current at 28 May 2024

How is property acquired after separation treated?

As with many issues in family law, it depends on the circumstances.

Property was said in Jones v Skinner[1] to be

“the most comprehensive of terms (to describe) every possible interest a party can have”.

The Court has the power to alter interests in property regardless of when it was acquired or in whose name it is held. It is also very important to be aware that the identification and valuation of assets occurs at the time of final agreement/judgment and not at the time of separation.

This means that any increases or decreases in values after separation have a potential significant effect on the amount each party is to receive.

This is particularly relevant in 2024 as it is likely that it will take 3 (or more) years for a matter to be reached for final hearing in the Family Court of Western Australia. In that time, significant changes may have occurred to the financial position of each of the parties.

While the global approach is more commonly adopted, in certain circumstances, it can be appropriate for after acquired property to be put into a separate pool for the purpose of considering contributions – for instance, an inheritance that is received after separation may be put into a separate pool and an assessment of contribution to that inheritance considered.

It is important to note that this does not quarantine or exclude the asset/s from the pool – that approach is misleading as the Court is required to consider all of the parties’ existing legal and equitable interests in property regardless of when and how they were acquired.

The discretion to be exercised by the Court in adopting a one or multiple pool approach is not limited by, and in individual cases may not even be informed by reference to the time at which a particular item of property is acquired. Rather, the discretion is exercised by reference to the

“nature, form and characteristics of the property in question and the nature, form and extent of the parties’ contributions of all types across the entirety of their relationship”[2].

The important question that the Court will consider is whether the parties will achieve a just and equitable outcome if the 2 (or multiple pool) approach is adopted.

If there are 2 or multiple pools, the Court will assess contributions made by the parties to each individual pool. If the Court determines that no contributions have been made by one party to a pool of assets, that party may not receive any share or interest in the assets set out in that pool (save as a factor for consideration under section 75(2)(o) of the Family Law Act 1975, and its equivalent in the Family Court Act 1997).

Where a relative of one of the parties gifts property to that party, it is a financial contribution and one made directly to the acquisition, improvement, and conservation of the property of the parties. In such a case it is open to the Court to conclude, if the facts justify it, that the contribution was made on behalf of that one party.

It is unlikely that the other party would be regarded as contributing significantly to an inheritance or gift received by one party late in the relationship or after separation except in unusual circumstances. 

Even when property is gifted to both parties, depending on the circumstances of the case it is open to the Court to look at the actuality and treat that as a financial contribution made directly on behalf of the spouse relative.

It is important to consider how the facts of each individual matter apply as each case may be different and you should be careful not to make assumptions as to the characterisation of the property.

Some examples of approaches taken by the Court are as follows:

• In Calvin & McTier[3] the Husband received an inheritance 4 years after separation which represented 32% of the total assets at the time of trial. The limitation period had in fact expired but the Wife was granted leave to commence property proceedings out of time in this case.
  • The trial magistrate made orders to divide all the property (including the inheritance) in favour of the Husband.
  • The Husband appealed on the basis that the inheritance should not have been included in the pool of assets available for division.
  • The Full Court dismissed the Husband’s appeal and stated that

 “the court retains a discretion as to how to approach the treatment of after-acquired property. The trial magistrate could have included the inheritance amongst the property to be divided or dealt with it separately”

• In Farmer & Bramley[4] the Husband received a lottery win after separation. But for this win, the assets were nominal. The Court took into account the lottery win with the other assets in the one pool and assessed the Wife’s contributions and relevant section 75(2) factors accordingly.
• In S and S[5] the Husband inherited his father’s farm after separation. The value of the farm was about 98% of the total net assets of the parties. The Court determined that the parties had worked very hard throughout their fairly lengthy relationship and had made sacrifices in the hope that one day the husband would inherit his father’s property. The trial judge determined contributions as 82.5% to the husband and 17.5% to the wife of the total assets, which included the value of the farm.
• In Elgabri & Elgabri[6] after a long marriage, the Husband inherited $527,000. The trial judge assessed the parties’ contribution based entitlements to the non-inherited assets (worth $826,072) as being equal. He assessed the Wife’s contribution based entitlements to the inherited assets as being 5% and gave the Wife a further 7.5% as a section 75(2) adjustment of the non-inherited assets.
• In Chan & Chih (No. 2)[7] the trial judge determined that there should be 2 pools and assessed the Wife’s contributions to the first pool at 100% and to the second pool at 30%.
• In Whatley and Whatley[8] the trial judge agreed with the parties approach that in the circumstances of the case a three pool approach was appropriate as the assessment of contributions and consideration of prospective factors led to a conclusion that neither should have any entitlement in relation to the separate property of the other nor any responsibility for the associated liabilities.
• In Stella & Stella[9] the trial judge held that substantial contributions were made by or on behalf of the parties to the property within Pool A and determined contributions of 40% to the wife and 60% to the husband. In relation to Pool B the trial judge determined it would not be just and equitable to alter the parties’ respective interests therein as neither party could be said to have contributed relevantly to the inheritances received by the other shortly prior to separation.

This was in fact a case with unusual circumstances in which the Wife developed a close relationship with the Husband’s grandmother. The Wife was specifically named in the grandmother’s will as the “granddaughter in law” and had also received gifts during her lifetime. The Husband contended that the inheritance was a financial contribution made by him as the wife only received the inheritance by virtue of being married to him. The Court disagreed given the separate bequests which formed Pool B.

It is important to bear in mind that while some general principles are espoused in this article, from the cases it is clear that each family law matter must be carefully considered on its own facts to ensure that the right approach is taken.

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Disclaimer

This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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[1] Jones v Skinner (1835) 5 LJ Ch 87

[2] Holland & Holland [2017] FamCAFC 166

[3] [2017] FamCAFC 125

[4] [2000] FamCA 1615

[5] [2008] FCWA 26

[6] [2009] FamCA 227

[7] [2018] FamCA 822

[8] [2023] FCWA 110

[9] [2023] FedFamC1F 1092