Negotiating and Finalising Property Settlements After Separation: Consent Orders, BFAs and the “Just and Equitable” Test

Negotiating finalising and documenting a property settlement between separated couples usually involves a number of steps and sub-steps to ensure that the ultimate adjustment of property is, as required by law, “just and equitable”.  These steps include:-

1. Identifying and valuing the property pool – this step involves a number of sub-steps including:-

1. 1. An exchange of relevant financial documents such as payslips, tax returns, bank records/statements and superannuation statements;
   2. Valuing any property the value of which is in dispute.  Property can include real estate, shares in private companies, business interests or other investments and motor vehicles; and
   3. Assessing the contributions of each of the parties.  This is an historical analysis which includes assessing each parties’ direct and indirect financial contributions, contributions as homemaker and parent taking into account any history of domestic violence and the impact that had on the contributions made by either party. The assessment of contributions starts at the beginning of the relationship with a consideration of what each party brought into the relationship, assessing what financial transactions of significance occurred during the relationship and then considering if there are any contributions made post separation which are relevant.  At this step, there is a notional adjustment of property as between the separated couples.
2. Making an adjustment (if required) for future needs.  This would include consideration of a number of sub-steps including:-
   1. Considering the age and state of health of each of the parties;
   2. Whether there is any income differential and considering future income earning capacity; and
   3. Whether either party has dependents including children of the relationship;
   4. The need to house children in the future; and
   5. Any domestic violence which has impacted the financial position of either party.
3. Taking into account the net property pool identified in the first step, making an adjustment after assessing respective contributions and adjusting for any future needs, the final division of property and superannuation as between the parties needs to be within a range that the Court would consider “just and equitable”.

Usually, once the property pool has been identified and valued and contributions can be evidenced, negotiations take place for a property settlement to be effected.  Lawyers often talk about a “range” which refers to various possible outcomes if the matter was to be litigated.  Unfortunately, there is no formula which gives a mathematical outcome but rather the Family Law Act 1975 (“FLA”) sets out a number of factors which need to be taken into account for the Court to exercise its discretion and then make Orders adjusting property between separated couples.

Once agreement is reached between parties to effect a property settlement it can be achieved in two ways and only two ways.  The first way is by way of an Application for Consent Orders and Minute of Consent Orders submitted to the Court.  A Registrar of the Court considers the documents and if they consider that the proposed settlement is within the range of what a Court would consider “just and equitable” they will make the Orders “in chambers” which means that neither party nor their lawyer need to attend Court.  This is administratively achieved and the parties will receive a formally sealed copy of the Orders and the matter will be concluded.

If the Court officer called a Registrar considers the proposed settlement not to be “just and equitable” and can fall outside the “range” they will refuse to make the Orders.  Requisitions (otherwise known as questions) will be submitted to the practitioners and further information and details will be sought in an effort for the Registrar to understand the proposed settlement better.  If the Registrar is convinced that the settlement is just and equitable they will make the Orders.  If they still remain unconvinced they will refuse to make the Orders and the parties are left with no settlement.

In that situation, the parties’ only alternative is to enter into a BFA to document their settlement if they still wish to proceed.

Often in an effort to expedite matters and/or to save legal costs, parties agree to skip one or more of the above steps.  The eagerness to do so is understandable but can create problems in that a lawyer representing them is unable to provide them with proper and accurate advice as to whether the proposed settlement is what the Court would consider “just and equitable”.  Often in these situations the client is provided with written advice that their instructions are contrary to legal advice provided to them but that the lawyer is prepared to proceed on the basis that the client provides their instructions in writing by signing, dating and returning the letter of advice.  The letter of advice is then used by the lawyer to protect themselves against any future claim made by the client against them.

Although it is understandable that parties wish to expedite and document their financial settlement both quickly and cheaply so that they can move on with their lives, this may create future problems.  The preferred approach would be for there to be a limited exchange of relevant financial documents, a valuation of any property that may be in dispute so that a proper assessment can be made of contributions and an adjustment for needs so that both parties can be assured that the proposed settlement is fair and proper and not subject to any challenge in the future.

Pearsons Lawyers

This is general advice only.  Pearsons Lawyers have a team of specialist family lawyers who can provide timely and accurate advice on all matters that need to be dealt with following a separation including parenting and property matters.  To arrange your free initial consultation contact Pearsons Lawyers today on 1300 699 688 and “know where you stand”.