03 Oct Dividing property after separation – is there a quick, just and cheap option?
A version of this first blogged on the Australian Dispute Resolution Research Network.
It is important for many separating families to have access to cost effective, quick and fair ways to resolve any disagreements about how to distribute their shared assets (and liabilities). It is also important 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.
The financial concerns of each family following separation will vary according to their assets and specific needs. Many will have questions about Centrelink entitlements, child support obligations, debt management, capacity to manage two households, and information about how they should divide their assets.
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. 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. It can be very expensive, and may take up to three years, for parties to litigate a property matter in a family court. Litigation is also emotionally exhausting 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 can cost between $400 and $800, and thousands of dollars if more assistance is required. Legal Aid Commissions generally don’t fund property disputes, but may if there is also a dispute about children. Some community legal centres (CLCs) provide free legal advice in relation to family property disputes, and will help assist people with documents, and other CLCs specialise in help with child support.
Unlike disputes about the care of children following separation, there is no requirement to attempt to resolve property disputes before filing a court application. Before starting a family law property cases, people must do certain things, including fully disclosing financial matters, and attempting to resolve the dispute quickly using dispute resolution methods to avoid legal action and limit costs. Lawyers are obliged to advise clients about 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.
There is no government-funded system to resolve family property disputes, in the way that the 65 Australian Family Relationship Centres (FRCs) provide (largely) free family dispute resolution (FDR) to promote agreement about children’s care. Given the close connection between parenting and financial matters, is it unfortunate that the Commonwealth did not, or that resources were not provided to support other agencies to assist people sort out financial matters following separation.
Some commentators have suggested introducing compulsory FDR for property would have put ‘the cart before the horse’. It may be 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.’
Some FRCs now assist parties to resolve, or at least narrow, the issues in property disputes. Other 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. This mediates financial or property disputes that have already been filed in a Family Court and have reached the post-conciliation conference stage, for about $2000, excluding legal fees. Private mediators also assist people to resolve disagreements about property
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. Collaborative processes also support parties to make interest based decisions and is generally less cost that court proceedings.
Determinative processes to decide family property matters, 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.
Evaluative processes are also available, such as where a senior family lawyer conducts a neutral evaluation and recommends a possible outcome to a dispute. People who commence litigation in a Family Court must also attend conciliation conference or case management conference presided by a registrar who will provide advice 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. People’s 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.
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.