Settling up: Property and income distribution on divorce in Australia

Settling up: Property and income distribution on divorce in Australia

Peter McDonald

Archived publication— December 1986
Settling up: Property and income distribution on divorce in Australia

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Based on the most comprehensive study of divorcing couples ever undertaken in Australia, Settling Up explores the current state of family law in this country. The findings of the study contradict some of the popular myths about the economic outcomes of divorce. The book provides insights into the most equitable ways of reforming and applying the law, making it compelling reading for anyone involved with families, family law and divorce.

Contents

  • FOREWORD
  • CONTRIBUTORS
  • ABBREVIATIONS
  • LIST OF TABLES
  • LIST OF FIGURES
  • 1  INTRODUCTION by Margaret Harrison
    • Outline  of the study
    • Married  women and  property ownership
    • Property, maintenance and  marriage breakdown
    • Divorce and  the approach to property division
    • Elements of contribution and need
    • Difficulties  with the principle of contribution and  need
    • Strengths and  weaknesses of the discretionary system
    • Alternatives to the discretionary system
    • Research into economic consequences of marriage breakdown
    • Conclsuion
  • 2  THE DESIGN  OF THE STUDY by Kathleen Funder
    • Sampling for the study
      • The sample  design 
      • Mailing  procedures
      • Sample bias
    • Characteristics of respondents and non-respondents
      • Ethnicity
      • Sex of applicant for divorce
      • Occupation
      • Income
      • Couples
    • Issues in non-response
      • Survey of non-respondents 
      • Difficulties in sampling divorced populations
    • The interview schedule and  questionnaire
      • Historical orientation of the questionnaire
    • Conclusion
  • 3 LEGAL PROCESS by Margaret Harrison
    • The decision  to separate
      • Financial  preparations and  separation
      • Finalisation  of property matters
    • Legal  processes
      • Forms of agreement 
    • Legal  process  groups 
      • Completed legal process  groups 
      • Uncompleted legal process  group 
    • Difficulties involved with property division
      • Costs and  the legal process
      • Legal  aid
      • Affidavits
    • Conclusion
  • 4   FAMILY REFORMATION by Peter McDonald
    • Extent of repartnering
    • Timing of remarriage
    • Factors  associated with repartnering
    • Characteristics of new  partners
    • Family type in 1984
    • Conclusion
  • 5   WORK AND THE MARRIAGE  PARTNERSHIP by Kathleen Funder
    • Employment, income and  the 'new  property'
    • Human capital
      • Education and  achievement
    • Occupations
      • Continuity in workforce
      • Responsibility and  advancement
    • Workforce participation following marriage breakdown
      • Effects of marital breakdown on work
      • Other  aspects of workforce participation
    • Non-financial contributions to the marriage
      • Household tasks
      • Relationship  between paid and unpaid work contributions
    • Work history factors and  post-separation income for women
      • Predictions  of post-separation income
      • Unpaid  contributions and  property settlement
    • Conclusion
  • 6   CHANGES IN HOUSEHOLD INCOME CIRCUMSTANCES by Ruth E. Weston
    • Procedure
    • Changes in levels of household income 
      • Sex differences
      • Age and  time  since separation
      • Marital  status 
      • Combined effects of age, time  since separation and  marital status 
    • Changes in economic  welfare
      • Use of equivalence scales 
      • Changes in absolute levels of standards of living 
      • Comparison with the _general community
    • Perceptions of financial circumstances
      • Satisfaction by family  type
      • Predictions  about the future 
    • Conclusion 
  • 7   FINANCIAL  ARRANGEMENTS AND PERSONAL INCOME by Ruth E. Weston 
    • Financial  arrangements 
      • Changes in financial arrangements post-separation
      • Income pooling and  sharing of financial control
    • Personal income
      • Sex differences in personal  income levels 
      • Women's  personal incomes 
    • Appraisal of circumstances 
    • Conclusion
  • 8   HOUSING by Peter McDonald
    • Special characteristics of survey respondents 
    • Housing situation prior to separation
    • Equity in the matrimonial home 
    • Equity in housing as a proportion of total wealth
    • Housing in the first three  months after  separation
    • New accommodation of the person  who left
    • Allocation of the house 
    • Housing at the time  of interview 
      • Value, mortgage and  equity
      • Costs
    • Persons who rented the matrimonial home 
    • Conclusion
  • 9 PROPERTY DISTRIBUTION: THE SHARES OF EACH PARTNER AND THEIR DETERMINANTS by Peter McDonald
    • Data  collection
    • Issues to be considered
    • Wealth  levels of respondents
    • Ownership of property before distribution
    • Shares of property at  distribution
    • Shares of basic  and  non-basic assets
    • Factors  associated with the division of property
    • Cash transfers between the spouses
    • Conclusion
  • 10   DIVISION OF SPECIFIC PROPERTY by Peter McDonald
    • Bank, credit union and  building society accounts
    • Furniture and  household equipment
    • Cars 
    • Other  assets
    • Superannuation
    • Life insurance policies
    • Other  liabilities
    • Conclusion
  • 11  THE ALLOCATION OF BUSINESSES by Peter McDonald
    • Business as a source  of family  income
    • Type of business
    • Acquisition and  ownership of the business
    • Participation in the business
    • Personal income from the business
    • Business value  and  business debt
    • Distribution of business assets and  debts
    • Types of settlement
      • Farms
      • Manufacturing, construction, transport businesses
      • Wholesale and  retail  businesses
      • Professions and  service  businesses
    • Conclusion
  • 12 HIS AND HER DIVORCE by Kathleen Funder/em>
    • Non-financial contributions through homemaking
    • Income arrangements and  financial control
    • The matrimonial home: major  contribution and  ownership
    • Businesses, property values and  shares
    • Fairness of outcomes 
    • Satisfaction with lawyers  and  knowledge of legal process 
    • Household income and  personal income
    • Work and  education
    • Custody, access and  maintenance 
    • Choosing to separate 
    • Current  marital status 
    • Perceptions of life then  and  now 
    • Attitudes to issues in family  law 
    • Conclusion
  • 13   ATTITUDES TO LAWYERS AND THE LEGAL PROCESS by Margaret Harrison
    • Information and  advice
      • The role of lawyers 
    • Attitudes to the law 
      • Compulsory joint ownership  of matrimonial home 
      • What  property should be available for division? 
      • Needs 
      • Superannuation entitlements
      • Discretionary or fixed entitlement system 
    • Fairness or unfairness of the property division
      • Reasons for fairness
      • Reasons for unfairness
  • 14   MAINTENANCE. CUSTODY AND ACCESS by Margaret Harrison and Teresa Tucker
    • Maintenance arrangements
    • Child maintenance arrangements over  time 
      • Amounts  of child maintenance 
    • Regularity of maintenance payments
      • Factors  affecting receipt of maintenance
      • Reasons for non-payment 
      • Types of maintenance arrangement 
    • Custody
    • Access 
    • Inter-relationship of custody, access and  maintenance 
    • Economic effects of divorce on children
    • Non-financial effects on children
  • 15   'MONEY ISN'T EVERYTHING' by Ruth Weston
    • Data collection
      • Satisfaction measures 
      • Affect measure 
      • Distribution  of ratings 
      • Respondents' comments
      • Method of analysis
    • Satisfaction across time 
      • The last year  of marriage
      • The first three months of separation 
      • The time of interview in 1984
      • Expectations for the future
      • The single  and repartnered groups
      • The 'leavers' and those who were 'left' 
      • Variations in ratings 
    • Disruptions accompanying marriage  breakdown
      • Difficulties encountered
      • Further negative repercussions
      • Long-term negative effects
      • Experiences of personal growth
    • 'Money isn't everything'?
    • Life's priorities
    • The contribution of circumstances  to well-being  in 1984
    • Conclusion
  • 16   DIRECTIONS FOR LAW REFORM AND SOCIAL POLICY  by Peter McDonald with Kathleen Funder, Margaret Harrison and Ruth Weston
    • Equality in marriage 
    • State responsibility
    • The need for reform of matrimonial  property  law
      • Fundamental principles
      • Co-operative or relative contributions 
      • Compensation for loss of income-earning potential
      • What is matrimonial  property? 
      • Future needs of the parties to the marriage 
      • Future needs of children
      • Financial resources
      • Special circumstances 
      • Exceptional circumstances 
      • Valuations and disclosure of assets
    • Reform of arrangements for the payment of child
    • maintenance 
    • Contracting out
    • Concluding remarks
  • INDEX

