As you will see, however, things such as how a liability came about (particularly if post separation) can impact how the law will then deal with that item in the overall settlement.
We do, of course, also need to consider the assets and liabilities as at the date of separation.
Therefore, if either of the parties to the relationship has a debt at the time of the hearing, then such debt will be taken into account in calculating the net pool of assets available for distribution between the parties.
For example, a mortgage secured over the former matrimonial home jointly held by both parties will ordinarily be included as a liability when calculating the net assets available.
However, sometimes, we may be dealing with certain debts which are not as straightforward, for example: -
a. Debts that are incurred following separation without the knowledge of the other party. This may be of particular relevance if parties have been separated for a lengthy period of time, have not finalised their property settlement, and their respective financial circumstances have changed significantly since separation.
a. Debts incurred to as a result of having to pay for the party’s legal costs.
a. Unpaid taxation liabilities.
a. Debts which are unlikely to be repaid, such as family loans.
The assessment of debts and liabilities is not necessarily arrived at by a strictly mathematical or accountancy approach in all cases.
The Court has discretion as to how it treats liabilities in a particular case. The Court may, for example, exercise its discretion to completely disregard an alleged “loan” that one party asserts he or she borrows from his or her parents, if there is evidence to show that it is unlikely that the parents will enforce such a “loan”. (This does not mean the Court will not take the amount into account as a “contribution” when assessing property settlement, however).
There are also cases where the Court has exercised its discretion to completely disregard debts that were incurred by one party as a result of his or her deliberate or reckless behaviour.
Exclusion of such debts mean that these debts would become the sole responsible of the party who incurred it in the first place, and the other party need not share that responsibility.
If a liability is excluded when calculating the net asset pool, but there is evidence to show that such a liability is nevertheless enforceable, then the Court may have regard to such a liability when considering other relevant factors under section 75(2)(o) of the Family Law Act in reaching a final decision for a property settlement.
Each case is different, and depending on the circumstances different approaches might be warranted.
At Watts McCray Lawyers, our specialist experience means we are well aware of all the possibilities and the importance of looking at the whole picture and how to best present the case to achieve the desired outcome.
Eleanor Lau is a solicitor with Watts McCray.
