Parties who have been in a de facto relationship (heterosexual or same sex) or marriage and have separated sometimes ask if his or her (or the other party's) conduct has any impact on their financial settlement. Common questions include:
- Will I get more if my partner/spouse has cheated on me?
- Will I get more if my partner/spouse is the one who decided to leave?
- Will I get more if my partner/spouse gambles?
- Will I get more if my partner/spouse is a heavy drinker?
The answers to these questions is usually no. A party's conduct normally has no impact on his or her financial settlement. However, in some situations, conduct can affect the final division of the property pool.
In 1981, Chisholm and Jessep concluded that
"in determining maintenance and property applications under the Family Law Act, it is not relevant that one spouse was responsible for the breakdown of the marriage, or committed what was formerly regarded as a matrimonial offence...... it is not the intention of the Family Law Act to use financial orders for the purpose of rewarding or punishing the behaviour of married people......"
However, they went on to say, the Court is required to
"have regard to certain types of conduct closely related to financial matters... conduct of a party that unreasonably reduces the value of property of the parties or of either of them or conduct of a party which unreasonably weakens his or her financial position."1
AT STEP 1: POTENTIAL EFFECT ON BALANCE SHEET
Pre Stanford2, in the matter of Kowaliw & Kowaliw3, the Court stated that:
"financial losses incurred by parties or either of them in the course of a marriage...should be shared...except...where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets or where one of the parties has acted recklessly, negligently, or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value."
However, the position has likely changed post Stanford. The recent decision of Owen4 affirms that funds are unlikely to be added back to the balance sheet. There are still some cases where the Court may adjust the parties' existing property by notionally adding back sums which have been wasted.
For example, in the matter of Blackwell & Trantor5, the wife was able to identify $17,000 of the husband's expenditure on internet dating and dating generally and the Court allowed that $17,000 to be added back.
In the matter of Asher & Asher[6], the husband gave evidence that he had spent money post separation on "buying food, drinks, and women" and "prostitution, prostitution, prostitution", having pointed out to the Court that these were very expensive services. These liabilities were deleted from the Balance Sheet.
However, these are the exception rather than the rule and specific evidence will need to be presented if seeking an add back and submissions made on how that might be just and equitable in the specific circumstances of the case.
STEP 2: POTENTIAL EFFECT ON CONTRIBUTIONS
In the 1997 Full Court decision of Kennon & Kennon7 the court remarked that
'where there is a course of violent conduct by one party towards the other during the marriage which is demonstrated to have had a significant adverse impact upon that party's contributions to the marriage, or...to have made his or her contributions significantly more arduous than they ought to have been, that is a factor which a trial judge is entitled to take into account in assessing the parties' respective contributions."
The important elements of this principle are that the party seeking an adjustment in their favour on the basis of contributions must prove to the Court both that:
- there has been a course of violent conduct during the relationship and prior to separation; and
- it has in fact had significant adverse impact on his or her contributions or made his or her contributions significantly more arduous.
The potentially negative contribution of the offender in these situations is not taken into account; only the adjustment made in favour of the victim on the basis of his or her contribution.
Two of the judges in Kennon8 stated that the application of the principle was not limited to domestic violence. The Full Court in Spagnardi & Spagnardi9 confirmed that the principle included misconduct generally rather than only in relation to matters involving domestic violence.
However, this principle has not always been followed in subsequent cases. The trial judge in Palmer & Palmer10 considered that he was not bound by the principle and declined to follow it. The trial judge in Kozovska & Kozovski11 stated that:
"Clearly the adjustment that the Full Court contemplated in its decision in Kennon was not meant to be compensatory but more in the nature of perhaps symbolic recognition."
There is clear difficulty in quantifying how this adjustment should be made and how a party is to produce evidence about the quantifiable effect of the conduct on their capacity to contribute. Certainly if relying on the principle, the party doing so must be able to lead detailed evidence with respect to the conduct and the physical and mental impact on him or her as a result.
STEP 3: POTENTIAL EFFECT ON FUTURE NEEDS
One party's conduct may have an impact on the future needs of the other party. For example, family violence, physical, mental and emotional abuse may play a significant part in a person's ability to find employment when the relationship or marriage is dissolved. The unemployed or underemployed party may receive an adjustment in his or her favour for future needs but must show evidence that the conduct caused the impact.
Given that the impact of conduct on the Balance Sheet may not be taken into account, the Court may consider it in this section. For instance, if it is shown that a party has gambled funds (the total losses being known or unknown) or consumed alcohol excessively (the total expenditure being known or unknown), this may potentially represent an adjustment in the other party's favour when it comes to a final property settlement pursuant to Section 75(2)(o) of the Family Law Act 1975 which relates to 'any fact or circumstances, which in the opinion of the Court, the justice of the case requires to be taken into account'.
WHAT DOES THIS MEAN FOR A PARTY?
The hundreds of pages of bank statements and credit card statements that are exchanged in a family law matter may hold valuable information which allows a party to make a case in their favour when it comes to assessing contributions.
If a party can provide evidence to prove (or disprove, should the application be made against him or her) that there has been a course of conduct by the other party that has affected his or her capacity to make contributions (which is more than an inference), it is possible for him or her to obtain an adjustment for contributions. However, the adjustment is only granted in a 'narrow band' of cases depending on circumstances and trial judges may use their discretion not to apply the principle at all.
If a party can provide evidence to prove or disprove that the conduct of a party caused them to have increased future needs such as impacting on their health, future earning capacity, or such other matter that needs to be taken into consideration, it is also possible to obtain an adjustment for future needs factors.
The existing principles concerning the relevance of domestic violence and misconduct has been criticised by a number of trial judges and academics, as well as some members of the legal profession. However, amendments in this area are unlikely to occur quickly and at the time of writing remain as above.
Footnotes
1 Chisholm, R and Jessup, O. Fault and Financial Adjustment under the Family Law Act [1981] UNSW Law Journal 43
2 Stanford v Stanford (2012) 247 CLR 108
3 Kowaliw & Kowaliw [1981] FLC 91-092
4 Owen & Owen [2015] FCCA 2823
5 [2014] FCCA 1667
6 [2016] FCCA 2072
7 Kennon & Kennon [1997] FamCA 27; (1997) FLC 92-757
8 Ibid
x9 Spagnardi & Spagnardi [2003] FamCA 905
10 Palmer & Palmer [2010] FMCAfam999
11 Kozovska & Kozovski [2009] FAMCAfam 1014
For further information please contact:
Sherlene Heng, Senior Associate
Phone: +61 2 9233 5544
Email: SXH@SWAAB.COM.AU
Amy Pun, Graduate Solicitor
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
