Resolving property disputes following separation – is there a quick, just and cheap option?

split house

Most Australian jurisdictions aim to facilitate the just, quick and cheap resolution of civil disputes. The High Court has affirmed that ‘speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of the proceedings.’[1]  Non-litigious dispute resolution is frequently advocated as the most appropriate means to achieve these sometimes conflicting objectives.

The availability of cost effective, quick and fair ways to resolve any disagreements about how to distribute shared assets (and liabilities) is important for many separating families, and also for the broader community. Research has consistently shown that separation can be a key predictor of financial disadvantage and falling living standards for many women and the children in their primary care. Financial stress experienced by either parent is likely to affect the whole family, and money and capacity to parent effectively are closely connected. While the financial concerns of each family following separation will vary according to their assets and specific needs, many will have urgent questions about Centrelink entitlements, child support obligations, debt management, capacity to manage two households, and information about how they should go about dividing their assets. It is often very difficult for people to know where to start to find answers to these questions.

While many separated families don’t have much to distribute (about 60% have less than $40,000 of assets), 40% will sort things out by discussion, 30% will use lawyers, 4% will rely on mediation, 7% will have the matter decided by courts, and the 20% remaining will not use any particular process.[2]  This means a significant number will seek, and more may need, some kind of professional or service assistance. Cheap, quick, and simple options that achieve fair outcomes are important as it can be extraordinarily expensive, and may take up to three years, for parties to litigate a matter in a family court.[3]  Litigation is also emotionally exhausting for all involved, and research indicates the emotional impact on children increases with the length of time spent in court proceedings.

DIY aside, there are few ‘cheap’ service options. A single session advice by a family lawyer may cost between $400 and $800, and thousands of dollars if more assistance is required.  There is not a nationally consistent approach by Legal Aid Commissions, and funding is rarely granted to resolve property disputes, but may be possible if connected to disputes about children.  Community legal centres may provide free legal advice in relation to family property disputes, and assist parties to initiate or finalise documents, and specialist CLCs provide assistance with child support.

Unlike disputes about the care of children following separation, there is no enforceable requirement to attempt to resolve property disputes before filing a court application. There are pre-action obligations which parties are required to follow before starting a family law property case, including full disclosure of financial matters, and making attempts to resolve the dispute quickly using dispute resolution methods to avoid legal action and limit costs. Lawyers are obliged to advise clients in relation to these options. However, it seems that most people do not comply with the pre-action procedures, and costs orders are rarely made against parties who fail to follow them.[4]

There is no government-funded system to facilitate the resolution of family property disputes, in the way that the 65 Australian Family Relationship Centres (FRCs) provide (largely) free family dispute resolution (FDR) to assist agreement about children. This possibility was mooted in 2010, but the Commonwealth Attorney General did not proceed with it. Given the close connection between parenting and financial matters, is it unfortunate that it did not, or that resources were not provided to support other agencies to assist with financial matters following separation.

Some commentators have suggested introducing pre-filing FDR for property would have put ‘the cart before the horse’ and may have been dangerous without also providing a wider a range of services and options to assist separating parents to fairly negotiate financial issues. The options they recommended included ‘access to a range of professional assistance, including … financial counselling, information and advice (including legal advice) in relation to the range of financial matters affecting them (Centrelink benefits, child support responsibilities and property division [including their financial disclosure obligations]), along with appropriately trained FDRPs to conduct financial dispute resolution, lawyer assisted FDR if appropriate, and legal advice and assistance prior or during FDR, and in relation to formalising their arrangements.’[5]

Some FRCs now assist parties to resolve, or at least to narrow the issues in property disputes, and some community agencies are funded to provide FDR for property at minimal or a sliding scale cost (generally less than $1000 shared between the parties, excluding legal advice). There is scope however, for expanding these services to separating families. The Law Society of NSW administers a Family Law Settlement Service which mediates property disputes that have already been filed in a Family Court and reached the post-conciliation conference stage, for about $2000, excluding legal fees.

Mediating property disputes may be simple and relatively quick, depending on the complexity of the parties’ assets, liabilities and needs.  As a facilitative process, it may also provide parties with more certainty and control and assist them to tailor outcomes to meet the needs of their family members. All family mediations are required to be conducted by accredited FDR practitioners or mediators, who are obliged to ensure procedural fairness in facilitating agreement. The substantive fairness of the outcomes of these processes is discussed below. Collaborative processes also support parties to make interest based decisions and is generally less cost that court proceedings.

