When a relationship ends, many separating couples assume that the Federal Circuit and Family Court of Australia (FCFCOA) will automatically divide their property. However, the Court does not intervene in every case. Its power to adjust property interests under section 79 of the Family Law Act 1975 (Cth) for married couples and section 90SM for de facto relationships is discretionary. The Court will only make an order if it is just and equitable to do so. The phrase “just and equitable” is the crucial threshold. The Court discretion must first decide whether it should intervene at all before considering how the property should be divided.
Step One – Is It “Just and Equitable” to Alter the Property Interests?
In Stanford v Stanford (2012) 247 CLR 108, the High Court made it clear that the Court must not assume it should make an order simply because the parties have separated. Instead, it must consider whether, in all the circumstances, it is fair and reasonable to disturb the existing legal and equitable ownership of property. Factors that may influence this question include (a) whether the parties’ financial affairs remain intermingled, such as through joint bank accounts, mortgages, or shared expenses, (b) whether informal agreements existed about how property was to be used or owned, (c) the nature and extent of contributions made by each party, both financial and non-financial, (d) whether one party holds title in a way that disadvantages the other despite their contributions, and (e) whether the parties have already separated their financial lives, such as through asset transfers or independent financial arrangements. Only once the Court is satisfied that it is just and equitable to intervene does it move on to consider how the property should be adjusted.
Step Two – Assessing Contributions
If the Court decides that it should exercise its discretion, it then assesses contributions made by each party under section 79(4) or section 90SM(4). These contributions may be (a) financial, such as income, inheritances, or the acquisition of property, (b) non-financial, such as improvements to property, unpaid labour, or work in a business, and (c) contributions to the welfare of the family, including homemaking, parenting, and emotional support. The Court evaluates these factors qualitatively, recognising that non-financial contributions can be as significant as financial ones.
Step Three – Future Needs and Adjustments
The next consideration is whether an adjustment should be made to account for future needs under section 75(2) or section 90SF(3). The Court considers (a) the age and health of each party, (b) their earning capacity and employment prospects, (c) care arrangements for children under eighteen, and (d) financial resources available to either party, such as trusts or superannuation. This ensures that the final division reflects fairness in light of both past contributions and future circumstances.
Step Four – The Final “Just and Equitable” Check
Even after assessing contributions and needs, the Court must finally ensure that the overall outcome is just and equitable. This final step checks that the result is fair and practical, ensuring that one party is not left without adequate housing or that the outcome does not significantly overcompensate one side.
Recent Case Spotlight on Court Discretion: Cosola & Moretto [2023] FedCFamC1A 61
The Full Court’s decision in Cosola & Moretto [2023] FedCFamC1A 61 is a clear reminder that the Court’s discretion to alter property interests is not automatic, even after a long relationship. The parties had been in a de facto relationship for about fifteen years. Each had children from previous relationships. They lived together in the man’s home, while the woman retained ownership of her own property, which she leased out. They maintained separate bank accounts and loans, did not mix their finances, and managed their assets independently. When the relationship ended, the woman sought property orders. The primary judge declined to make any, finding that the parties had not sufficiently intermingled their financial affairs. On appeal, the Full Court upheld that decision.
The Court made several key findings. (a) The “just and equitable” enquiry is a genuine threshold that must be satisfied before considering contributions or needs. (b) Existing legal and equitable interests must be identified first. Only then can the Court decide whether any alteration is warranted. (c) The parties’ conduct and deliberate separation of finances showed a shared understanding that each would retain their own property, and this weighed heavily against intervention. (d) The statutory factors in section 90SM(4) do not compel the Court to make an order. Even after considering those factors, the Court may still conclude that it is not just and equitable to alter property interests. (e) The result was that the appeal was dismissed and each party kept what they already owned.
Lessons from Cosola & Moretto
The case demonstrates that separation does not automatically lead to a property adjustment. Even in long relationships, if finances have remained separate, the Court may decline to make any orders. Evidence of financial intermingling, such as joint accounts, shared loans, or joint ownership, helps show a mutual intention to share assets. Without such evidence, the Court may view intervention as unjustified. For practitioners and clients alike, Cosola & Moretto reinforces that the threshold question of whether it is just and equitable to alter property interests must be addressed directly. Clients should be advised that even significant contributions or disparities in future needs do not guarantee an order if the threshold is not met.
Conclusion
The Court’s discretion to alter property interests is a carefully guarded power. It is not exercised automatically upon separation. Both Stanford v Stanford and Cosola & Moretto remind us that the first and most important question is whether it is just and equitable to intervene at all. For separating couples, this highlights the importance of obtaining specialist family law advice and providing clear evidence about how finances were managed during the relationship. Fairness in the eyes of the law begins with how the parties themselves structured their financial lives.
