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How the court determine assets after divorce

WN Legal Podcast Ep 3: What Belongs to Who? How the Court Determine Assets After a Divorce or Separation

Want to talk to a lawyer about family law, separation or divorce? This is the next best thing: an open conversation with Perth lawyers Khew Wong, Kyran Nunes, Aimee Price and Caris Tysoe.

In this episode, our lawyers discuss how the court looks at assets and spending in a divorce, or property division after separation. What financial information do you need to disclose? What kind of assets and spending does the court consider? How deep does the assessment go?

Together, the team takes a look at the real-world issues and questions people need answered surrounding this situation.

The full transcript is below!

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Khew:   Welcome to another of WN Legal’s podcast. So I’m Khew, the host for this podcast today. Together with me I have Kyran. He is my business partner.

Kyran:   Good afternoon.

Khew:   I have Aimee and I have Caris, the two other lawyers.

Aimee:  Hello.

Caris:   Hi.

Khew: Today’s topic for the podcast, we’ll be talking a little bit about the pre-action procedure stage in family court proceedings. Some of the issues that we will be dealing with or we usually deal with, this is going to be a very conversational podcast and we’ll be discussing some of these issues including but not limited to what needs to be disclosed by the parties during separation and during divorce or property proceedings, any spendings post separation between the parties. What happens if assets are hidden or while they are overseas and not declared and excessive spending during relationship, the contribution aspects of the parties during post separation and subpoena of documents and forensic accounting issues that we would come across.

Kyran:   Generally, when you’re looking at what documents need to be disclosed in family court proceedings, whether it would be during court proceedings or in negotiation phases, the family law rule set out what documents need to be disclosed. Generally it’s bank statements for the past three years. That can be varied depending if the other bank statements in previous years, that would be relevant. Pay slips, income tax assessments, bank statements for your companies. Basically you need to establish what the actual asset pool is in marital life.

Khew:   The full financial climate of the parties, is that right?

Aimee:   Yeah, including the superannuation as well, the loss statement as well.

Khew:   Would they be part of the disclosure and de facto?

Aimee:   It is required, so you do still have to disclose your superannuation if you are in a de facto in a relationship as opposed to it being considered part of the asset pool, not so much for de facto. However, it will come into play I suppose when you’re dealing with the future needs aspects of one party and the financial resources of that party as well. If one party has $100,000 in super as opposed to maybe not so much for the other person, and that will be taken into account. But if you’re a de facto, you can’t necessarily, well, you can’t do a super split WA unless you’re married.

Khew:   I think you also need to disclose gifts, any testamentary dispositions, although they are inherited to yourself. I think you need to as well.

Kyran:   In terms of what we’re trying to set up to the public today, we’re trying to establish what is the asset pool. That’s the first step. What the court actually needs to determine as in the first step of proceedings is to determine what is the asset pool.

Khew:   Yes. Apart from that I think asset is not really the proper term because liabilities is also something that they would have to establish.

Aimee:   That’s right. They look at the net asset pool, so basically putting all of your assets into one big pile and then deducting off your liabilities and then what net are you left with at the end of that I suppose is how you determine it.

Khew:   Yep. That comes to the second point which is spending after separation, during separating, contributions or negative contributions of the parties.

Aimee:   I suppose in respect to negative contributions or maybe firstly we’ll start with the actual financial contributions but this is income. This is … Yeah. This is income, any sort of gift or inheritance, large lump sums, any lottery wins, anything like that, so who’s contributed the most in terms of the financial contributions.

Khew:   Yes. The issues, the difficulties we deal with in this practise when we deal with post-separation is a lot of our clients ask us and tell us about the diamond ring that the other party spends on and it’s not a wedding ring. It’s not an engagement ring. They just went out there and bought a very expensive ring. Kyran, what’s your opinion on that, spending aspect of things if post-separation, if there is such a huge spending? How does that affect the contribution of the parties?

Kyran:   Often the problem is people tend to spend money after the relationship and intentionally deplete the asset pool of the relationship by buying a new car and heavily financing that vehicle. The problem with that is they fail to take into account that one of the main things the court takes into account when determining the split between the parties is the conduct of the parties and also they make adjustments for negative contributions. When one party intentionally does something to deplete the asset pool, the court will actually make an adjustment in the asset pool to account for that action that was taken. It’s imperative that people take that into account. It’s important that you receive legal advice before making any drastic changes even if it occurs after separation.

Khew:   I think the issue here is not whether it’s a necessary spending. It’s spending that is more malicious, if I could put it that way because you know, I like shopping.

Aimee:   Unnecessary spending during the course of a relationship is very hard to do anything about. From I suppose previous experience in the family court, they don’t really, you know, it’s very difficult to calculate how much someone has spent during the course of a marriage, who’s to say what is reasonable and what’s unreasonable really at the time.

Khew:   I like shopping. It doesn’t mean that every single cent I spend.

Aimee:   You like Push bikes as well.

Khew:   Yes, I do.

Kyran:   Face cream.

