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Can your Affair End in a Property Settlement? Family Law Lawyers Delve Into This

If you’re having an affair, something that you may want to consider is whether the person you are having an affair with can claim your property after the relationship breaks down.

Firstly, your family law lawyers will need to consider whether your affair amounts to a de facto relationship. Considerations include the duration of the relationship, whether you have lived together, whether you attend events together socially, and whether you depend on each other financially.

The case of Jonah v White (2011) considered whether someone you are having an affair with can amount to a de facto relationship. In this case, the Husband (H) had a 17 year long affair with a woman (Ms J). During the affair, H continued to live with his wife and three children. Family law lawyers for Ms J argued that the relationship she had with H amounted to a de facto relationship under the Family Law Act.

The Court said that “The key to the definition is the manifestation of a relationship where the parties have so merged their lives that they are, for all practical purposes, living together as a couple on a genuine domestic basis. It is the manifestation of “coupledom”, which involves the merger of two lives as just described, that is the core of a de facto relationship as defined [by the law]”.
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Divorce Lawyer Explains section 114 Orders – Restraining Travel to Enforce Property Settlements

A divorce lawyer explains how the Family Court can impose restrictions on travel to ensure compliance with Family Court Orders.

In accordance with section 114 of the Family Law Act, the Family Court has the power to restrain a person from leaving Australia pending compliance with Family Court Orders, including final orders.

The Court will consider the following:

  1. A person’s freedom of movement, and
  2. The likelihood that the Order will not be complied with if the paying party’s freedom to leave the country is not restrained.

Ultimately, the Judge is faced with a balancing exercise and will consider whether the person’s compliance with the Orders outweighs their personal freedom of movement.

Example: Rahman v Rahman

In the 2012 decision of Rahman v Rahman, the husband was Ordered to pay to the wife a sum of $377,000 and was restrained by injunction from leaving Australia until he complied with that Order. To ensure he did not leave Australia, he was Ordered to hand in his passports to the Court and was placed on the Australian Federal Police watchlist. The husband appealed the final Orders which was dismissed. In 2020, the husband’s divorce lawyer was heard on a further application regarding the 2012 Orders again claiming that the Orders significantly impede on his freedom of movement. Judge Rees rejected the husband’s argument that given he has not made any payments to the wife over the 8 years that the “the Court should simply “give up” and allow him to travel.” If he was permitted to travel he would have no incentive to comply with the original Orders. The husband’s application was ultimately dismissed.
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How Binding Financial Agreements can let you Decide the Terms of your Property Settlement Agreement

A Binding Financial Agreement (BFA) allows couples to negotiate a property settlement agreement that suits their needs. Unless successfully challenged, it will  prevent the Family Court from dealing with your future property or spousal maintenance claims.

Binding Financial Agreements can be made:

  1. Before a marriage under a s 90B Agreement, also known as a “pre-nuptial agreement” or “prenup”;
  2. During a marriage under a s 90C Agreement – this is typically exercised during the period between separation and divorce; or
  3. After divorce under a s 90D Agreement.

A BFA can be drafted with your family law lawyer to formalise a property settlement agreement between you and your former spouse. It is an alternative means to going to Court which can be timely and expensive. The Court does, however, have the power to set aside a BFA  in certain limited circumstances.

In order to be binding and enforceable on the parties, BFAs must adhere to certain requirements including:
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Recent Family Court Case Sheds Light on What Initial Contributions are Really Worth?

On 1 May 2020, the Family Court handed down the decision of Barnell & Barnell. This matter involved a wife’s separation lawyer seeking to appeal a final judgment based on the Court’s treatment of the husband’s initial contributions.

The husband purchased Property B in 1988 prior to the commencement of the relationship in 1995. While no valuation was conducted on the property as at the commencement of cohabitation, the current value was agreed to be $340,000.

Given the length of the relationship and consistent gifts of money from the wife’s parents, the wife’s separation lawyer argued that the overall contributions of the parties should be considered equal. The Judge disagreed and said that to do so, would be to give insufficient weight to the fact that Property B was unencumbered at the commencement of the relationship and has not since been improved by either party. As the value of Property B represented some 36% of the net property pool, the Judge held that the husband’s contribution must be accorded significant weight. The Judge made an assessment of contributions as 62.5% to the husband and 37.5% to the wife being a 25% difference in contributions to reflect the various contributions of both parties.
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Will Expected Inheritance Be Included in My Family Property Settlement Agreement?

An expected or future inheritance is an inheritance that one party is expecting to receive once the testator passes away. Will the Family Court take into consideration a future or expected inheritance in your divorce settlement? If you or your ex-spouse are anticipating an inheritance, say from an elderly parent, you may want to get some advice regarding how this may impact your property settlement agreement.

In the 1995 case of White & Tulloch the Court noted that the expectancy of inheritance will generally not amount to a financial resource to be considered in your property settlement agreement. The term financial resource involves some degree of “entitlement to, control over, or relative certainty of receipt of property”. On the other hand, a will has been described as a mere expression of intention at the time it was made. They may be revoked or altered and only have legal effect upon the death or the testator. In this case, the expected inheritance of an elderly parent was not included in the divorce settlement.
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The Bank of Mum and Dad – Gifts from your Parents and Property Settlement Agreements

The Australian housing market is difficult to break into for most first home buyers and many couples have looked to their parents for some assistance to get their foot in the door. For many, parents may provide assistance to their children by allowing them to live at home rent-free or contributing to their deposit in the form of a gift or loan.  In many cases, “the bank of mum and dad” is crucial to helping relatives to be able to buy their own home.

As it becomes more common for parents to provide financial support to the parties during a de-facto relationship or marriage, there is an increasing likelihood that these “third parties” may become involved in a dispute concerning a property settlement agreement between the parties if the relationship was to break down.  For example, where there is an argument as to whether money received by the parties (or either of them) was a gift or a loan to be repaid.
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Valuing the Family Home in Family Law Matters

Family Law Property Settlement

The Family Law Act 1975 (Cth) gives the Family Court power to divide property in the event of separation and relationship breakdown. In doing so, the Family Court adheres to a four step process as follows:

  • Identify and value the property, liabilities and financial resources;
  • Assess the contributions;
  • Assess any relevant future needs; and
  • Consider the effect of those findings and determine what order would be just and equitable.

Valuation of Real Estate

Quite often your family or matrimonial home is your most significant asset. Accordingly, there is often some argument during step 1 over what value to assign the property. As a general rule property will be valued as at the time of the final hearing. The Court will value all properties currently owned by you and/or your former spouse.

Firstly, the parties are able to negotiate and agree on the value of the property. An advantage of this avenue is that it allows the former couple to decide the value of the property themselves.
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The Basics of What Your Exs Company is Worth: The Balance Sheet

One way to determine what you or your former spouse’s company is worth is to instruct your divorce lawyer to engage a single expert valuer to put a dollar figure to the value of the business. Your divorce lawyer will then instruct the valuer to analyse the company’s financial statements among other things to determine the value for the purpose of your family property proceedings.

A company’s financial statements are made up of the following:

  1. Balance Sheet
  2. Profit and Loss Statements (Or Income Statement)
  3. Cash Flow Statement

 

The Balance Sheet

The balance sheet is a snap shot of a company’s accounts. It provides at a glance what the company owns and is owed. It can give an indication of the financial position of the company at a single point in time.

The balance sheet depicts a company’s assets, liabilities and owner’s equity (net worth). Assets include cash, office equipment eg chairs and desks, all inventory and accounts receivable which refers to people who have bought from the company but have not yet paid.  Non-current assets are also listed under assets which include the building and land, goodwill, patents and copyright.

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