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Part 3: Property proceedings during the COVID-19 pandemic

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Now, let’s get straight to the point….. There is no need to explain the potential impact of COVID-19 on the economy. It has already been seen around the world with a significant impact on share prices, property values, superannuation and employment. This will have an impact on Family Law Property proceedings. 

This blog, which is split into 3 brief parts, does not intend to provide advice, as clearly such advice is entirely dependent on the precise circumstances of your matter. However, there are some general principles that you need to consider in light of the current pandemic.

Part 3(A): Valuations and Agreements

The Asset Pool

The first step of the Family Court’s “4-Step Approach” is to establish the asset pool available for division.  While this is always a moving beast in the best of times, the implications of COVID-19 will have ramifications that will influence, and potentially change, the appropriate approach required for property matters. 

Generally, the Court will utilise the value of assets as at the time that the matter is decided. This means that, even if you separated 3 months ago, the Court will adopt the value as at the time of Trial, which may be some time in the future. As such, your duty of disclosure requires you to continuously provide updated information regarding the value of assets and liabilities. This may include bank account, superannuation or share portfolio statements, which are easily updated throughout your matter and during this turbulent economic time.

However, other assets, such as businesses or property, are much more difficult to continuously provide information to substantiate their value. Accordingly, valuations play an important role in that process.  These valuations, particularly those for complex businesses, can cost a significant amount of money and take time to prepare. The long-term impact of COVID-19 on the value of businesses and property is not yet known. Additionally, the impact of COVID-19 on the potential delay with the Court system is not yet known. As such, the timing for valuations and when to provide updated information regarding the values of assets is a decision that needs to be considered carefully, with the assistance of your legal team. 

But what if you already have filed documents, or otherwise reached an agreement with your former spouse, as to the value of assets? Is that value still accurate and is that agreement still equitable? If the Court were to make Orders based on those values, would you actually be able to implement the Orders? 

For example, let’s say you and your spouse agreed a month ago that in exchange for you keeping shares in your employer’s company, or retention rights, you would pay a lump sum of $50,000.00.  Let’s say those shares and rights were worth $100,000.00 then, but as at today, they’re only worth $25,000.00. Is $50,000.00 still a reasonable and equitable amount for you to pay? 

This is just one example, but others may include the ability to raise a lump sum in this market, the ability to refinance in a certain timeframe and of course, the division of Superannuation where dollar amounts are adopted, and the Fund is largely comprised of shares.  

All these situations need to be addressed by a lawyer with the experience and expertise to answer difficult questions at difficult times.

Part 3(B): Income and Expenditure

The discrepancy between a party’s income and expenditure is considered by the Court when determining if one party is entitled to spousal maintenance. However, COVID-19 and the newly announced governmental regulations will be detrimental to many people’s employment. What do you do if you have been ordered, or agreed, to pay spousal maintenance but can no longer afford to? Additionally, if there are short term “freezes” on rent, mortgage or utility payments, how will this effect any previously agreed maintenance payments? 

Income earning capacity and expenditure relating to an accustomed standard of living is considered by the Court when determining what future factors justify an adjustment in the percentage division of the asset pool between the parties. COVID-19 will change the way in which Australians are employed, definitely in the short term, and potentially in long term as well. With industries having to make dramatic changes to their structure and function to comply with government regulations, the future income earning capacity of many people is unknown. 

We do not know how Australia, and the world, will respond once the threat of COVID-19 has passed. As such, it is important to carefully consider the strategy of any Family Law matter. Is this an opportune time to settle or will these changes and the potential delay be to your advantage?

Part 3(C): Anticipated delay

It is no secret that, while constant improvements are being made, the Family Court has struggled to cope with its demanding workload in the last few years. In fact, our Blog “The Family Court – A System in Crisis” was written in January 2016 when many of our clients had become exasperated with dealing with the delays in the Family Court.  At the time, litigated matters were expected to run for a minimum of 18 months before a Trial.  

The Court’s workload has only increased since then with the time estimates exceeding 18 months. Now, with the added uncertainty of COVID-19, that timeframe may increase further. Notification has been received this week, from the Family Court of Western Australia, that Callover, a monthly hearing during which Trial dates are allocated, cannot proceed due to the inability to conduct such a hearing by telephone. This means that those matters which otherwise would have been listed for Trial are now pushed back by at least a month (and more likely, pushed back until COVID-19 has entirely resolved and the government restrictions have been lifted). 

Given the current social distancing requirements, Trials have been indefinitely postponed. With initiating applications still accepted, more and more matters enter the queue, while none are able to be resolved at Trial. As such, if you are looking to resolve your matter without years of delayed litigation at the Family Court, you may need to consider an alternative option such as mediation or arbitration. 

We will continue to provide updates as the situation progresses. While delays may exist at the Family Court, there is no reason to delay seeking legal advice. As above, each situation is different to the next, and receiving prompt advice is paramount to resolve your Family Law matter in the best possible way.

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Wednesday, 05 August 2020

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