Determinative processes, such as arbitration, have recently experienced a revival, although this option has been available to parties for 25 years. Arbitration may provide parties with finality and greater certainty about legal costs and processes, and choice about who arbitrates, and thus assist them to move on with their lives. Parties may also have some control over the arbitration process and may elect to dispense with the rules of evidence, and the arbitrator must ensure procedural fairness. Recent reforms to the rules governing family law arbitration require full and frank disclosure, and permit arbitrators to compel witnesses and the production of evidence. Arbitrators must be family law specialists and be accredited. They are required to provide written reasons in accordance with the Family Law Act 1975, and these are appealable or may be set aside.[6]

Evaluative processes are also available, such as where a senior family lawyer conducts a neutral evaluation and provides recommendations to parties about a possible outcome or elements of the dispute. Parties who commence litigation will also be required to attend a conciliation conference or case management conference presided over by a registrar who will advise about likely outcomes.

The extent to which family law informal processes and agreements are fair or just is moot. The empirical evidence indicates that the type of process or type of agreement parties reach does not affect the substantive outcome. Property outcomes are more likely to be influenced by the size of the asset pool, the length of the marriage, the dynamics of separation, whether violence is present, care of children and perceptions of guilt.[7]  Parties’ views about the fairness of the division of domestic or household property assets depends on whether they think that their contribution to these assets was reflected in the final outcome and who has care of the children. Whether such outcomes are also substantively fair is uncertain. The outcomes of informal processes often treat the division of family business assets differently to domestic assets, and fail to reflect the opportunity cost of caring for children, in contrast to the outcomes of more formalised or assisted processes which more closely reflect legislative requirements to consider these matters.[8]

In conclusion, there are a range of options that can assist separating couples to divide their joint property, but not all are quick, simple or cheap. The extent to which parties will achieve just resolution depends on a range of factors not necessarily tied to the type of process they use. Whilst the dispute resolution process chosen may minimise some of the financial difficulties and uncertainties families face at separation, such processes also need to be anchored in a broader range of inexpensive, accessible and consistent financial information and advice services, as a critical first step.

[1] Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175.

[2] Lixua Qu, et al, Post Separation Parenting, Property and Relationship Dynamics after Five Years, AIFS, 2014, 99.

[3] Patrick Parkinson reported that among 80 separated parents he researched over 5 years, 12 reported legal costs of ‘$100,000 or more just for themselves, with the highest estimate being between $450,000 and $500,000.’ Although these costs primarily resulted from disputing about children, many families were disputing about both children and property. Patrick Parkinson, et al, ‘The Need for Reality Testing in Relocation Cases’ (2010) 44 Family Law Quarterly 1, cited in Patrick Parkinson ‘Can There Ever Be Affordable Family Law?’ Current Legal Issues Seminar, Supreme Court of Queensland, Brisbane, 9th May 2017.

[4] Belinda Fehlberg, et al, ‘Pre-filing Family Dispute Resolution for financial disputes: Putting the cart before the horse?’ (2010) 16 Journal of Family Studies 197–208; Justice Robert McClelland, ‘Expectations and opportunities for dispute resolution in family law property cases.’ Presentation to Resolution Institute NSW, 27 April 2017.

[5] Fehlberg, ibid.

[6] Patrick Parkinson, ‘Arbitration in Family Property Proceedings: Exploring the Potential’ (2016) 21 Law Society of NSW Journal 78-79; McClelland, above note 4.

[7] Qu, above n 2, 105; Belinda Fehlberg, et al, ‘Parenting Arrangements, Child Support and Property Settlement: Exploring the Connections’ (2010) 24 Australian Journal of Family Law 214.

[8] Grania Sheehan & Jody Hughes, ‘The division of matrimonial property in Australia: What is a fair settlement?’ (2000) 55 Family Matters 28.

 

 

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About Dr Susan Armstrong

Sue Armstrong is an Adjunct Professor in the School of Law, Western Sydney University, Australia. She is an accredited Family Dispute Resolution Practitioner and a collaborative practice coach. She publishes, researches and teaches about family dispute resolution.

