Monday, November 12, 2012

Deferral of property settlements

This week’s post looks at a recent Family Court case - Pratt [2012] FamCAFC 81 (13 June 2012).  A link to the full copy of the decision is as follows:

The husband and wife were graziers.  The main issue in dispute was that a valuer had confirmed there had been a $10 million decrease in value of their two cattle stations over recent years as a result of exceptional circumstances (such as the restrictions on live cattle export).  The parties agreed that as a result, the bank debt over the properties substantially exceeded the value of the land.

The wife sought a three year adjournment under the Family Law Act to enable a ‘just and equitable property settlement’, on the basis of the valuer’s statement that the land should increase in value substantially over the next two years, as market conditions return to normal. 

The husband opposed the delay on the basis that the parties’ debts exceeded their assets and he could not meet the interest owed to the bank.  The adjournment was originally granted but appealed by the husband.

Normally an adjournment is only available where a ‘significant change’ in financial circumstances is likely and the delay will probably do justice, more so than an immediate division of property.

Ultimately, the Court accepted the husband’s argument and ordered that the property settlement be finalised immediately.  A key aspect of the decision to deny an adjournment was the failure in the original decision to factor in the cost of maintaining an increasing debt through interest on the loan facility and the ongoing costs of running the properties.

In other words, it was held that in order to delay a property settlement, all relevant financial issues must be considered.  It is not sufficient for there simply to be a ‘significant change’ in the gross value of the assets.

Until next week.