Foreword

This study is the most important yet completed by the Australian Institute of Family Studies (IFS).

Its findings not only demonstrate how the present system offamily law 'works' for people in different circumstances, they also indicate what might be done to improve that system and remove the uncertainties and inequalities that abound.

Everyone 'knows' what happens when couples divorce. Stories proliferate about unjust property settlements, about lawyers who profit by extending the arguments, about people holding out on child custody and access agreements until a better property deal is agreed. Yet this study, because it is based on full details ofa more representative cross-section of divorcing couples, comes up with some surprises which contradict the folk wisdom about divorce.

The majority of couples settle out of court with a minimum of conflict. Not many lawyers enjoy or prolong the property battle. The party who stays in the matrimonial home after separation tends to get a better deal on divorce settlement.

A greater share to the custodial parent is often still not enough. Women from higher income marriages are more likely to apply for Supporting Parent's Benefits. Post-divorce poverty for women and children is widespread.

Serious questions are therefore raised by this study about compensation for time out of the labour force, about a more certain system of payment for child maintenance, and about the whole issue of 'contributions' versus 'needs' as a basis for matrimonial property settlement.

Perhaps the most significant question raised concerns the nature of marriage itself. Women long ago ceased to be chattels of their husbands with no property rights of their own. But we have a long way to go yet in recognising the partnership of modern marriage, the equal worth of efforts inside and outside the home to sustain family life, and the ongoing responsibility of both parties to a marriage to support children of the marriage. Dr McDonald and the IFS research team raise some questions and challenges that will generate controversy for a long time to come.

A study of this magnitude cannot be successfully conducted without the assistance of numerous people. First and foremost, we owe a great debt to the study participants who gave much time and, often, much emotion to provide the information requested. The interview schedule was a long and difficult one and the participant's responses are an important contribution to the reform of family law.

We gratefully acknowledge the valuable co-operation and input of the Chief Judge, Justice Elizabeth Evatt, and officers of the Family Court of Australia (Sophie Bordow, Susan McIllhatten, Roger Mackay, Carmel Morfuni, John Myers and Alan Ray); the equally important contributions of Professor David Hambly and his Law Reform Commission team (Ann Risely, John Schwartzkoff, Deena Shiff and Peter Waters); and the advice of key consultants (Bettina Cass, Marian Dunlop, Meredith Edwards and Sophie Watson).

