Marital Infidelity and Property Settlements

In 1975, the Family Law Act  introduced the concept of no-fault divorce to Australia. This new approach to family law allowed a former couple to dissolve their marriage, and divide the assets of the relationship, without having to assign blame. This was a huge step forward from the previous practice which barred people from seeking a divorce unless they could establish ‘grounds’, which required that they prove (with sufficient evidence) that one party caused the breakdown of the relationship through factors such as adultery, habitual drunkenness or insanity. After the introduction of the Family Law Act, a person could seek a divorce because there had been irreconcilable break down of the relationship, which was demonstrated simply by a period of separation of at least 12 months. Importantly, the cooperation of the other party was not required to establish that the relationship was broken beyond repair. As a result, current family law in Australia does not occupy itself with the issue of marital infidelity when finalising divorce proceedings or deciding property matters, except in very rare cases. This article looks at the legal framework and possible impact of marital infidelity on property settlements in Australia.

Property settlement

It is important to note that divorce and property settlement are two separate legal proceedings. A divorce is the formal dissolution of a marriage, whereas a property settlement involves the division of assets and liabilities after a couple separates, and can apply in cases when the couple were never married (including in de facto relationships).

Property settlement matters are dealt with in the Federal Circuit and Family Court of Australia, and the Family Court of Western Australia. The court does not take infidelity into account when determining property proceedings. On occasion, a party to a property settlement will claim that they are entitled to a larger share because the other party was at fault for the divorce. While it is understandable that someone who feels wronged may believe that the other party should be ‘punished’, it is important to note that no part of the court’s assessment in property matters relates to the marital fidelity of the parties. When it comes to property settlements following the breakdown of a relationship, the court does not attribute blame. Instead, it follows a five-step process to determine what is fair and just.

1. The first step is to determine whether fairness requires that there needs to be a property adjustment between the spouses. In this case, ‘fairness’ relates solely to financial fairness and does not take into account moral issues of blame or punishment.
2. The second step is to establish the net worth of the couple, including all of the assets, liabilities and superannuation owned or owed by each person.
3. The court then considers the contribution (financial and otherwise) that each spouse made during the relationship (and afterwards). Again, this is not a question of morality. The court is interested in how each person contributed to the accumulation and retention of assets. This means that the amount that each person earnt and spent is relevant to the question of how the assets were acquired or retained, as is the amount of non-monetary contributions that each person made (such as by running a house and raising children).
4. The final step is to assess the financial needs of each spouse moving forward, with respect to factors such as respective income, employment prospects, age, health, and future care arrangements for any children.

Impact of marital infidelity on property settlements

In rare cases, the court has discretionary power to adjust a property settlement in light of a spouse’s misbehaviour during the relationship. For instance, the court might make an adjustment to the settlement if one spouse recklessly wasted marital assets or ran up debts through gambling. There have been cases where the court has accounted for exorbitant wastage on an extramarital affair, such as jewellery, accommodation, holidays and lavish gifts. The court may consider this type of spending to be negligent and reckless with the marital pool of assets. For instance, in Gans & Albert [2013], the husband discovered that his wife was having an extramarital affair from reading her diary, and then established that she had spent more than $100,000 on her lover. When making property orders, the court considered the amount wasted and made adjustments to the final distribution.

The court may consider the financial habits of the cheating party when assessing appropriate maintenance. If it can be proved that a spouse has been financially supporting someone else, this can be particularly relevant in spousal maintenance claims. Similarly, the court may find one party’s contribution to the relationship (such as rearing of children, housekeeping or employment) was made more difficult because of the conduct of the other party. This can change the assessment of how much each party contributed to the accumulation and retention of assets.

However, it is important to understand that in such cases the court was recognising the damage done to the party’s assets as a result of the conduct, not punishing the unfaithful party for a moral failing.

Although marital infidelity is largely irrelevant in property settlement matters, there are rare instances when the court has made significant adjustments to property settlements when infidelity led to financial wastage. For advice about making a strong case in a property settlement proceeding, please contact Go To Court Lawyers on 1300 636 846.