The case of Hearne v Hearne [2015] FamCAFC 178 (16 September 2015) was an appeal by the husband to the Full Court of the Family Court of Australia from a decision by Judge Harman of the Federal Circuit Court of Australia.

The matter involved settlement of property after a husband and wife permanently separated. The Trial Judge’s decision was that the property be divided with 65% going to the wife and 35% going to the husband.

The ground of appeal by the husband considered here was that the Trial Judge had not stated that it was just and equitable to make an order altering property interests under section 79(2) of the Family Law Act 1975 (Cth) (“the Act”).

Background

At the time of the hearing, the appellant husband and respondent wife were both aged 44 years of age. They had commenced their relationship in 1994 and began cohabitating in 1996. They married in 1997 and separated permanently in 2010. There were three children of the relationship born 1999, 2001 and 2003.

The Parties’ Property and Assets

The Trial Judge found that the parties’ initial pool of property and assets was $922,548. In addition to this the wife’s superannuation was added and a mortgage over the husband’s property was subtracted. Add backs for the wife’s legal fees and the sale of some of the husband’s assets were included in the property pool.

The Trial Judge then looked at the contributions the parties brought with them to the relationship.

The husband had nominal contributions whereas the wife had $50,000 in savings, superannuation, accumulated service with her employer and shares.

In addition to the contributions brought to the relationship, the wife asked the Court for a 10% adjustment in her favour for a redundancy payment received during the relationship from service accumulated to the employer before the parties’ relationship, the provision of care for the children during the relationship, income contributions and for the maternal grandmother providing home care of the children.

In making the property division Order the Trial Judge found that there were matters to be taken into account for spousal maintenance under section 75(2) of the Act. However, the wife and husband’s factors balanced each other out.

This meant that the primary consideration before the Court was whether there should be an alteration of property interests under section 79 of the Act.

Requirements for Altering Property Interests under Section 79 of the Family Law Act 1975

Section 79(2) of the Act states that a court must not make an order for the alteration of property interests unless it is just and equitable to do so.

The husband’s case was that the Trial Judge had a duty to directly express whether the property division was just and equitable and this was not done. The husband put forward that this rule was found in the High Court case of Stanford v Stanford (2012) 247 CLR 108 (“Stanford”).

In considering the husband’s argument the Full Court found that the principles in Stanford created three propositions, being that a court:

1. must identify the existing legal and equitable property interests of the parties;

2. make a decision under section 79 of the Act as to whether the parties’ property rights and interests should be altered; and

3. in determining whether a decision is just and equitable, the Court need not depend only on those factors that a court must consider under section 79(4) of the Act.

In considering Stanford the Court determined that a judge must have a principled reason for interfering in the parties’ property interests. The Court agreed with the decision in Chapman v Champman (2014) FLC 93-592 at 22 that a principled reason under section 79(2) of the Act could be inferred from the issues joined and not joined between the parties. The Court determined that the Trial Judge’s principled reason in this case could be found by “necessary implication from the totality of the trial judge’s reasons for judgement”. As such the Husband’s ground of appeal was dismissed.

Conclusion

The Family Law Act 1975 requires that when a court alters property interests under section 79 of the Act that a court has a duty under section 79(2) to be satisfied that it is just and equitable to do so. To determine this a court has a duty to identify the property interests and rights of the parties.

Section 79(4) specifically requires a court to identify and take into account certain contributions and matters effecting the parties. But matters and contributions not covered by section 79(4) can also be taken into account.

Importantly, this case rejected the notion that section 79(2) of the Act created a specific requirement for orders directly mentioning section 79(2) of the Act to be included in a court’s orders. However, a threshold of principled reason which shows it is just and equitable to alter property interest is required from the entirety of a court’s reasoning. The threshold of what constitutes principled reason was determined in Stanford to include relevant section 79(4) matters in the Act and other relevant matters put forward before a court by the parties.

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