With more young people choosing to put career ahead of settling down and the rising prevalence of subsequent marriages, it is now often the case that parties begin a relationship with vastly different net worths. So what happens when one party has brought more into the relationship then the other? Well, the Court helpfully says, “it depends”.
Below we discuss what the Court considers in determining the weight to be given to the greater initial contribution made by a party, how the Court has applied both the Erosion and Springboard principles previously and the current landscape post the Full Court of the Family Court decision of Jabour.
What the Court considers
When determining the weight to be given to a party for their greater initial contribution, the Court will consider the following:
- what the class of asset or assets were that formed the initial contribution;
- whether the asset or assets have increased in value and whether that increase was due to market forces or the efforts of the parties;
- whether those assets still “exist” today or whether they were disposed of and new assets acquired;
- whether the other party contributed to the upkeep, maintenance, preservation or improvement of the asset or assets;
- whether the parties have children of their relationship; and
- the length of the relationship.
The Erosion Principle
The Erosion principle, in simple terms, is a principle which says that the weight to be given to the greater initial contribution of one party may be eroded over time by contributions made by the other party.
The erosion principle was discussed by Fogarty J in Money & Money (1994) FLC 92-485 and later adopted by the Full Court in Bremner & Bremner (1995), stating:
an initial substantial contribution by one party may be “eroded” to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party.
The above illustrates the important distinction to be made – an initial contribution is not eroded merely by the passage of time, but by the contributions of the other party throughout the relationship. As such, where a relationship is of considerable length, there is simply more years in which the other party is likely to have made contributions which offset the initial contribution of the other party.
The Springboard Principle
Conversely, the Springboard Principle is another principle applied by the Court when trying to establish the weight to be given to an initial contribution. The Court may consider applying the Springboard principle where, assessing the asset pool of the parties at current day, that asset pool would simply not exist (or be of substantially lesser value) if it weren’t for the “jump start” or springboard afforded to the parties by way of one party’s initial contribution.
Jabour & Jabour [2019] FamCAFC 78
The 2019 decision of the Full Court in Jabour saw the Court pull away from principles such as erosion and springboard and make clear that the weight to be given to any initial contribution is to be assessed and weighed up against all other contributions, both financial and non-financial and direct and indirect, made throughout the course of the individual relationship.
Jabour involved a relationship of 24 years duration which produced three, at the time of the trial adult children. The assets (excluding superannuation) consisted mainly of a block of land owned by the husband prior to the marriage. The husband had been gifted a half interest in three separate blocks of land by his father. After the marriage, two blocks of land had been divided between the husband and the co-owner and the net proceeds received from the sale were applied to both everyday expenses, and to purchase the co-owner’s interest in the third block of land. As a result, the parties now owned 44 acres of land which in 2010 was fortuitously rezoned such that the value at the date of trial was in excess of $10 million.
At first instance, the primary judge found that throughout the relationship the contributions of the parties had been equal and thus it was the husband’s greater initial contribution (being the piece of land) and his greater post-separation contributions which called for an adjustment in his favour. The primary judge ordered that the pool be divided 66% to the husband, and 34% to the wife.
On appeal, the Full Court overturned the primary judge’s orders and ordered that the husband receive 53% and the wife 47%. The adjustment to the husband was not related to the main property, but to another significantly less valuable property he also brought into the relationship which was used as the family home. As such, the Full Court found that in relation to the initial contribution of the 44 acres, the contributions were equal.
The Full Court pointed to two main factors as to how the primary judge erred in assessing the weight of the initial contribution of the husband, namely:
1. That it was a joint decision between the parties to not apply all of the net sale proceeds from the original sale of the two blocks to some other cause, but to apply half of those funds to purchase the whole of the block of land which was ultimately rezoned; and
2. That given the length of the relationship and equal contributions throughout, it was a joint decision by the parties to hold on to the land for as long as they did, thus enjoying the uplift in value caused by the rezoning.
“There can be little doubt on the evidence that each party contributed to the maximum of their respective capacities and abilities within these various roles. There was a genuine mutuality to their relationship and the financial decisions and arrangements within it.”
How we can help
Critically, the weight to be given to an initial contribution may turn on a number of factors and professional advice should be sought in relation to each individual matter. If you feel we may be able to assist, please contact our office to arrange an appointment.
If you are entering into a new relationship and looking to protect your assets, the best line of defence is to have a Financial Agreement in place between yourself and your new de facto partner or spouse. Read more about Financial Agreements here
