The Results of Failure to Document a Property Settlement

A client came to us recently having been served with an application for leave to proceed with property settlement orders. The application had been made several years after the standard time limit for commencing these proceedings had expired. The parties had not formally documented their property settlement upon separation but had divided up their assets informally. This case demonstrates some of the dangers of failure to document a property settlement.

Property settlements

Under the Family Law Act (1975), there are two ways of formally documenting a property settlement.

Court Orders

Orders can either be made by a Judge or Registrar in Court proceedings or if an agreement is reached without the need for Court intervention, with an Application for Consent Orders. An Application for Consent Orders can be made to the Family Courts, and once filed, the proposed Orders and supporting Application are reviewed by the Court (without the need for an appearance) and if approved, Orders will be made. If the Court is not satisfied that the proposed Orders are just and equitable, the Court may request further information or refuse to make the Orders at all.  Although it is recommended that both parties seek legal advice, it is not required; or

Financial Agreements

Financial Agreements can finalise property settlements (and in some circumstances, spouse maintenance) without the need for an application to be made to the court.  There are strict procedural requirements on how these agreements are required to be entered into, including a requirement that both parties receive independent legal advice prior to entering into the agreement.

Failure to document a property settlement

In this particular matter, the parties had not documented their agreement in either of the above ways but had simply divided up their assets amongst themselves as an informal property settlement.  Because of this, the client remained exposed to the possibility of his former partner filing an application seeking leave to proceed out of time, which if successful, would mean his former partner could have sought a further property adjustment.

The client’s immediate concern was that the funds he had received from an informal property settlement were significantly less than what his former partner had received and given that he was aware the general time limit had expired years ago, he had structured his finances with his new partner on the assumption that there would be no further claims from his former partner. Had the client sought legal advice at the time of the informal property settlement and documented the agreement formally, he would not have faced the current proceedings.

With our assistance the client filed his response documents and attended to the disclosure process, which clarified what had occurred in the informal property settlement and that on the face of the documents prepared by both parties, the client’s former partner was then (and remained currently) in a stronger financial position than the client.

Further disclosure was then sought from the other side, to clarify how the funds that had been received previously had been applied. At this point, we were able to provide our client with advice on the prospects of the case.

Final orders negotiated after failure to document property settlement

Although a court hearing was coming up, our client instructed that he had no desire to be in conflict with his former partner, even if on the face of it the orders sought by the other party were unlikely to be made. He instructed us rather to contact the other side’s solicitor and attempt to negotiate final orders that the application be dismissed.

We then had a frank discussion with other side’s solicitor and were able to resolve the issue by consent to the satisfaction of both parties without incurring any unnecessary costs. The outcome was assisted by both parties being willing to provide the documents necessary for both solicitors to provide their clients with appropriate advice early, and cost-effectively, without the need for the angst and the cost of protracted court proceedings.

Our client could have proceeded with the court hearing. However, after advice on the likely costs of doing so, was decided that it was more beneficial for him to try to resolve the matter.  Had either side adopted a more adversarial approach and instructed their solicitors to proceed with the hearing, while the outcome may not have been different, both parties would have incurred significantly more legal costs.

However, had the parties documented their agreement formally at the time they divided their assets, both sides would have saved legal costs and stress associated with the application for leave to proceed out of time.

If you require legal advice or representation in any legal matter, please contact Armstrong Legal.