Family Court Orders
The recent High Court decision in Stanford and Stanford highlights the importance of estate planning arrangements in blended families and the necessity for parties to clearly communicate their wishes to family members in the event of incapacity.
In Stanford, the husband and wife married in 1971, a second marriage for both parties. The husband and wife had children from their respective first marriages. In 2008, the wife suffered a severe stroke which required her to be placed in a care facility. The wife later developed dementia. The husband continued to live in the former matrimonial home and it was not disputed that the marriage continued despite the physical separation of the parties. The husband visited the wife and made provision for the wife’s financial needs. The husband and the wife’s children disagreed about the care needs of the wife.
On behalf of the wife, the wife’s daughter (from her first marriage) applied for a property settlement in the WA Family Court. Orders were made that the property of the parties to be divided 57.5% to the husband and 42.5% to the wife. The effect of the first instance decision was that the husband would have to sell the former matrimonial home to pay out the wife’s share of the property pool.
On appeal to the Full Court of the Family Court, the wife died before judgement was delivered. The case was continued by the wife’s daughter as personal representative of the wife. The Full Court recognsied that the wife had made contributions to the property owned by the parties and ordered that upon the husband’s death, the wife’s personal representative be paid the sum of $612,931.00 (or 42.5% of the property pool).
On appeal to the High Court, the decision of the Full Court was set aside, due to the operation of a specific section of the Family Law Act that operates on the death of a party to a proceeding.
That section (section 79(8)(b)) states, broadly speaking, that if proceedings are underway in Court and a party to those proceedings dies before those proceedings are concluded, the personal representatives of the deceased party can continue those proceedings.
However, and crucially, if that situation arises (i.e. a party’s personal representatives continue the proceedings) before the Court can make a final decision the Court must be of the opinion that:
- That it would have made an order with respect to property if the deceased party had not died; and
- That it is still appropriate to make an order with respect to the property.
So in the present case, before the Full Court of the Family Court proceeded to make its decision as to the division of property they were required to ask themselves if they would have made such a decision had the wife not passed away and, given that she had passed away, whether it would still be appropriate to make such an order.
In their decision the High Court made the following comment:
“……the Full Court made no separate inquiry into whether had the wife not died, it would have made a property settlement order. That inquiry required it to consider whether had the wife not died, it would have been just and equitable to make a property settlement order. And because the Full Court did not consider whether it would have made an order if the wife had not died, it did not make any express inquiry into whether it was still appropriate to make an order.”
The High Court went on to summarise their decision as follows:
“It was not shown that, had the wife not died, it would have been just and equitable to make a property settlement order. It follows that it was not open to the Full Court to find that it was still appropriate to make an order with respect to property.”
The failure of the Family Court to make the above-mentioned enquiries, or rather, the failure of the Family Court to demonstrate in their reasoning that they had made the necessary enquiries, meant that the Husband’s appeal had to succeed.
The High Court also confirmed the position that the Family Court had had for many years in that the Family Law Act 1975 gave Court the power to make property adjustment Orders notwithstanding the fact that the marriage may still be ‘intact’.
The High Court amended the Orders of the Full Court of the Family Court so as to dismiss the application originally brought by the wife’s daughter. Accordingly, no orders were made recognising the wife’s contributions to the property of the parties.
In this case, the primary assets of the parties were in the husband’s sole name, therefore, from an estate planning perspective, the practical effect of the decision is that the wife’s estate was diminished and did not reflect the contributions she made to the property of the parties during the marriage.