Stanford v Stanford – Implications for Family Property Orders & Estate Planning

The High Court of Australia handed down its decision in Stanford v Stanford [2012] HCA 52 on 15 November 2012 holding it is not “just and equitable” to separate the assets of elderly married couples just because they involuntarily separate when one spouse is forced to move into a nursing home.

The case considered whether courts could make property settlements in cases where elderly couples become physically separated through illness or old age, despite continuing to be married.

In Stanford, the parties married in 1971. It was the second marriage for both parties, with each having children from their previous marriages.

In 2008 the wife suffered a stroke and was forced to live, without her husband, in residential care. While in care, the wife developed dementia. The husband continued to provide for his wife, placing about $40,000 into a bank account to pay for her medical needs.

In 2009 the wife, via her daughter as case guardian, applied to the Family Court of Western Australia seeking orders that the matrimonial home, valued at approximately $1,300,000, be sold and divided equally between the parties, along with the husband’s superannuation and the parties joint bank accounts.

The Judge hearing the matter at first instance made orders that the wife be awarded $612,931.

The husband appealed against the decision to the Full Court of the Family Court of Australia. The Full Court held that although courts do have powers to make property settlements in cases of physical separation, the Judge had not sufficiently considered the effect of the orders on the husband or the fact that the marriage was still intact.

Before the final orders were made, the wife died. The proceedings were continued by her legal representatives under the Family Law Act 1975. (If a party to proceedings passes away before judgment, the Family Court can still make a property settlement order as if it would have when the party was alive and if it was still appropriate to do so despite the party’s death.)

So after the wife’s death, the Full Court reconsidered its position. The Full Court then ordered that upon the husband’s death, the $612,931 be paid to the wife’s legal representative. The husband applied for special leave to appeal this decision to the High Court and it was granted.

The majority of the High Court said, “…the bare fact of separation, when involuntary, does not show that it is just and equitable to make a property settlement order. It does not permit a court to disregard the rights and interests of the parties in their respective property and to make whatever order may seem to it to be fair and just.”

Effectively the Court held that there was no basis to conclude that it would have been just and equitable to make a property settlement order had the wife been alive, particularly because she had never expressed a wish to divide the family property.

However, the High Court ruled that there may be circumstances when married couples separate involuntarily, in which a property settlement order can be made by the courts. The majority stated:

“For example, demonstration of one party’s unmet needs that cannot be answered by a maintenance order may well warrant the conclusion that it is just and equitable to make a property settlement order”.

This decision highlights that the mere fact of physical separation, particularly if it is involuntary, does not give the Family Law Courts the power to consider property settlement between parties. To enliven the court’s jurisdiction to consider property division, there needs to be more than mere physical separation.

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