2 thoughts on “Resolving property disputes following separation – is there a quick, just and cheap option?

  1. Thank you for this post Sue, your acknowledgement of the influence that financial settlements have on parenting is so important. Some additional thoughts from me building from yours:
    1. Speed – the timing of final financial settlement is going to affect the long term fairness for the parties. Often at least one of a separated couple is both needing urgent resolution of immediate financial needs and lacks emotional capacity to make wise long term decisions. Fairness might be better achieved by resolving urgent financial needs on a short term basis to allow everyone in the family time to adjust (including trialling new parenting arrangements) before tackling the big property settlement issue. Speedy final resolution may therefore not be desirable. This kind of staged decision making process can be supported by dispute resolution processes.
    2. Quantum – The average separating couple who need to negotiate how to divide $40K of assets (or those who need to negotiate division of net debt) may need the most careful dispute resolution processes. The consequences of the way that sum will be divided will be of enormous significance to those people. Their capacity to “recover” from the financial consequences of separation may be much more limited than those who divide a larger pool, in terms of income earning capacity. Bridgette Toy-Cronin gave an excellent presentation at this year’s Civil Justice Research and Teaching Forum that highlighted the way the significance of small quantum legal claims tend to be minimised, when in reality they are often far more significant to the parties involved than big money claims.
    3. Perceptions of fairness – You raise such an interesting point about perceptions of fairness in consensual outcomes of property settlements. Most of us have heard non-legally informed views about what people expect will be a fair division of property following separation. Inevitably people’s perceptions of fairness will be influenced by cultural factors including the prioritisation of traditional men’s work (financial contribution to family) and the minimisation of traditional women’s work (non-financial and care-giving contributions to family). Many negotiations outside legal dispute resolution frameworks settle on the basis of other things you mentioned, such as guilt, need to be safe from violence, size of the property pool, dynamics of separation, but I suggest also privileging of financial contributions to family in people’s perceptions of fairness. I still remember from practice the many primary carers and home-makers who baulked at the idea that they would “take any of his Super” even though on application of family law they would be both entitled to a division of superannuation and such a division would make a significant difference to their future lives.
    Middle aged single women are a growing sector of homeless people (see for example https://probonoaustralia.com.au/news/2016/11/homelessness-older-australian-women-sleeping-giant/). This trend could, in part, highlight the long term risks of hurried, overly self-sacrificing property settlements in a context of urgency and/or danger. Your post highlights how important it is that the family law dispute resolution system grapples with the messy problem of supporting fair resolution of property settlements in a timely, well informed, principled and yet also self-determining manner. We must respect people’s right to reach agreement on terms that they are comfortable with, however, we must also surely support them to take the time to consider the long term financial consequences of proposed agreements.

    Liked by 1 person

  2. Thank you Olivia for your thoughtful response, and for several ideas I hadn’t considered or included.
    Re speed – I agree parties may well lack emotional capacity to fairly negotiate, when they are the leaver, who may feel guilty, or those who are unsafe, and who may concede too much, or the left who is still reeling emotionally from the separation and may want to (unrealistically) hold onto solid assets like the home which may also have a profound emotional significance. I know examples of each. I also think many may trade-off entitlements for finality, especially if they are wanting to move on with life, or a new partner. But I agree that the dust needs to settle so that everyone’s financial needs are clearer. The 3 year time wait in eastern states for litigation in family courts is far too long however, and will fritter assets. The extension to Local Courts of a larger quantum family law jurisdiction, soon to be reality, might ease the delays. I agree that staged DR provides a more consensual and appropriate framework.
    Re quantum – excellent point. I think the management of debt is also critical. The challenge is finding the free or low cost assistance to understand how to do this prudently. The suggestions made by Fehlberg et al provide a useful starting point.
    Re fairness – yes, I agree that community norms that under-value homemaker contributions (and the opportunity cost of these) and privilege financial contributions, and which may also exclude non domestic or business assets, creates a real challenge about achieving substantively fair outcomes. This is particularly so if at least 60% of separated couples DIY or don’t use services. I think this point was made well by submissions by National CLCs in the 1990s opposing the proposed introduction of 50/50 starting point for property distribution. At the time CLCs also said that a key issue was assisting people to fairly distribute debt.
    We still have a long way to go. Glad to be discussing it!

    Liked by 1 person

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