Above all, this has been an Institute team effort, taking up most of our resources for the past two years. I wish to acknowledge not just the excellent work of those who did the analysis and writing up, but also those who made significant contributions in other ways such as typing, editing and computer programming (Leigh Baker, Rhonda Carrington, Sharon Craig, Mari Davis, Judith Foster, Simon Freidin, Dugald McLellan, Sandra Marsden, Meredith Michie, Mary Browning, Di Press, Paul Amato and Sonia Savannah). The entire staff was involved in commenting on study design and the interpretation of its findings.

I trust that this book will be read not only in relation to the Matrimonial Property Inquiry being conducted by the Law Reform Commission, but in relation to those broader issues of equality and justice in which the structure of marriage and the family play such a large part.

Don Edgar,,
Director,
Australian Institute of Family Studies,
Melbourne, March 1986

EDITOR'S NOTE

A number of special ECMB Technical Notes have been written to explain in detail methods of analysis used In this study; for example, on Multiple Classification Analysis, the Australian Standard Classification of Occupations, on the use of Equivalence Scales and system of weights, the scale used for rating household tasks and the estimation of unknown values for property. ECMB Technical Notes are held on computer at the Australian Institute of Family Studies and copies can be made available upon request. In addition, most chapters in the book have been condensed from longer, more technical versions which contain a considerably larger number of tables. These research versions of chapters are also held on computer and are available upon request.

Introduction

by Margaret Harrison

This introductory chapter sets the context for an examination of property and income by providing a brief summary of the major features of the current Australian system of family law (particularly its financial provisions on marriage breakdown), the broad-ranging effects of marriage breakdown and current laws on the financial position of formerly married persons.

In 1980, the Parliamentary Joint Select Committee on the Family Law Act recommended that arrangements for the introduction of a Matrimonial Property Regime should be preceded by:

  1. a survey to establish community attitudes to the proposal;
  2. a full study carried out by the Law Reform Commission of the legal implications of the introduction of such a scheme;
  3. the assessment of the experience of the New Zealand and various Canadian schemes (Recommendation 36).

The Committee also recommended that 'the Family Law Act be amended to provide that during the subsistence of a marriage and on the break up of a marriage, the parties to the marriage will be presumed to own the matrimonial home in equal shares' (Recommendation 37).

In June 1983, the Attorney General referred the issue of matrimonial property to the Law Reform Commission with Terms of Reference which required a consideration of whether any changes should be made to the law and a consideration of whether any system introduced should affect the acquisition and management of assets held during a continuing marriage. Such terms of reference obviously require an examination of the details and operation of Australian law, together with that of countries with similar and different matrimonial property provisions. The Law Reform Commission and the Australian Institute of Family Studies (IFS) considered that a full review of matrimonial property should include a consideration of the effects of marriage breakdown on the economic situation of divorced people. Such research would amplify the reference to incorporate the experiences and views of men and women in a variety of circumstances, and would enable the Law Reform Commission to assess the impact of the operation oflaws in an empirical, as well as a technical, sense.

The Law Reform Commission has examined the operation of the discretion~ ary system by surveying contested property cases, Section 871 agreements and Regulation 962 conferences during specified periods of 1983 and 1984 (Australian Law Reform Commission, 1985b). This examination and the survey by the IFS complement each other and together provide a picture of both the law's role and other relevant circumstances affecting people after marriage breakdown.

Information about the economic and other experiences of people whose marriages have broken down has, until now, only been available in Australia in a piecemeal fashion, which does not permit a coherent view, particularly of experiences over time. The literature commonly talks about marriage breakdown as being a process characterised by grief, anger and remorse, on one hand, and by relief, increased life opportunities and improvement in health on the other. It is known that factors such as age at divorce, the presence or absence of dependent children, possible or actual repartnering and economic independence, can either moderate or exacerbate the impact of the separation. And a substantial body of research has developed around the effects of divorce on both young children and adolescents (Wallerstein and Kelly, 1980; Smiley and Goldsmith, 1981; Dunlop and Burns, 1984).

However, official statistics on divorcing people are limited in the details they provide. For example, the Family Court of Australia keeps records of the overall numbers of its clients who divorce and seek maintenance, custody and property orders. But it is not possible to use these figures to trace the pathway of people's passage through the Court processes; nor is there at present any record of the outcome of their applications, for example, of whether the matrimonial home was sold and the proceeds divided. In addition, because many orders for maintenance are made in Magistrate's Courts, there is no central statistical repository of orders for all Courts operating in the family law jurisdiction.

The Department of Social Security records the number of recipients of pensions and benefits, such as Supporting Parent's Benefit and Widow's Pension, associated with separation and divorce. However, it is difficult to ascertain from these figures the characteristics of those people who obtain benefits or for how long they need to rely on such public assistance.

Australian and overseas research has drawn attention to the economic hardship that follows marriage breakdown, particularly for female-headed singleparent families. Censuses and surveys conducted by the Australian Bureau of Statistics (ABS) show the increase in this family type, largely due to increased divorce. But once again these surveys give a static picture ofa family type which is constantly changing. Divorced people repartner, and children, of course, grow up.

OUTLINE OF THE STUDY

The broad aims of the study of the Economic Consequences of Marriage Breakdown (ECMB) were to map the financial arrangements made in marriages; to describe the post-marriage-breakdown circumstances of men and women who were parties to different arrangements; to assess the effects of social status, education and employment background, and the types of legal processes used, on Court outcomes; and finally, on the basis of these analyses, to make policy recommendations relating to the public and private law. Thus the Institute's study was designed to obtain information on the financial circumstances of men and women who were divorced over a period of several years via the Melbourne Family Court. Chapter 2 describes in detail the sampling and analysis categories of the survey.

