June 15, 2017

Sometimes, couples can separate or divorce and agree on a final property settlement, only to reconcile at a later date. If they then happen to separate again, this can cause much confusion over how their property pool is to be divided.

The Family Court recently considered the question of how a prior property settlement can affect a future settlement if there has been reconciliation. It’s a good lesson for separated couples who are considering getting back together: what steps should be taken to ensure that their financial position is clear, just in case things don’t work out the second time around?


Background – divorce then reconciliation

The husband and wife started living together in 1983 and then married in 1991. Their children were born in 1991 and 1994.

In 1998, they separated, having been in their relationship for 15 years. Their children were aged 7 and 4 at that time.

The husband and wife had agreed on how their property was to be divided and also agreed on the care of the children. Just 3 months after separation, they asked the Family Court to make consent orders to reflect their agreement. The Court orders made the agreement binding on both parties.

Among other things, the orders were for the sale of their home, with the proceeds to be divided equally between them. They would each keep one car, their own superannuation and other belongings.

The wife received Centrelink benefits and the husband paid her child support.

A few months later, in 1999, the husband and wife recommenced their relationship and went on a family holiday with their children. Soon afterwards, they started living together again. The husband bought a home for them to live in, but it was in his name only.

By 2011, the wife was around $15,000 in debt. The husband helped her to file for bankruptcy.

Around this time, they once again separated. The total time of both the first and second relationships was 27 years.

This time, the financial settlement would be far more complicated because there was a question about whether the original consent orders (made in 1998) should have any bearing on the property issues the second time around.


The Court took a close look at how the husband and wife had operated their finances since their reconciliation. The husband had given evidence that they had kept their finances separate:

  • They did not operate joint bank accounts.
  • They did not own any joint assets.
  • He paid the mortgage, electricity and council rates.

He also said that the wife paid the household and children’s expenses and spent about $50 per week on poker machines.

The Court found that in their first relationship, the wife was the main homemaker and primary carer of the children. When the relationship resumed after their divorce, even though the wife had part-time work, she was still the primary homemaker.

The Court said that final orders for settlement of property issues are meant to bring an end to all outstanding financial issues between the parties. In other words, a “clean break.”

The key question was whether, after the first divorce, the husband and wife intended that their financial relationship be brought to an end.  To work this out, the court looked at the “separateness” of their financial lives since the reconciliation. For example, whether they kept separate bank accounts, separate loans and separate assets.

The Court said that the evidence didn’t show that there was a separateness of their financial lives. Instead, there was a separateness of responsibility for meeting expenses from the joint finances of both parties.  Even though the husband allowed the wife to take responsibility for paying the family’s day to day expenses, this didn’t necessarily mean that their finances were separate.

Another issue was the wife’s Centrelink payments. The husband had told her to retain her nominated address as her brother’s address because if she told Centrelink that they were living together, she would lose her pension. He said that he was unable to give her more money in addition to the child support that he was already paying to her.

The Court found that the orders that were made after the end of the first relationship didn’t bring an end to their financial relationship. The contributions that both parties had made since then should be considered in the final property settlement.

What does it mean?

The final decision of the Court was significant for the wife, because it meant that she would be able to claim a share of the second home that the husband had bought after they had reconciled. This had the potential to increase the amount that she could claim in the final settlement.

The Court had chosen its words carefully – it talked about a separateness of responsibility rather than a separateness of finances. This is a fine distinction, but it determined the outcome of this case. This is where an experienced family lawyer is really valuable because technical legal knowledge in this area can dramatically affect the outcome in a case of this type.

The case also shows that even a final order may have to be re-examined if circumstances dramatically change. All of this adds to the complexity and cost of legal proceedings so it is important to ensure that there is no chance of reconciliation before asking the Court to make orders.

It is of concern that the wife’s arrangement in respect of her Centrelink payments became a central issue. It may have left her exposed to legal action from Centrelink to recover its funds, legal action by the Australian Taxation Office, or even criminal law proceedings.

Any such arrangement should be discussed in depth with a lawyer as it will affect your legal options.

Websters Lawyers has a team of outstanding family lawyers who are highly experienced in separation, divorce and property settlements for family law matters. Contact us today for a free first interview. Because the sooner you act, often the better off you’ll be.

Waterman v Waterman [2017] FamCAFC (8 February 2017)