Family law proceedings are lengthy, costly and emotionally draining, commonly taking twelve months to two years to finalise. In some cases, a party needs urgent relief. In these cases, a party can apply for a partial property settlement order, before final orders are made. It is possible to receive a partial property settlement order before final orders are made by agreement with the other party or by application to the Court.
What is a partial property settlement order?
A partial property settlement is an early distribution of assets prior to a Final Hearing/Trial.
The Court has three sources of power to make an order for a party to receive funds early in a property settlement proceeding:
- Partial Property Settlement Order (s80(1)(h) & s79 / s90SM
- Litigation Funding (Costs) Order: s117(2)
- Spousal maintenance: s74 & s72 or s90SE & 90SF
Unless a spousal maintenance order is sought, the payment will generally be proposed by way of partial property settlement.
What are the elements necessary for the Court to make a partial property settlement order?
The Court’s willingness to make a partial property settlement order depends on the Court’s answer to the following:
- Is it appropriate? (s90SM(1)) ; s79(1))
- Is it in the interests of justice? (s90SM(5) ; s79(5))
The most pressing factor in these types of applications is the urgency of financial relief. Most commonly, the Applicant is in an inferior financial position to the Respondent, cannot work and does not have the funds to pay their living expenses and other legal costs. The Respondent is in a position of financial strength and has capacity to pay his/her legal fees.
A partial property settlement is usually sought to alleviate the financial pressure on that party, to assist them to pay their legal costs and to enable them to negotiate on a level playing field.
What are the relevant factors when seeking a partial property settlement order?
The cases are clear that compelling circumstances need not be shown when seeking a partial property settlement order. However, more is required than the fact that at a Final Hearing, the Applicant would receive the property being sought or an amount in excess of that, from the other party.
The factors the court will look at when determining whether it is appropriate and in the interests of justice to make a partial property settlement order are:
- Financial Disparity: The Respondent should be in a position of relative financial strength and have control over most of the assets.
- Reasonable Need: The Applicant must provide a legitimate explanation as to why the funds are required.
- Arguable case for relief: is it just and equitable that the court make any order altering the property interests of the parties?
- Source of Funds: There must be a clear source of funds to enable the payment.
- Legal Expenses: The Applicant must demonstrate her inability to fund her legal expenses, while the Respondent should have the capacity to cover his own.
- Just and Equitable: It must be established that making a partial property settlement order sought is just and equitable, i.e. it does not exceed the Applicant’s entitlements.
- No need to reverse the order: Will the order limit the court’s power to make final orders? Will it need to be reversed and is it capable of reversal? You can’t reverse sale of a house for example.
It is commonly the case that the source of funds is the most contentious issue. Unless the funds are coming from an account or from refinance of a mortgage, an asset may need to be sold, and the sale of that asset, if one party wants to keep it, may be contentious.
In our experience however, the Court will not deny a party’s request to liquidate assets where there are real needs for those resources. In other words, the Court will frequently make orders selling assets if the sale of that asset meets the needs of an applicant, within the range of their entitlements, and the order will not likely need to be reversed.
If the Applicant seeks an early cash payment which requires the Respondent to refinance the mortgage, this issue may also be contentious. In our experience, the Court will make orders facilitating an early cash payment to a party, which requires the Respondent to refinance the mortgage. The reasoning behind this is because if the Respondent can’t refinance now, to pay a portion of the Applicant’s entitlements, then it is clear on its face that the Respondent is not in a financial position to retain the property and pay the Applicant out, in which case the property should be sold.
Case Studies where an application for a partial property settlement order has been successful
Tina Smith & Rob Smith
- Tina had not worked for the duration of the 20 year relationship, and had primary care of two high needs children.
- Tina had mental health issues which, in addition to her role as primary carer for the children, prevented her from working.
- Tina was not able to pay her legal fees and living expenses without support from Rob. Rob was refusing to support her.
- The property pool was $1.4M
- Tina sought orders for a 60/40 split in her favour (60% Tina’s way was $840,000)
- Rob sought orders for a 60/40 split in his favour (40% Tina’s way was $560,000)
- Tina made an application for an interim property settlement of $85,000 for litigation funding/partial property settlement and lump sum spousal maintenance.
- Tina sought that the payment be made from funds in a term deposit.
- Tina’s application for $85,000 was successful given that she was in an inferior financial position, she had a need for the funds, there was an appropriate source for the payment, and the order sought was within the range of her entitlements (noting the orders sought by Rob).
Joanna Carter & Simon Carter
- Joanna had not worked for the duration of the 30 year relationship. She had 4 adult children with Simon who were independent.
- Joanna had mental health issues. Her mental health issues, her age and the fact that she had been out of the workforce for so long, impacted on her capacity to obtain paid employment.
- Joanna was not able to pay her legal fees and living expenses without support from Simon. Simon was refusing to support her.
- The property pool was $2M
- Joanna sought orders for a 60/40 split in her favour (60% Joanna’s way was $1,200,000)
- Joanna sought orders for a 50/50 split (50% Joanna’s way was $1,000,000)
- Joanna made an application for an interim property settlement of $100,000 for litigation funding/partial property settlement and lump sum spousal maintenance.
- Joanna sought that the payment be made from Simon’s income/financial resources in circumstances where he had a high income ($140,000 pa) and he had access to financial resources as a beneficiary of a trust (he was historically receiving in excess of $200,000 per year from the trust);
- Joanna’s application for $100,000 was successful given that she was in an inferior financial position, she had a need for the funds, there was an appropriate source for the payment – Simon’s income and financial resources, and the order sought was within the range of her entitlements (noting the orders sought by Simon).
- In relation to the source of the funds, Simon contested that he had capacity to pay spousal maintenance and denied that he had an interest in the trust for which he could expect a distribution of $200,000 per year. Simon however have funds in his bank account which could be used to support Joanna and to pay her legal fees.
- Simon’s entitlement to the trust was limited to whether discretion was exercised in his favour by the trustees (his brothers) – i.e. Simon had no guarantee whether he would receive funds, it depended on whether his brothers distributed money to him.
- The Court determined that Simon’s income, in addition to his interest in the trust (and the likelihood he would receive distributions from his brother) in addition to the funds in his bank account, amounted to sufficient income, assets and resources, such that Simon had the capacity to make payment to Joanna in the amount sought by her.
How does the court characterise a partial property settlement?
See our article on this topic: Characterisation of money received in a partial property settlement
Contact us to discuss whether you are entitled to a partial property settlement order
If you would like further information on whether you are entitled to apply for a partial property settlement, contact us to book a reduced rate consultation with one of our experienced family lawyers, to discuss your individual circumstances.
