Property settlements under the Family Law Act 1975 where one party has entered into an aged care facility

With life expectancy increasing and the aging population on the rise, more people are entering nursing homes.  In recent years the Courts have been required to consider the effect of one party entering into an aged care home on its power to alter the property interests of the parties under the Family Law Act 1975.

In Stanford & Stanford [2012] HCA 52, the Husband and Wife married in 1971.  It was the second marriage for each and they each had children by their first marriage and separate Wills in favour of their children from their earlier marriages.

For 37 years the parties lived together in their matrimonial home in Perth. The house was registered in the Husband’s name. The Husband had purchased the property with his first wife but, after the end of that marriage, the house was transferred to him.

In December 2008, the Wife suffered a stroke and was admitted into full time residential care.  She was later diagnosed with dementia. The Wife could not and did not return to live with the Husband.  The Husband continued to reside in the matrimonial home. He continued to provide financially for the Wife.  In July 2009 he opened a trust account of which the Wife was the sole beneficiary and paid some $42,000 into it to provide for the Wife’s medical, accommodation and other expenses.

In August 2009, the Wife filed an application for property settlement proceedings under the Family Law Act 1975.  As the Wife was by this time disabled, her application was made by a daughter of her first marriage as case guardian.

The Wife’s application sought orders that the matrimonial home be sold and the net proceeds be divided equally between the parties and that the Husband’s superannuation entitlements and the parties’ combined savings be divided equally between them.

At first instance, the Magistrates Court of Western Australia ordered the Husband to pay the Wife $612,913 by way of property settlement. The Husband appealed this decision to the Full Court of the Family Court of Australia.

The decision of the Magistrates Court was overturned in part by the Full Court, where orders were made that provided for the sale and division of the former matrimonial home upon the Husband’s death. The Husband appealed this decision to the High Court.

After the Husband’s appeal to the Full Court had been heard, but before it was decided, the Wife died. Her daughters as her legal personal representatives continued the proceeding.

In dismissing the application continued by the Wife’s daughters, the High Court found that it would not have been just and equitable to have made an order with respect to property if the Wife had not died.

In making this decision the Court considered that the Wife’s needs were met. In short, the provision of care funded by her pension and the trust fund that the Husband had created was sufficient to meet the Wife’s needs.

The Court said that there were aspects of the Wife’s application that did not require an immediate order finally altering the interests of the parties in their property and particularly so where it would require the Husband to leave his home of 48 years in which he was still residing.

Importantly however, the Court confirmed that a property settlement can occur in circumstances where the relationship between the parties is “intact”, as was the case here, as the parties had not separated voluntarily.

However, while parties do not need to have separated in the sense that their marriage has broken down for the Court to be able to make an order, the circumstances surrounding separation may be relevant when the Court is considering the question of whether it is just and equitable to do so. Likewise, the bare fact of separation, when involuntary, does not show that it is just and equitable to make a property settlement order.