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Whenever a marriage ends, there are some decisions that simply must be made. Unfortunately, hurt feelings, injured pride and resentment can make civil communication difficult, if not impossible. This in turn, makes it hard to agree on important matters, such as the division of property.

When you can’t come to an agreement on your own and attempts to reach consensus through mediation or Family Dispute Resolution (FDR) also fail, you may seek court intervention. Specifically, you can ask the court to decide how your assets and debts should be divided.

Even if you can come to an agreement about the division of property on your own, you may ask the court to approve it. This is also known as entering into Final Property Orders by consent.

In either case, there is no guarantee that the court will agree to make a property settlement order.

What is a property settlement order?

A property settlement order, also known as a financial order, is a written decision issued by the court following a hearing or trial. As such, it is legally binding, meaning that all parties must follow it.

The court bases its decision on the material each of you (or your lawyers) presents during the hearing or trial. Because each case is different, the court does not use a specific formula to decide the outcome. Instead, the Family Law Act allows the court to consider several factors including:

  • The financial contributions made by each person (how much each of you earns);
  • non-financial contributions made by each person (inheritances, gifts and so forth);
  • the contributions made by a person acting as a homemaker or stay-at-home parent;
  • the amount each person may potentially earn based on their training, experience and so forth; and the potential effect of the order on their earning capacity (if any);
  • the effect of any other orders issued by the court;
  • each of your current and future needs;
  • how much each of your assets and debts are worth.

Taking all of this into account, the court must be satisfied that the order is just and equitable to everyone involved.

When a court can’t issue a property settlement order

The Family Law Act prohibits “the Family Court, or a Family Court of a State” from issuing a property settlement order unless:

  • You have both attended mediation or FDR as required;
  • you have successfully demonstrated you are both exempt from attending mediation/FDR;
  • the court is satisfied that attending mediation or FDR is not “practicable” in your case.

When a court can refuse to issue a property settlement order

As we’ve already noted, the Family Law Act precludes the court from issuing a property settlement order unless it is satisfied that it is just and equitable to do so based on the entirety of the case. In other words, a court can’t – and won’t – issue a property settlement order if it is fundamentally unfair to do so.

Horrigan & Jennings[2018] is a case in point. This particular matter involved a couple that had been involved in a lengthy de facto marriage. Because the parties disputed the timing of when separation occurred, and because the Justice asked to clarify the matter wasn’t able to do so, she set the original Consent Orders aside. This effectively meant that a court never formalised the informal property settlement agreement the de facto couple originally reached. To complicate matters further, the de facto couple also never formalised it by making a Binding Financial Agreement.

The story didn’t end there. More legal wrangling ensued, with the de facto wife seeking a new property settlement benefiting her. Meanwhile, the de facto husband asked the court not to grant her request. Specifically, he argued that it would not be “just and equitable” to grant the request based on the totality of the circumstances. The Justice agreed and dismissed the case.

And still, the saga continued. The de facto wife appealed the ruling, but to no avail. Upon completion of its review, the Full Court ruled that a lower court does not have to consider “the financial, non-financial and homemaker contributions of the parties under section 79(4) or section 90SM(4)” of the Family Law Act,  in order to decide if “altering property interests” as requested is fair.

Basically, this meant that the informal agreement would stand, and left the de facto wife without any options for further legal recourse.

Clearly, these are complicated legal matters. So if your marriage is ending and you are facing separation or divorce, it is crucial that you get proper legal advice regarding property and financial settlement orders. Don’t leave anything to chance. Contact Law By Dan to discuss your situation today.