By Anastasia Zasentseva
Separating from a partner or spouse is a difficult and often stressful process. Particularly when one party maintains control over joint assets or has a significantly higher earning capacity, financial separation can create significant challenges. In this guide, we will delve into interim property orders in family law, providing a comprehensive understanding of what they are, how they work, and why they are crucial for individuals navigating the intricate landscape of separation and financial settlement.
The Challenge of Financial Separation
Post-separation, financial matters can become increasingly complex due to several factors:
- Control Over Assets: One party may maintain control over joint assets or possess a more substantial earning capacity.
- Withdrawal from Workforce: In some cases, one party may have withdrawn from the workforce during the relationship to assume the role of the primary caregiver for the couple’s children.
- Time-Consuming Process: Resolving financial settlements can take months or even years, putting financial burdens on the party with lower earning capacity, who may require additional funds for daily living expenses.
To address these challenges, a party may seek “an interim property order” from the Family Court, which essentially serves as an advancement of funds before the final settlement is complete. These settlements are designed to counteract the financial inequities that arise during negotiations or legal proceedings and are considered in subsequent discussions and proceedings as a distribution in favour of the disadvantaged party.[1]
An interim property order may be an order to:
- distribute funds
- pay spousal maintenance
- sell assets
- disclose assets
- Pay legal fees[2]
- Pay educational costs.
To apply for an interim property order to the court, you will need to provide:
- financial statements
- Affidavit
- Any other evidence to justify an interim property settlement[3].
Requirements for a Successful Interim Property Settlement
The Family Court possesses the authority to reallocate marital assets between the spouses in a marriage. This authority is outlined in section 79(1) of the Family Law Act 1975 (Cth). Under sections 79 and 80 the Family Court has the discretion to make interim property orders when deemed appropriate and in the interest of justice. Section 90SM of the Family Law Act contains analogous provisions for individuals in a de facto relationship that has come to an end.
When seeking a partial property settlement, the applicant must convince the Court that it is in the interest of justice for the Court to exercise sections 79 and 80.[4] The Court will analyse the case through a 4-step process:
- Identification of the source of finance: Value of assets, liabilities, and resources of either or both of the parties.[5] This includes real estate, investments, business interests, superannuation, cash at bank, and debts. The outcome of this step is what is commonly referred to as the “net asset pool.”
- Assessment of Contributions: The Court in accordance with section 79(4)(a)-(c) or section 90SM(4)(a)-(c) of the Family Law Act will assess the contributions each party made to the acquisition, conservation, and improvement of the marital assets. These contributions can be financial, such as wages, or non-financial, such as homemaking and parenting roles. Contributions made before the commencement of the relationship or after separation may also be considered.
- Assessment of Future Needs: These may include age, health, financial circumstances, ability to earn, and the necessity to care for any children. This assessment aims to address any economic disparities between the parties that may persist after the termination of the marital relationship. There must be a party with majority control of assets or relative financial strength.
The court will analyse parties’ future economic circumstances in relation to the factors set out in section 79(4)(d)-(g) or section 90SM(4)(d)-(g) of the Family Law Act.
- Just and Equitable: The Court must be satisfied that, in all the circumstances, it is just and equitable to make interim orders.[6] Compelling circumstances must be shown and a reasonable explanation for the intended use of funds needs to be provided by the applicant.
In the case of Sully v Sully (No. 2) [2016] FamCA 706, the court rejected the wife’s request for a $10 million partial property settlement as it was deemed premature and not “just and equitable” at that stage of the proceedings. The court expressed concerns about the lack of evidence regarding the husband’s company’s value and tax implications, and it considered the uncertain living arrangements of the children. Consequently, the court ruled against the request.
It’s crucial to note that the court does not make interim property settlements, without careful consideration of each party’s circumstances. The applicant must convince the court that they will ultimately receive more in the financial settlement than they are requesting on an interim basis to prevent potential injustices when the relationship’s assets have already been spent.
When the court issues this order, it is referred to as an “add-back.” The funds distributed to a party through an interim settlement are acknowledged and added back to the asset pool’s value available for distribution but are recognized to have been distributed in one party’s favour already.
In Sudono & Sudono [2010] FamCA 54, the Court directed the husband to give the wife $500,000 to buy a house but placed restrictions preventing her from selling it until the final property settlement. This ensured her accommodation without altering the property pool’s value, and it didn’t impact the final settlement’s outcome.
Under section 117 of the Family Law Act, that Court may make cost orders where circumstances justify doing so. Such orders are commonly referred to as “Hogan Orders,” named after the Hogan case [1986] FamCA 34. In the case of Oates & Crest (2008) FamCAFC 29, the wife was directed to pay the husband’s legal fees amounting to $80,000, along with re-establishment costs and maintenance.
Form of Payment
Under section 80 of the Family Law Act, the Court has the power to make interim property orders by way of payment of a lump sum in one payment or by instalments or periodic payments.
If a Spouse Dies before the property settlement begins
Even after the death of a party to the marriage, an interim order, under s 80(1)(h), is permissible, so long as the requirements of s 79(8) are satisfied. Section 79(8) empowers the Family Court to give effect to the moral claims in respect of the property of the spouses which was made available to answer those claims by the commencement of the proceedings, provided ‘it is still appropriate to make an order with respect to property’: section 79(8)(b)(ii).[7]
Limitation Period:
It is important to remember the time restrictions that apply in relation to seeking orders for a property settlement.
- For married couples, the limit is 12 months from a nullity decree or a divorce decree becoming absolute.
- De facto couples have 2 years from the date of separation to file an application.
Conclusion
Navigating financial separation in the aftermath of a relationship is a challenging journey, particularly when there are significant disparities in financial resources. Partial property settlements serve as a valuable tool to address these disparities and ensure financial fairness during the often-protracted process of reaching a final settlement. Understanding the legal framework, gathering essential evidence, and seeking expert legal advice when needed are vital steps in effectively navigating these complex legal proceedings.
Foulsham and Geddes notes that this article is written for the purpose of providing generalised information and not to provide specialised legal advice. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Foulsham and Geddes are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.
[1] Carter Dickens Lawyers, Partial Property Settlement in FC Proceedings (2022)
[2] Cudmore Legal, Interim Property Settlement
[3] ibid
[4] May & May [2022] FedCFamC1F 227, 27.
[5] Swiftly Legal, Property Settlements Family Law Act
[6] Family Law Act 1975 (Cth) s 79(2); Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52.
[7] In the Marriage of Fisher [1986] HCA 61; (1986) 161 CLR 438, 457-458.