Initial Contributions – How Important Is What You Brought In To A Marriage?
Upon separation of a married or de facto couple, parties arrange the division of assets, liabilities and superannuation in an agreement called a property settlement. This can be either agreed upon by the parties or determined by a court following a contested hearing. Oftentimes, property is not divided perfectly equally. So the court a five-step test in assessing the parties’ entitlement to an adjustment in property rights.
1. Consider whether it is just and equitable to alter any of the parties’ property rights;
2. Establish the current property pool by determining the parties’ assets and liabilities;
3. Assess the contributions of each party to the relationship;
4. Assess each party’s future needs;
5. Consider whether the proposed division is just and equitable.
The third step considers the contributions of each party to the relationship. These may be direct or indirect, financial or non-financial. One primary financial contribution parties often make to the relationship is that of initial contributions.
At the commencement of a relationship, parties bring to the relationship existing assets in the form of cash, land, real property or otherwise. These assets are the parties’ initial contributions.
The court has no clear formula to apply in assessing initial contributions. In longer relationships (lasting more than 5 years), the court views contributions broadly. The passage of time is seen to have the effect of blurring divisions in asset acquisition and maintenance. Conversely, in shorter relationships, assets may be more distinguishable. Therefore, the court may more readily identify who has contributed what to the relationship and how much. Ultimately, each case will be assessed on its own merits and specific circumstances to the Judge’s discretion.
Because the acquisition and application of assets are more feasibly discerned in shorter relationships, initial contributions have a large impact on the final division of property. The assets acquired by the parties jointly will likely be minor, while initial contributions forming the majority portion of the relationships current property pool.
The longer the relationship, the less weight likely is applied to initial contributions. These contributions need to be assessed against other contributions made over the length of the relationship. This may be a significant imbalance, given the length of time.
In Jabour & Jabour  FamCAFC 78, the Full Court of the Family Court assessed the initial contributions of parties who were married over 20 years. The husband’s initial contributions included a half share in three parcels of land, purchased 13 years prior to the marriage. During the marriage, the husband sold two of these parcels to acquire the other half share of the third parcel of land. This parcel of land, now fully acquired, was rezoned for residential use. At first instance, the trial judge assessed the contributions made by the parties during the relationship as equal. However, the third parcel of land brought into the relationship by the husband still formed a major portion of the current property pool. Thus, the husband’s contribution was assessed as 66% and the wife’s contribution as 34% of the property pool.
This decision was reversed by the Full Court, reassessing the contribution to be 53% in the husband’s favour and 47% in the wife’s favour. In doing so, the Full Court confirmed the following principles:
- The parties’ contributions during the relationship cannot be minimised. Initial contributions must be assessed against those made during the relationship. The trial judge overlooked these contributions, which included:
- The decision not to use all the sales proceeds from the half shares in the two parcels of land for family purposes, and
- The decision not to sell the third parcel of land at an early stage.
- If an asset increases in value and it is not due to the efforts of the parties, it is considered a contribution by both parties. Therefore, the increase in value of the third parcel of land due to the rezoning for residential use cannot be considered a contribution solely by the husband. Therefore, both parties must equally benefit from the increased value.
- An increase in the value of an asset that is not due to the efforts of the parties is considered a contribution by both parties. The increase in the value of the third parcel of land was due to the rezoning of the land for residential use. The Full Court found that the husband cannot be afforded the benefit of that increase in value of the property as a contribution by him.
Ultimately, the Court has total discretion over how to assess the contributions of the parties, jointly or individually, in determining how to divide property. It is a complex area of law, which our specialist family lawyers have the knowledge and experience to assist. It is always important that you seek specialist legal advice to ensure your interests are best protected. Contact our team today.