It is not uncommon for a newlywed couple to receive gifts from their parent(s). Some gifts can be significant, such as real property. An important question is what will happen to those gifts when the marriage fails. We will look at Wallis & Manning  FamCAFC 14 (‘Wallis & Manning’) to help you understand how the court divides a significant gift between a couple after the breakdown of their 27-year marriage–with a focus on the assessment of the parties’ contribution. An important aspect of this case is how the length of the marriage can affect property division between the parties.
Before examining the case, it is necessary to set out the four main steps courts usually take in dividing property:
Step 1: Identify and valuate the parties’ assets;
Step 2: Identify contributions of each party, including both financial and non-financial;
Step 3: Consider additional factors, including age, state of health, income earning capacity, the property of each party, whether the party has the care or support of children, the financial circumstances of any new relationship and the duration of the marriage, among others; and
Step 4: Consider the practical effect of any proposed settlement, to ensure the result is just and equitable in all the circumstances.
Note that our discussion of Wallis & Manning is focused on Step 2, namely to identify the contributions of each party.
Wallis & Manning concerns an appeal to the Full Court of the Family Court (‘the Full Court’) from Demack J’s property settlement orders under the Family Law Act 1975. The Husband and the Wife had 27 years of marriage. By the end of the marriage, their children were all adults. Their property mainly comprised three pieces of real property (Property N, G and W), upon which the parties had conducted a farming business. The Husband’s father gifted to them a half share of Property N two years after their marriage and a half share of Property G and the associated water licenses one year later. Both parties agreed that the father’s gifts should be treated as the Husband’s direct contributions and that the farm assets should be retained by the Husband.
In the first instance, Demack J–in his Step 2 assessment–fixed the contributions of the Husband and the Wife at 70% and 30%, respectively. In her Honour’s Step 3 assessment, Demack J made an adjustment of 10% to the Wife, resulting in the ultimate division of the property in 60% to the Husband and 40% to the Wife.
APPEAL AND OUTCOME
On appeal, the Wife claimed, among others, that Demack J gave excessive weight to the contributions by the Husband’s father and insufficient weight to her contributions over the course of a long marriage. She also asserted that Demack J incorrectly considered Property W as part of the gifts by the Husband’s father.
The appeal was allowed. The Full Court held that Demack J had erroneously taken into account the extent and timing of the father’s gifts in assessing Step 2 contributions. It also agreed with the Wife that her Honour wrongly considered the farming land at Property W as part of the gifts by the Husband’s father.
In re-exercising the discretion, the Full Court considered a number of comparable cases and accordingly assessed the Step 2 contributions at 57.5% and 42.5% to the Husband and the Wife respectively. A further 7.5% adjustment was made in Step 3 assessment in the Wife’s favour, ultimately resulting in the equal division of the property between the parties. No Step 4 adjustment was made, as the court considered an equal division was just and equitable.
STEP 2 ASSESSMENT
The Full Court’s Step 2 assessment is particularly interesting. The court found fault with Demack J’s treatment of the significant gifts by the Husband’s father. Specifically, the court noted that the approach of Demack J was first to arrive at a result by reference to relevant contributions other than the gifts and then to consider the gifts only for making an adjustment to the prior result. The court maintained that this approach was erroneous; instead, those gifts should be considered as a contribution together with other contributions (‘a global approach’).
An important consideration to the court in taking a global approach is the length of the marriage. The Full Court cited Fogarty J in Waters and Jurek (1995) FLC 92-635:
‘When the marriage ends, especially where that marriage has been a long one, one cannot separate the parties as individuals from the people they became in the context of the marriage relationship, and the allocation of roles, duties and responsibilities which it entailed.’
In re-assessing the Step 2 contributions, the Full Court mainly balanced the gifts against two other considerations. The first was that the gifts were made at the early of a long marriage. Given that, there should be a significant reduction of the proportionality of the original contribution as per a well-settled rule. The second was that the improvements of the gifts were attributed to both parties’ considerable efforts throughout the marriage in roles that both ‘differed and overlapped’.
Relevantly, while the Wife worked for the farm business during part of their marriage, her overall roles were more on parenting, with the Husband primarily taking care of the farm business. Despite their roles having a different focus, both parties had made efforts ‘to the maximum of their respective capacities and abilities’. The court thus accorded equal value to their differing roles.
AN IMPORTANT LESSON FROM THIS CASE: A GLOBAL APPROACH IS PREFERRED FOR A LONG TERM MARRIAGE
In making the Step 2 assessment, the Full Court in Wallis & Manning adopted a global–rather than an asset-by asset–approach. In other words, the court sought to determine the overall contribution made by each party to their property as a whole.
Evidently, this approach also reflects a partnership notion of marriage, in which the parties are treated as equals that make collective efforts—albeit in different roles. It tends to create a more favourable outcome for women in circumstances where their main contributions are non-financial. This is particularly the case where there is a family farm involved. A farm, typically inherited by the husband to the marriage, would otherwise be perceived as the husband’s dominant contribution, to the disadvantage of the wife.
Important to this approach is the length of the marriage: a long-term marriage is considered in alignment with a partnership ideal, thereby justifying a global approach, while there will be more scrutiny of the parties’ contributions for a short-term marriage.
RN LEGAL has assisted many clients in resolving their family law property disputes. RN LEGAL has the experience, expertise, and resources to help you in this area. Contact us on (02) 9191 9293 or [email protected] if you or anyone you know require relevant advice or assistance.