Khew:   That doesn’t mean that it becomes a negative contribution. It needs to be… For example, drug habit, going out there and striking deals that are unnecessary. Say if me and my partner, we’re in a relationship and then she goes out there and she invests 50% of the asset pool into a business that she hasn’t told me about and then it’s all gone. That probably is something that the court will seriously consider.

Aimee:   I think unfortunately into this day and age, there is a lot of negative contributions in relation to drug use as well…

Kyran:   And gambling as well.

Aimee:   Yeah, given the prevalence of that in today’s society, so that’s a big one that comes into it most definitely.

Khew:   That would ultimately tip the scale or the balance itself of the contribution of the parties and who is to get what at the end of the day. It’s something that should be really, seriously considered.

Kyran:   I think just thinking of it from the commonsensical point of view, if someone is spending maybe $300,000 to sustain a drug addiction during the relationship, that’s money that could have been put towards a mortgage or something, so the court does take it into account when determining people’s entireness.

Khew:   Obviously that’s something people don’t just simply disclose, back to point one, something that will be brought up as an issue when we negotiate or when we make submissions in court in respect to parties proceedings and what assets split is necessary.

Aimee:   I might direct a question that, Kyran, in relation to hidden assets and how we do all that, getting disclosure on assets that are overseas or that someone is intentionally trying to hide which is notoriously quite difficult and there’s a lot of things that you need to lay off before you can actually … not before you can actually do that but before you should do that. There’s a lot of things that should be taken into account first. Kyran, what sort of things or searches can we do in order to find possible assets that are overseas or hidden?

Kyran:   Again, I think that this is totally towards people specifically situations, you know. Always obtain legal advice when you can, please, before making a decision. In respect to hidden assets maybe or monies that have been utilised or excessively spent during relationship, we would actually get the bank statements from the other party and do a full investigation to find out whether there have been excessive withdrawals and then seek justification for those types of withdrawals. When you’re talking about overseas assets that maybe some parties have, it’s difficult to obtain information in relation to certain jurisdictions because it’s just the reality that some jurisdictions don’t hold a central title deeds office like in Australia. And often they syphon out the properties to family members of which you probably won’t even know who they are. That’s something that needs to be considered. If it’s in a jurisdiction that there is a central deeds office, then we could do property searches obviously and maybe get boys over there to assist us, turning that type of information.

Khew:   I guess the triggering fact, while you need to find … What we, in the past, in our practise, we realised things have been different things through looking at a simple thing, a bank statement. You actually see … We did see money going out by some of them 10,000 a week. Some of them a lot more a day and day by day basis. The money just go out to bank accounts that are not referred to by the parties. I guess it requires a more keen eye in looking at bank statements to determine whether there are overseas ties, not specifically hidden assets because we don’t sometimes really know whether they are assets that they purchased. It’s just money that’s going out. That’s not declared and not mentioned by the parties.

Aimee:   As Kyran said earlier in relation to each person’s circumstances, that you should get legal advice, this is where it’s quite imperative because to do these overseas searches and to try and find assets that are possibly overseas is very expensive and you’ve got a way out the cost of doing that as opposed to potentially I suppose of what you’re going to find. If you’ve got while a large asset pool, then maybe you can justify the cost associated with doing that. But if the asset pool is new, nominal or in or about that amount, the cost benefit of doing that is just publicly not there. It’s just not worth it. You could spend tens of thousands of dollars and come up with a few dollar switch at the end of the day. It’s just not feasible.

Khew:   We must also make it clear that if for example, if the parties have an estimated gross asset pool of what say, three million? And if you realise that the asset found overseas is one or two million for example, then we are talking about a wholly different jurisdiction where the manner is to continue or proceed with. It’s the supreme court, no longer family court.
Those are the issues that you also need to consider at the end. Now, that comes to the fourth point which is excessive spending during the relationship. It ties in with the second point of spending after relationship, but this is during the relationship. I think we’ve covered a bit about drug use and during the relationship previously. I’m sure there’s other issues that are prevalent that occurs during the relationship that the parties can easily identify, usually most of them not, it comes out to our clients telling us what they believe is an expensive spending.

Obviously we won’t be going through every single itinerary through the list to determine what is excessive and not. It needs to be very, very prevalent. There are some incidences where the business accounts have been utilised as a module to syphon money out. There are some instances where it’s personal accounts. Some instances we had from trusts. There are many more. The same issue comes out to finding the trigger, finding the point where the money exits.

Aimee:   I think that’s a really subjective position as well. My idea of what is excessive, I would consider Khew’s spending on his bicycle quite excessive, but then Khew would also probably think my spending on handbags or shoes is excessive but to me it’s not and to him it’s not. It’s a hard one that actually putting that into putting practical use.

Kyran:   I just think about, Aimee when you bring that up, I just think about a recent court hearing that I heard before I went up in one of my own where the party was seeking disclosure or statements about I think it was six or seven years worth for nominal amount spent on beauty products and the court was absolutely blasting the other party for seeking something of that nature because obviously, when you’re earning money, you need to spend on your living and each person [crosstalk 00:14:01].

Khew:   You get that, Aimee?

Aimee:   I need my shoes to survive.