The project has been complex. Respondents were asked about their standard ofliving, income, housing and personal assets at various points in their life. This questioning required the full co-operation of respondents who were asked to remember events that happened during the marriage, as well as after its termination. Amounts earned and values of assets were an important component of the questionnaire.

Because the nature of sex roles within the marriage has an important impact on the earning capacity of the parties should the marriage end in divorce, the study asked for a great deal of information about the working patterns of husbands and wives and their different forms of contribution to matrimonial property. These questions also reflect the Family Law Act provisions relevant to property settlement

How divorced people cope financially with the aftermath of marriage breakdown is linked to their ideas of fairness, their state of emotional well-being and their way oflife after the divorce. The study was therefore not restricted to the 'hard' data of dollars and cents, but included subjective material which might have affected not only a person's self-esteem and ability to cope, but even the way he or she approached litigation, remarriage or new employment.

It has been repeatedly shown that marriage itself, and child bearing and raising in particular, have a detrimental financial effect on women (Joshi, 1984). Survey results described in Chapter 5 reinforce the fact that women frequently leave their jobs for family reasons, and thereby lose out on future job opportunities in addition to job skills, retraining and promotion opportunities. The inclusion of maternity leave provisions and other measures intended to minimise these disadvantages do not appear to have been widely successful. The recession and chronic shortages of adequate child care exacerbate the difficulties of work force participation for married women.

Using 1981 Census data, Watson and Shiff(l984) have shown that there are considerable discrepancies between the work participation rates (and therefore incomes) of divorced men and women. These discrepancies were marked even where there were no dependent children, suggesting that employment of women is affected by structural labour market factors and marriage itself, as well as responsibility for dependants.

Thus, even though the sex role balance of the 1950s and 1960s has been altered by higher working rates of married women, this change has still not given them equality. Many are employed in piecework or work on a part-time basis, and women are still concentrated in low skill, low paid jobs which provide no career structure.

While for many women in an intact marriage, the 'traditional' division of labour (working husband - housewife) may be acceptable, and the loss of job prospects considered worthwhile (at least until the children are ofa certain age), the picture obviously changes dramatically if the marriage terminates.

MARRIED WOMEN AND PROPERTY OWNERSHIP

A short historical summary of the legal provisions relevant to matrimonial property helps to explain why a major characteristic of Anglo-Australian law is that marriage has no effect on the property rights of husband and wife. Until just over a century ago, married women were effectively divested by the marriage ceremony of rights to property they would otherwise have acquired or managed. Lunatics, married women and children were considered to be legally incompetent.

The husband's sovereignty over his wife (frequently explained as being of a protective nature) resulted in her loss of financial independence. The English Married Women's Property Acts of the 1870s and 1880s (adopted in the Australian Colonies shortly after) sought to overcome the inequities produced by the unity doctrine of marriage, which largely benefited husbands only. They did this by providing that henceforth husband and wife were quite separate in their property ownership and dealings. Such a regime stressed legal title to the property as providing the right to its management and disposition.

A major impetus for the introduction of the Married Women's Property Acts was the high participation of married women in the workforce. The English Census of 1861 estimated that 24 per cent of married women were in employment, which meant that the paternalistic attitude of the early nineteenth century was somewhat misplaced. However, at the same time, the rate of home ownership was very low, so the effects of the reforms must have been slight. Only about 10 per cent of people lived in property that they owned, and this limited owner-occupation ratio was experienced in England until well after World War I. In Australia, although the home ownership rate has always been higher than it is in England, women were similarly constrained in their access to equal wages and conditions, and were minor partners in the management of household finances.

The separation of property principle gave both spouses the freedom to deal with assets independently in their name. However, on marriage termination no account was taken of the marriage or its effect on the ability to acquire property, and each spouse was entitled to claim only that to which he or she had strict legal entitlement. Current law has quite radically altered this because of manifest unfairness, and, in many countries (of which Australia is one), as McCall (1982) has pointed out, an entirely new property regime comes into existence on the breakdown of marriage, with the power to alter the interests of the parties as a result of the application of a set of criteria which. go far beyond strict legal entitlement.

The relationship between legal reform and social change is always a fragile one, particularly in areas oflaw where 'social engineering' is involved. In the case ofthe Married Women's Property Acts, the social, economic and philosophical impetus for their introduction altered. Very reasonable rationales, such as individualism and a notion of equality, produced the nineteenth century reforms. However, the industrial revolution increased the family's reliance on earned income outside the household and widened the base of people who could be considered landowners. Women, both single and married, were drawn into a workforce that was no longer restricted to domestic service, and their contribution was therefore increasingly seen in financial terms. For those women who, for a variety of reasons, did not produce income, the doctrine ofthe separation of property failed to protect them, unless they acquired property by way of inheritance or gift. Ironically, the division between women who did, and did not, work made the non-working wife's economic position very vulnerable.

Deech (1984) has argued that the major twentieth century changes which have affected property relations between husband and wife are the growth of owner occupation, the effect of inflation on house values, the increasing numbers of income-earning women and the high divorce rate, together with irretrievable breakdown as the basis for divorce.

