Dividing assets in family law: The Court’s view of party contributions

When relationships come to an end, questions often arise about how assets should be divided, especially in situations where one party has made no financial contributions. This issue is frequently raised in family law proceedings and has a specific legal framework guiding its resolution. Whether the relationship involved marriage or a de-facto partnership, both the Family Law Act 1975 (Cth) and the Family Court Act 1997 (WA) allow the Court to consider a range of contributions (both financial and non-financial) when determining how property should be divided.

What happens if one party makes no financial contributions?

This is a common question asked during family law proceedings which has a specific legal answer to it.

When a relationship breaks down, the parties face the challenge of dividing their assets and, ideally, severing all financial ties on a full and final basis.

In Western Australia, the Family Law Act 1975 (Cth) (FLA) regulates the separation of married parties, and the Family Court Act 1997 (WA) (FCA) regulates the separation of de-facto parties. Section 79 of the FLA and section 205ZG of the FCA are the relevant sections that deal with the alteration of property interests.

Financial contributions can be made directly or indirectly throughout a relationship. An example of a direct financial contribution includes one party making a lump-sum payment towards the purchase of a particular asset (like a property). An example of an indirect contribution can consist of weekly contributions from your earnings towards expenses.

There are several factors that the Court will look at when resolving arguments between the parties about what each party is entitled to and what they will ultimately walk away with. They are outlined in section 79(4)(a) of the FLA and section 205ZG(4)(a) the FCA. The Court is required to assess the direct and indirect contributions to the acquisition, conservation or improvement of property.

Court decisions: What about inherited property?

The way the Family Court may view and assess inherited property is important to note.

In the case of Holland v Holland [2017] FamCAFC 166, the husband inherited an unencumbered property over 3 years after separation, and his initial position was that the inherited property be classified as a financial resource and therefore excluded from the Court’s assessment of the parties assets. While this argument was initially successful, on Appeal, it was held that referring to an inheritance received post-separation as a ‘financial resource’ was deemed to be incorrect as a matter of principle in law.

It was held that when a property is acquired by way of inheritance, and the owner of that property objects its inclusion in the asset pool, the subject of consideration by the Court, there must be a separate and specific consideration as to whether there is a principled reason for its inclusion and division.

Referring to that property as a financial resource is in and of itself incorrect, as a financial resource does not fall within the definition of ‘property’. In other words, if a party receives an inheritance by way of a property, that property, no matter when received, is deemed an asset to be considered by the Family Court.

The preferred approach adopted by the Family Court when assessing inheritances received by parties appears to be, that when a party receives an inheritance, that inheritance is to be dealt with in a separate asset pool. The Court will then make a determination as to each party’s respective contributions to that inheritance separately, to the rest of the asset pool. The Court will then continue their usual assessment of the parties’ contributions to the other asset pool (that will contain all other assets held by the parties). An overall outcome will then be achieved in respect to each separate asset pool, rather than adopting a ‘global’ assessment approach.

The parties’ contributions to that inheritance will ultimately be considered.

In the case of Marcin v Marcin [2020] FamCAFC 85 a property was also acquired by inheritance. The wife in this matter inherited property, however, it was upheld on Appeal that, neither party had made any contributions to (financial and non-financial) to that inherited property, and as such, it was found that any order altering the interest of the wife in her inherited assets, would not be just and equitable, in all the circumstances.

Non-financial contributions

Contributions do not have to be financial to create an ‘entitlement’. The Court also takes into account non-financial contributions. Such contributions can encompass the improvement and conservation of the property through one’s labour, including for example when one party repaints the home or undertakes landscaping or renovations.

If you are going through a separation or have questions as to how property might be divided, especially in cases involving inherited assets or uneven contributions, it’s important to get clear and tailored legal advice.