Khew:   Yes. But the case and point that what Kyran is trying to bring up is if in the past five years, you spend on beauty product, say 200 grand, and yes, that’s quite a bit, but five years worth of it and beauty products can range from simple nail polish all the way to full fledged…

Caris:   Very expensive creams.

Khew:   Creams, yeah. Therein lies the difference of if we are talking about something that petty, that’s a different story. We need to be talking about drug use. We need to be talking about money laundering schemes or…

Kyran:   Gambling.

Khew:   Or gambling.

Caris:   Prostitution even.

Khew:   Yep. Actually that’s true.

Caris:   Prostitution is another one as well or using of prostitutes.

Khew:   Yeah, but we have to be careful. We have to draw the line between whether using it is unethical. It actually needs to be the issue of excessive spending.

Caris:   Yeah.

Kyran:   What can be proven is very important because you can see large withdrawals, but if you can’t prove otherwise, then it’s not going to point to the direction of that was spent on that particular habit.

Khew:   Yes. That brings us to the next issue which is subpoenas. Long story short is once you found the trigger of where the money has gone and then you need to start finding out what’s happening there. Subpoenas are your best friend and your enemy at the same time because it clearly eliminates all doubt, but be very sure as to what you’re subpoenaing because all documents subpoenaed will be made available to every single party in the proceedings and they will be held in court, in an office or specific storage. But subpoenas are very…

Caris:   I suppose the moral of the story is don’t subpoena something you’re not really entire sure about what you’re going to pull up because it can either work really well or blow up in your face.

Khew:   Yep.

Caris:   I suppose.

Khew:   But it’s a very good reality check. I mean, it’s an extremely important reality check because if you are going in there and go, “Oh, wait. She spent so much money on this thing. It turns out to be nothing.” The test is what if our subpoena, will it look bad on me or will it not? I mean, the con of the parties will be heavily scrutinised at the time of the trial depending on obviously through the illegal proceedings. It’s a very, very careful step and process and Kyran, I know, does take into consideration all these things before doing so. Obviously in our practise, we have discussions about these issues from time to time and we apply them in our case.

Caris:   I suppose when it’s appropriate to subpoena and who and when… Yeah.

Khew:   Now, next question Kyran or Caris, forensic accounting, when is the time when we consider them and how. That’s a very another very interesting issue, isn’t it?

Caris:   Yeah. Again, I think again, with that it’s that cost benefit. You know, and again because that again is extremely expensive so while that’s a good way of going about, resolving any doubts that you might have about what is in an asset pool or where money might be going. It’s also can be a fruitless search.

Khew:   Don’t get us wrong. Forensic accounting doesn’t mean that we are looking at the full ledgers of the books and deciding. It can be very well be evaluation of the company’s worth, the bookkeeping aspect of things. From there we can tell. Most of the time, during separation, a lot of people will have difference in opinion of the value of a company that the other party holds.

Caris:   Definitely.

Khew:   Or ex-partner holds.

Caris:   Yeah.

Khew:   In forensic accounting and subpoenas, they are part and parts of what we do but the issue whether it’s feasible and practical to use them. I think before we even go there to the fifth point, we have to consider all previous full points with extreme care and make a decision accordingly before we decide to subpoena or scrutinise or hire a third party to scrutinise the intrinsics of any books.

Kyran:   If you got a business value where there’s goodwill of maybe $50,000, just doing a business valuation on that would probably be $10,000 for a normal business from what I’ve seen recently. It’s definitely a cost benefit analysis especially when you’re dealing with sole trade and businesses and that type of thing. Be mindful of that. You need to find gardens and again, if you need to seek legal advice, that’s what you should do before making any drastic movements especially if you’re representing yourself in family courts.

Khew:   Yes. A lot of times I find that self reps they tend to oversee all the necessary, I would deem it as red flags to canvas issues, but the problem of going in there and making application to subpoena documents to reviews and things, to look into an account intrinsically, they are time consuming, wasting the court’s time if it’s not relevant. Those are issues that needs to be dealt with very, very carefully by all the parties before the matter proceeds specifically through trial.

Aimee:   Yeah. Now I think that’s correct. Okay. I think that wraps it up for today. I don’t know if anyone’s got anything further to say. I think Kyran, you’re good, by the way?

Kyran:   Well, we’ve dealt with what … That’s the first step in property proceedings, so I think we’ll probably do a full episode podcast, so to speak, what’s involved in determining property entitlement and today, determining what is the asset pool of the relationship, so we’ll take it from there.

Khew:   Right. Thanks.

Aimee:   Thank you.

Khew:   Thank you, everybody.

Caris:   Thank you.

Kyran:   Thank you.

So What is Considered when the Court Determines Assets?

In summary, the courts will look at everything that may have had a significant effect on the assets belonging to a couple. Earning, saving, spending, even other activity like gambling, drugs, business investments, offshore bank accounts and spending after the divorce.

This is one of the first and very important steps of a divorce or separation court proceeding. More episodes will follow in which the team at WN Legal discuss what happens next.

Need Help with Your Divorce or Property Settlement?

If you need legal support or advice from property lawyers or family law in Perth, contact us at WN Legal. Our Perth team of experienced lawyers, including property settlement lawyers are on-hand to assist you through your legal and court processes.

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