PROPERTY, MAINTENANCE AND MARRIAGE BREAKDOWN

Divorce, which prior to World War 11 was unusual, has increased such that the phrase 'mass divorce phenomenon' has been used (Chester, 1981). Currently in Australia just over 40000 divorces per year are granted, and on current predictions people who are marrying now have a 35 per cent chance of that marriage ending in divorce (Carmichael, 1985). English and Canadian figures are very similar, and the divorce rate is higher in the United States.

The reasons for the increase in marriage breakdown and divorce are complex and appear to be related to changing social values and sex roles, economic problems, and increased secularisation. Higher divorce rates have been viewed with considerable concern as indicating a decline in the success of marriage as an institution. The psychological effects on children of their parents' divorce have been much publicised, and earlier research pointed to delinquency and personality disorders among such children. These concerns appear to have overshadowed the economic implications of widespread divorce both for society as a whole and for the families concerned. Lengthy Parliamentary debates which accompanied the passage of the Family Law Act rarely even speculated on the financial impact of no-fault divorce, although the possibility of an increased divorce rate was foreshadowed.

The economic costs of marriage breakdown have come to the fore as a result of complaints about the numbers of separated and divorced women on Supporting Parent's Benefit, concern about the pockets of poverty among such women and their children, and complaints that maintenance obligations are being ignored. In 1983, the Attorney General issued Terms of Reference in relation to the possible establishment of a national maintenance enforcement and collection agency. The departmental team, which conducted this inquiry and reported to the Attorney General in 1984, saw a reduction of social security expenditure as one of the three primary policy objectives of a maintenance enforcement system, where this was possible and reasonable. Other objectives were a reduction in the hardships of supporting parents, and preservation of the integrity of the judicial system by ensuring the enforcement of orders.

The inter-relationship of maintenance and property ~ssues is important. Overseas research has shown that the payment of maintenance may be the one factor which keeps single parent families above the poverty line. However, there is also overwhelming evidence, both in Australia and overseas, that maintenance is rarely paid. Even where it is paid, the amount transferred is frequently inadequate to pay even half the cost of raising children, which places additional financial burdens on women, who are almost invariably the custodial parent. This chapter explains the maintenance component in property division in the context ofthe law's approach to property settlement and to the concept of the 'clean break', while Chapter 14 discusses the importance and frequency of maintenance payments. As explained below, the 'clean break' philosophy is that, as far as practicable, the Court shall make orders which will finally determine the financial relationships between husband and wife, and avoid their involvement in further proceedings.

DIVORCE AND THE APPROACH TO PROPERTY DIVISION

Complaints about the vagaries of fault-based divorce, the dishonesty that frequently surrounded it, and the associated cost and indignities, produced a groundswell of opinion in Australia during the early 1970s that family law reform was required. However, the resulting legislation was not easily achieved, and the debate about its alleged strengths and weaknesses has not abated.

No-fault divorce has been the major characteristic offamily law developments over the past decade. In turn, no-fault divorce has been accused of increasing the divorce rate and of weakening the economic position of 'innocent' wives. Weitzman (1984) maintains that no-fault divorce (particularly where the relevant legislation permits divorce without the consent of the respondent) transfers power from the person who wants to remain married to the person who wants the marriage to end. This, she argues, strips the reluctant divorce partner of the leverage he or she had, and which was commonly used to obtain economic concessions. However, Californian no-fault divorce was introduced simultaneously with property provisions which require the Courts to divide marital property equally. Australian divorce laws, in contrast, combine no-fault divorce with a discretionary system of property distribution.

In some overseas jurisdictions, fault has been eliminated from the granting of divorce itself, but fault is still relevant when custody and/or the distribution of assets is being considered. In other jurisdictions, of which Australia is one, the conduct ofthe partners is irrelevant, except where it dissipates assets, requires the grant of an injunction for personal protection, or affects the capacity to parent. Certainly no-fault laws have altered the property and other entitlements of divorcing men and women by removing the advantage or disadvantage provided by the commission ofa matrimonial offence. The earlier simplistic formula of the 1950s and 1960s was that proven guilty conduct of one party, such as desertion or adultery, was the cause of the breakdown of the marriage. Everything that followed, as a result of that behaviour (most importantly the custody of children and the allocation of property), was considered to be linked to it. However this principle was gradually modified by legislative provisions which required decisions involving children to be made with their best interests as the paramount consideration, and property settlements to be just and equitable. The no-fault premise ofthe Family Law Act was therefore not so much a radical step as the end point of an evolutionary movement.

The Family Law Act takes an essentially pragmatic approach to property division after marriage breakdown. The major characteristic is judicial discretion, which underscores the belief that each marriage is different, and therefore incapable of having imposed upon it fixed rules for the redistribution of its assets and liabilities. The discretion is not, however, unfettered as it must be exercised according to the application of a set of principles based on contribution and need. Other principles, which form an important 'backdrop' to the process, are: that matters are to be finally determined between the parties wherever possible; that the Court must do what is just and equitable in all the circumstances of the case; and (implicitly) that both parties to the marriage are equal in status.

A characteristic of the discretion is that the principles of contribution and need are given different emphases according to the facts presented, and there is no requirement that the use of discretion be judicially explained.

ELEMENTS OF CONTRIBUTION AND NEED

It has often been explained that the contribution and need components reflect retrospective and prospective aspects of the marriage as seen at its end. The first step in a property claim is a consideration of what a party is entitled to, bearing in mind the contributions made.

