In my work with clients, one of the areas that people can find difficult to get their head around is the concept of being given a range of outcomes rather than a precise percentage when it comes to their property settlement entitlement. When we mention a range to our clients, for example, between 45% and 55%, that can be frustrating for them. It begs the question ‘how can it be such a large range?’
One of the things that people find challenging to understand about Family Law, in relation to property settlements, is that it is a discretionary area. If a mediation does not result in an agreement and it goes to court, a judge is required to exercise their discretion based on the evidence provided. Therefore when we are mediating we often stress the value of certainty of outcome.
Discretionary elements in property settlement
In a property matter, the first discretionary decision that a judge has to make is whether certain assets are within the pool. For example, a judge may decide that a piece of property inherited very late in the relationship or after separation, should not be in the pool for division. Another judge may decide that it should be in the asset pool for division. Similarly judges can treat an interest in a discretionary trust as an asset in the pool or in some cases only as a resource to be considered dividing the pool.
The second exercise of discretion is, assessing the entitlements on a percentage basis based on the contributions of both parties. For example, if one party has brought in significantly more at the beginning of the relationship or received significant financial assistance from their family or inheritances during the relationship this will impact on the judge’s assessment. It could be 60:40, it may be 70:30. The percentage depends upon how that judge considers the evidence and how the disparity and contribution should be weighted. Unlike some other international jurisdictions, there is no law in Australia that sets a fixed entitlement of 50:50 division.
The third discretionary element is when a judge considers both parties’ future needs and determines if any percentage adjustments are necessary based on factors including the earning capacities and roles with the care of children in the future. For example, if one party is left with the majority of the care of children and a diminished earning capacity, they may receive a percentage uplift to reflect this contribution to the relationship. Whether this percentage is, for example, 5%, 10% or 15% is decided upon at the discretion of the presiding judge after considering all the evidence.
Once these three discretionary elements have been covered, the court then makes a discretionary decision as to whether the outcome determined from going through these steps is just and equitable. The court has further discretion to adjust the settlement percentages again.
Prior to any of these steps, is a judge’s initial discretion about whether orders should be made at all. This is not uncommon in short relationships where couples have kept all bank accounts and assets separate during their relationship. A judge may decide that each party should keep what they have and that there is no need to make any adjustments.
Can I appeal the judgment based on discretionary elements?
Yes, you can apply to appeal your judgment but if the outcome is within the range of discretion of the Judge considered to be reasonable based on the evidence, an appeal court may not disturb it.
Negotiated settlement or go to Court?
While litigation is sometimes necessary, there are a variety of possible outcomes when a matter goes to court.
The outcome can depend on which judge oversees your matter and how they perceive you on the day.
As lawyers our first approach should always be to try to get an outcome that is commercially and legally sensible. In my work as a lawyer, I have had a small percentage of property settlement matters that have gone to trial. Of those who have, not one of them has come to me at the end of the experience and said ‘that was fantastic, let’s do it again’.
Tailoring an outcome with the assistance of a specialist family lawyer which is commercial, legally sensible and provides for certainty of outcome takes away the risk associated with the uncertainties of litigation.