I recently attended the Family Law Intensive Series in Sydney and one recent case highlighted was Hurst & Hurst. What makes this case interesting was that it considered how contributions were assessed in long marriage where an inheritance was received. The scenario where inheritances are received by one or both parties during a long marriage frequently arises.
The initial decision provided for a 60:40 division of the property pool in favour of the husband. The wife appealed the judgment, asserting that the discretionary assessment of contributions made by the Judge was incorrect. Subsequently, the orders made by the Judge were set aside.
The couple had married when the wife was 18 years old and they had four children together. The wife remained a homemaker throughout the relationship while the husband was the primary earner, earning a modest income. At trial, the husband was 66 years old and living in the matrimonial home and and the wife, aged 56, was living in rented accommodation. Both parties agreed that the wife would not have much prospect of gaining employment.
At the time of trial, three of the four children were adults. The eldest son was said to have psychiatric health issues. He and the youngest child, aged 13, were living with their mother who was on Centrelink benefits with minimal child support provided by the father.
Both the husband and wife received inheritances during the 38 year marriage however the husband’s inheritance, received 13 years prior to separation, was of significantly more value than any inheritance or gifts received by the wife. The husband had inherited a property which was valued at $400,000 when received by him and had increased in value to $1.8m by the time of trial.
The Initial Judgment
At trial, the Judge ruled that the inherited property would not be considered as part of the asset pool for division stating “it cannot be said that the wife has made any contribution to this property other than indirectly by the rates and slashing costs being paid”.
Basis for Appeal
The appeal sought to recognise that the property should not have been isolated from the asset pool in the initial judgment. It also highlighted the duration of their marriage (38 years), the nature of their roles, the wife’s likely inability to gain employment. As to assessment of contributions, it was recognised that in addition to market forces, re-zoning had taken place, significantly adding to the inherited property’s value.
The Full Court granted the appeal and identified that the Judge made an error in her assessment of the contributions stating that it “wreaks an injustice upon the wife”. The Full Court found that the ruling was made by a broad assessment and did not take into account the nature of the contributions made by way of roles in the relationship and the longevity of the marriage.
The argument for appeal presented the percentage difference of the 60:40 ruling in dollar terms – that is, the husband was to receive $530,000 more than the wife.
The appeal was allowed and the case was sent back for a re-hearing. The further installment is yet to be heard.
So what can be learned from this case so far?
The filing of the appeal by the Wife caused the Court to revisit the case and the assessment of contributions in a long marriage.
In particular, the treatment of inheritance, and the weight to be given to it was reconsidered.
It has also highlighted that when the difference between a separating couple’s property division is described in dollar terms instead of a percentage, the reality of the disparity or differential, becomes more evident.
For people who are separating, it is important to seek advice before you begin negotiating or agreeing to any terms relating to property arrangements, even if the end of the relationship seems amicable.
For accountants or financial advisors who become aware of clients who are receiving significant inheritances, if they have indicated to you that there are some marriage difficulties, it is wise to refer them on for legal advice early about how the inheritance is applied by them and how they may manage that in the event of a separation.
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