In examining contribution, the role of husband and wife in the acquisition, conservation or improvement of currently owned property (whether solely or jointly) is relevant, and the ultimate question the Court must decide is whether a redistribution of that property is necessary. The contribution is not necessarily seen in financial terms, the most common non-financial form of contribution being that made by a woman in her homemaking parent role or to the welfare of the family. Nor need the contribution made be a direct one to the acquisition, conservation or improvement of any property. It is not unusual, in a dual income marriage, for one spouse's income to be used for the deposit on a house or to meet mortgage repayments, while the other's income is used for the payment of household bills or other outgoings. It would be manifestly unjust in such circumstances for the spouse paying household bills to be considered not to have contributed to the acquisition of the matrimonial home.

The provision for statutory recognition of non-financial activities as a contribution is a realisation of the value of such activities, and a protection for the nonor partially-working wife. One rationale is that the wife's performance of domestic duties frees the husband to earn income and acquire assets. In the partnership of equals that modem marriages are claimed to be, the variety of functions of each spouse have equal, but different, characteristics. A non-working wife also has a reduced chance of surviving economically without a working husband, and this factor may become relevant to the needs component of the distribution equation.

Recognition of the relevance ofa non-financial contribution is one thing, giving it equal weight to that of a financial contribution has proved a more difficult step, particularly for men, to accept. There have been consequently many and bitter debates about this, particularly where the husband's acquisition of assets has been considerable. Until recently the Family Court was prepared to take the view that, in a long marriage, equality should be the normal starting point, even where the efforts of one were solely as homemaker (Pickard(1981), FLC 91-034 at pp. 76,314). This presumption is complemented by quite frequent statements by Family Court Judges that the wife's non-financial contribution should be recognised in a substantial, and not just a token, way. While not criticising these statements, the High Court in 1984 disagreed with Family Court decisions which started from a position of equal sharing, saying there is no legislative basis for any presumption and thereby stressing the discretionary bases of the Family Law Act (M aUet (1984), FLC 91-507).3

Not surprisingly, the whole issue of the relative weights of financial and nonfinancial contributions is a particularly controversial one. Writers such as Scutt and Graham (1984) place much of their criticism of the discretionary system on their allegations that women fare badly from (predominantly male) Judges who minimise and trivialise the role of women in marriage. Men argue,just as vehemently, that their efforts are inadequately recompensed, and that their wives should not be entitled to assets acquired and businesses built up, as they claim, on their own initiative.

The assessment of financial contribution in itself is made more difficult where, during the marriage, successive matrimonial homes have been acquired (perhaps with different contributions each time), and holiday houses, perhaps inherited from: one spouse's family, or several businesses have come and gone, with fluctuating economic fortunes. As can be imagined, a very wide range of possibilities may occur and require investigation.

DIFFICULTIES WITH THE PRINCIPLE OF CONTRIBUTION AND NEED

One of the philosophies of the Family Law Act is that, on marriage termination, ancillary matters should be brought to a conclusion, as far as this is possible. Obviously, relationships with children, and the obligation for their support, are not included in this 'clean break' concept, but financial arrangements other than these are concluded on a once-and-for-all basis, where circumstances permit.

This philosophy discourages the use oflong-term spousal maintenance unless a spouse is unable to support herself or himself adequately, because he or she has the care and control of a child of the marriage under 18, or because of age or physical or mental incapacity for appropriate gainful employment, or for any other adequate reason. The Act does enable short-term rehabilitative maintenance to be awarded, for example, to enable a degree or diploma to be obtained or for retraining. However, this appears to be only rarely sought, arranged or ordered.

Nygh J, in the case of Aroney ((1979), FLC 90-709) explained the relationship between maintenance and property entitlements in this way:

If the wife is [under the section which enables the Court to alter property interests] entitled to a large property adjustment, her need for support by way of maintenance is consequently reduced. If[under the property alteration section] her entitlement is less, it may be necessary to increase the lump sum allowance to ensure that she had adequate maintenance. The proper method is to look at the property adjustment first and see whether this would also satisfy the wife's needs for support or whether it needs to be supplemented by a lump sum or by periodic maintenance.

Where an entitlement to spousal support occurs because there are insufficient assets to divide, there is also often an incapacity to pay because of insufficient income. In such cases, the Family Law Act provides that an entitlement to a pension or benefit may be taken into account, and many divorced women do in fact become recipients of pensions for at least a temporary period, as discussed later in Chapter 6.

By its inclusion of a prospective component, the Family Law Act takes into account the realisation that an assessment of past contributions may not necessarily result in ajust and equitable redistribution of property. The Court is therefore required to estimate what the future economic needs are in each particular case, and what adjustment of the available assets can compensate for those needs.

Post-divorce family types vary considerably, usually after the property has been divided, and in ways which are difficult to predict (see Chapter 4). A change in the type of family may detrimentally affect a person's economic position, or may improve it. A woman who receives an additional proportion of the property, because she has no job prospects, may subsequently marry a wealthy man and have no future financial uncertainty, while her former husband may remarry a woman with several children, who require his financial support. The reliance on reallocation of property, or the payment ofa lump sum, rather than periodic maintenance, .is a conscious attempt by the drafters of the Act to enable divorced people to start their lives again, but it also contains possibly unforeseen results.

An examination of the contribution and needs factors, which underpin the property provisions of the Family Law Act, raises questions about their aims and the success of those aims. Is there appropriate recognition of the variety of different contributions made during the life of a marriage? Is there consistency as to the weight to be given these different contributions? Is a contribution made as a homemaker- parent quantifiable? Is it patronising to consider the future post-divorce needs of a spouse, or is this the only way to compensate a spouse for economic disadvantages incurred as a result of the marriage? Is the principle of the 'clean break' appropriate? Should the State assist divorced people via the social security system? These are obviously extremely difficult and controversial questions, and would be answered quite differently by various groups in the community.

