acres. In 2010, the property was rezoned from non-urban land into an urban growth zone. This permitted the land to be used for residential purposes and led to a significant increase in value. The land had been re-zoned and as a result had increased substantially in value to in excess of $10,000,000 at the time of the court hearing.

The trial judge held that aside from the contribution of the property prior to the relationship, the parties’ contributions throughout the marriage were equal. The trial judge noted that the husband had made a significant initial contribution which needed to be appropriately recognised and thereby assessed the husband’s contributions at 66% and the wife’s at 34% with no division to the superannuation of the parties.

The Full Court accepted the wife’s argument on appeal that the trial judge erred in seeking a nexus between the contributions by the parties to the property and its current value. The Full Court stated that the approach of the trial judge overlooked:

• The parties decision not to use all of the funds from sale of the other block for family purpose but to use half of those proceeds in order for the husband to gain sole ownership of the block of land that was rezoned;
• The decision not to sell the rezoned land at an early stage was also a significant contribution, allowing the parties to enjoy the benefit of the increase in the land value.

The case confirmed that in relation to a sudden increase in the value of an asset unrelated to the efforts of the parties, such as a re-zoning by a council or a lottery win, that the increase should be treated as a joint contribution by both parties regardless of which party may have brought the item during the relationship.

Despite the significance of the husband’s initial contribution, the Full Court assessed the contributions to favour the husband by 53% and the wife 47%.