COVID-19 | Protecting your property outcome in Divorce during the COVID-19 crisis

At this early stage of the health crisis caused by COVID-19, many people are worried about how they are going to make ends meet, particularly in view of the negative impacts upon the domestic economy and the global economy. Uncertainty about the duration of the economic effects will inevitably concern parties in financial cases before the family law courts. Recently separated couples, who are negotiating away from the Courts, may also have the same concerns relating to:

• income and loss of employment;
• cash flow and decline in business revenues;
• falling share markets and superannuation account values;
• the valuation of businesses and real estate; and
• where real estate is to be sold as part of any property settlement, what sale price may be achieved.

Adjournment of Property Proceedings

Under the Family Law Act 1975 (Cth) (the Act), the Court has the power to adjourn property proceedings in certain circumstances. The relevant sections are Section 79(5) of the Act for married couples and Section 90SM(5) for de-facto couples. The criteria defined for the exercise of the power to adjourn the case for a significant period include:

1. 1. where there is likely to be a significant change in the financial circumstances of the parties to the marriage or de facto relationship or either of them, and that, having regard to the time when the change is likely to take place, it is reasonable to adjourn the proceedings; and
   2. where an order that the Court could make in relation to the property of parties to a marriage or de-facto relationship or either of them, if that significant change in financial circumstances occurs, is more likely to do justice as between the parties to the marriage or de-facto relationship than an order that the Court could make immediately with respect to property.

Interestingly, the Act explicitly states that in forming an opinion as to whether there is likely to be a significant change in the financial circumstances of either or both of the parties to the marriage or de facto relationship, the Court may have regard to any change in the financial circumstances of a party that may occur by reason that the party:

(a) is a contributor to a superannuation fund or scheme, or participates in any scheme or arrangement that is in the nature of a superannuation scheme; or

(b) may become entitled to property as the result of the exercise in his or her favour, by the trustee of a discretionary trust, of a power to distribute trust property.

The latter prescribed examples do not however limit the Court’s discretion in forming an opinion that there is likely to be a significant change in the financial circumstances of a party.

What must be established?

In Grace v Grace (1998) FLC 92-792, the Full Court held that there are a number of preconditions  which collectively must be established to invoke the Court’s power to grant an adjournment including:

1. 1. there is likely to be a change in financial circumstances;
   2. the change must be significant;
   3. having considered the likely and significant change, it is reasonable to adjourn the proceedings; and
   4. an order for an adjournment if that significant change occurs is more likely to do justice and equity between the parties, than an immediate order.

If the Court exercises its discretion to adjourn the determination of the property case, it may do so for a specified period or until the happening of the expected future event that supports the adjournment (or until whichever first occurs).

Managing your family law property case at the present time

At this early stage of the COVID-19 infection, we anticipate a differential impact upon the negotiating behaviours of parties that are yet to conclude their property settlements. The immediacy of the negative economic impact upon some businesses is likely to see adjournment applications made for those cases that have final hearing dates in the near future, where the parties or either of them is a business owner adversely effected by a loss of earnings.

Some parties and lawyers will ”self-manage” the option of a formal adjournment by postponing the timing of valuation reports, private mediations and settlement conferences, subject to each party having sufficient cash flow and access to financial resources. Some parties will choose to press on with the finalisation of their property case on the basis that the negative economic effects of the crisis are shared or cushioned between them in the composition of the settlement.

At Gadens, our Family and Relationships Law Team is well equipped to advise and assist clients that are dealing with the ramifications of the present health crisis in their families, whether in property cases or parenting matters. We invite you to phone one of our partners in our Melbourne or Sydney offices if we can help you or someone you know.

For details of all our COVID-19 tips and updates, visit the Gadens COVID-19 Hub.

Authored by:

Paul Lewis, Partner
Katherine Evans, Associate