It must be stressed that very few property disputes are actually determined by a Judge, a point discussed in more detail in Chapter 3. The vast majority of people bargain in the shadow of the law, receiving advice from lawyers who, from their knowledge of the legislation and the case law, advise clients of the parameters of any dispute, and of its possible outcome.

Until the decision in Mallet's case,3 there was certainly a 'rule of thumb' that equality was at least the starting point in long marriages, although many divorcing people were not affected by such a presumption. While the situation is now apparently less certain for potential litigants, there is a large body of precedent which provides guidelines as to the manner in which matters are determined.

STRENGTHS AND WEAKNESSES OF THE DISCRETIONARY SYSTEM

Those who support the current system of property distribution on marriage breakdown in Australia mainly stress its flexibility, the ability to take into account the wide variety of circumstances that make one marriage different from another, and to reach a conclusion that is the best possible in the circumstances. This flexibility is particularly important in a society such as ours where marriages which end in divorce are so diverse. It is claimed that discretion is exercised in a manner sufficiently consistent to enable people to predict outcomes.

Critics such as Tennison (1983) and Scutt and Graham (1984) argue that the system is capricious, unpredictable, uncertain and expensive. They point to the instances where judicial discretion has resulted in different results from similar fact situations, and say that such results make it impossible for separating people to know in advance what their rights and obligations are. Because it is virtually impossible to appeal against judicial discretion, bad decisions are nearly automatically final decisions. Uncertainty produces unnecessary litigation and also advantages the party with greater power and/or resources.

Some claim that the principle of equality of husband and wife espoused by the Family Law Act is frequently not upheld in settlements based on interpretations of contribution and need. This has led some to urge the introduction of a fixed entitlement ~ystem (for example, Scutt and Graham), while others argue that equality at the time of divorce does not protect women from suffering long-term poverty, because of the economic disadvantages they experience by reason of gender inequalities (Cox, 1983).

The Parliamentary Joint Select Committee on the Family Law Act commented on the different complaints expressed by men and women in their submissions to the Committee. Men gave the impression that the present law operates as an asset stripping device, while women complained that their contributions as homemaker or parent are not recognized.

ALTERNATIVES TO THE DISCRETIONARY SYSTEM

This chapter is not intended to deal at any length with the vast and complicated topic of matrimonial property regimes discussed in the Australian Law Reform Commission's Discussion Paper (1985a). However, criticisms of the current Australian system are inextricably connected with a realisation of what the alternatives to it are, and how adaptable such alternatives might be.

Broadly speaking, the most common form of matrimonial property regime, and one found in many western European countries, is where the parties retain their separate property during the marriage, but, should the marriage break down, a system of equal fixed entitlements operates on property which is specifically designated as matrimonial property. Such a system provides certainty, but does not take into account the different needs or responsibilities of the parties. The system can usually be contracted out of, and, in some cases, is inapplicable where the marriage has lasted for less than three years. Countries such as New Zealand and Germany, and some American States and Canadian Provinces, have such systems. A less common regime involves the joint ownership of assets designated as matrimonial assets during the marriage, with equal entitlement to those assets should it end in divorce. During the marriage either one or both spouses may be entitled to manage the property.

It must be noted that because the Family Law Act does not specify what property is subject to division, there is no special attention given to 'marital' or 'business' assets, and therefore every form of property, however acquired, can be divided when the marriage breaks down.

RESEARCH INTO ECONOMIC CONSEQUENCES OF MARRIAGE BREAKDOWN

The prevalence of different divorce laws and matrimonial property regimes in different countries, together with concern over how divorced people manage financially, has generated several interesting research projects which have had some influence on the design of the Institute's study.

The data from these projects show quite dramatically how little information was available to legislators and policymakers about the financial implications at the time when these major legal changes were made. Although information was unavailable, the ramifications of the new legislation do not appear to have even been considered or debated. At least research data, both from overseas and Australia, are available now to influence the nature and course of any amendments that are considered in the future.

Lenore Weitzman's research in California (1981) involved an examination of the effects of that State's 1969 no-fault divorce laws on the pattern of maintenance and property awards. She also looked at the consequences of the awards for postdivorce standard ofliving. Her project required an examination of files completed prior to, and after, the new Act to see what changes had occurred as a result of the new provisions, particularly as regards the equal division of property introduced by the new Act. Weitzman's major findings can be summarised as follows:

  • Many divorcing couples had little or no material property to divide, particularly where the marriage had been short.
  • The earning capacity of the working spouse(s) was more valuable than the tangible assets.
  • Women received less of the material property under the equal division legislation than they did under the previous fault-based legislation.
  • Assets were fewer in many shorter marriages where there were dependent children, but it was in these cases that the house frequently had to be sold to effect an equal division of the matrimonial property.
  • Career assets were not included in the Californian definition of community property; had they been, the discrepancy between the economic consequences of marriage breakdown for men and women would be even greater. Typically it is men whose careers continue uninterrupted during marriage and who acquire qualifications and promotions which are vital for the remainder of their working lives. In contrast, many women come out of marriage breakdown poorly equipped for economic survival, let alone economic independence via a career structure.
  • Maintenance payments for wives were rare and were also rare under the faultbased legislation. Payments for children were modest when the father's ability to pay was taken into account, and they rarely covered even half the cost of children; therefore, the mother had the greater financial burden, although she had fewer financial resources.

In a later project, Weitzman (1984) investigated the approach of both English and Californian lawyers (both practitioners and Judges) to a series of hypothetical questions involving property and maintenance awards. Weitzman argued that the prevalence of divorce, together with death, has made it a major reason for the allocation of family property. In addition, she claimed that the legal rules governing divorce settlements reflect basic societal norms and values about marriage and family life.

While conceding that the social security and tax provisions of these two jurisdictions are very different, Weitzman concluded that the English marriage was couched in terms of a lifelong bond which implied that a wife was entitled to continuing financial support. In contrast, the Californian marriage was predicated upon the clean break, and a major implication of this was that a wife, almost irrespective of her age or the age of her children, was expected to work. Further, while English lawyers emphasised the need to protect the interests of children (especially in relation to housing), Californian lawyers appeared to be more concerned about the husband and his post-divorce career prospects. Not unexpectedly, the English discretionary system produced a far greater variety of suggested outcomes than did the Californian community property system. On property division alone, the Californian wife fared better, as she had an automatic equal entitlement to matrimonial property, while the English wife was likely to receive only about one-third of the assets. However, Weitzman concluded that the Californian view of justice, which was heavily reliant on the equality of the sexes, may be based on a false assumption of men's and women's equal economic position.

This study is interesting in the Australian context as Australian family law is a hybrid of English and Californian law. It has the discretionary system of property division, which it inherited from England, and yet, as a result of the Family Law Act's passage in 1975, has the no-fault, unilateral form of divorce, which was originally introduced into California in 1970. It tends more towards the clean break philosophy of California, at least as regards spousal support, and yet the interests of children are frequently an important component ofa property division. Weitzman might argue that the societal norms and values expressed in the legal rules are potentially contradictory.

In the United Kingdom, MacLean and Eekelaar (1983) examined the economic circumstances of divorced people with and without children, and looked at the effect of post-divorce events such as remarriage. Their research was conducted at a time when possible amendments to laws which determined the nature and principles of post-divorce financial obligations were generating a considerable amount of controversy in England.

Although their sample size was relatively small, MacLean and Eekelaar found, as Weitzman had, declines in the standard ofliving offemale-headed single-parent families. Such declines were not shared by divorced people not responsible for the care of children, or by those who had remarried. MacLean and Eekelaar classified sources of support which exist at divorce to minimise or stop the decline in the economic circumstances of the former family, as:

  • The resources oftheformer family as at the time of dissolution: these are generally small, and if there is a matrimonial. home, it is likely to be the major asset, although perhaps heavily encumbered.
  • The custodial parent's earning capacity: where this is the mother, such capacity is frequently restricted.
  • The non-custodial parent's earning capacity: as maintenance is frequently not paid, or amounts are inadequate, this is unreliable.
  • State provisions: these are not noted for their generosity and create dependency in those who receive them.

They considered that the interplay of each of these sources of support needs to be examined over time, as the process of marriage breakdown frequently has remarriage at its end point, a powerful economic resource in itself.

In one of the few research projects which looked at a cohort of still-married people, in addition to those who had divorced, Hoffman and Holmes (1976) assessed the impact of change of family composition on economic well-being. Women who remained married over the seven year period studied had increases in income relative to needs five times greater than those who were divorced or separated. Men who were divorced or separated suffered a decline in real income, but their economic position was only mildly affected because their needs also declined, the major cause of reduced needs being lack of responsibility for dependent children.

CONCLUSION

The study results described and discussed in this book were derived from a lengthy questionnaire which sought to assess the economic circumstances of 825 divorced men and women during the latter part of their marriage, in the period immediately after separation, and at the time of the interview.

The data show the trends which lie behind the diversity of marriage types, the workforce patterns (particularly of married women), and the allocation of tasks and responsibilities during marriage. In addition, the survey provides some fundamental, but previously unknown, Australian information about the nature and extent of matrimonial assets and liabilities of people married for specific periods of time, their distribution of these assets, and their use of the legal process, together with its influence on the way they managed their affairs.

It is hoped that the analysis of these Australian data provide some answers to questions posed by divorcing people, lawyers, law reformers and policy makers.

Endnotes

1 A Section 87 agreement is a maintenance agreement intended to be in substitution for rights and which, once approved by the Court, becomes effective and may be enforced as ifit were an order. The agreement (unless obtained by fraud or duress) cannot be the subject of a Court dispute again.

2 A Regulation 96 conference is a conference between a Court Registrar, the husband and wife and/or their legal representatives which is designed to resolve a dispute. It is now called an Order 24 conference.

3 ln the case of Mallet the parties had been married for nearly 30 years during which time the husband established and ran a successful business while the wife's role was as homemaker and parent. On appeal to the High Court of Australia from the Full Court of the Family Court (which varied an order of the Family Court), the major legal issue was whether, bearing in mind the different nature of tile contributions made by the husband and wife, there should be a presumption of equality, at least as a starting point, in considering the value of those respective contributions. The Family Court in earlier decisions had maintained that equality should be the normal starting point after a long marriage where assets had been built up by joint efforts regardless of whether those efforts had involved a financial contribution or not."
The High Court in Mallet's case repudiated this presumption, said it was not authorised by the Family Law Act and that each case must be examined on its own facts: the discretion contained within the Act is very wide and is unfettered by the application of any rules which would restrict it.

Publication details

Archived publication
Published by the Australian Institute of Family Studies, December 1986.
364 pp.
ISBN: 
0-7248-1116-8

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