Melbourne has cemented itself as one of Australia’s fastest growing cities over the last five years. With an ever expanding population, it is to be expected that property growth corridors emerge and properties previously owned in a rural or environmental zone are rezoned into urban land creating an increase in value.
In determining a property settlement, the Family Law Act 1975 (Cth) requires the Court to consider the initial contributions of each party as well as the financial and non-financial contributions during the marriage.
The recent case of Jabour & Jabour [2019] FamCAFC 78 (“Jabour”) considered how an initial contribution of land which significantly increased in value due to the land being rezoned should be treated in the context of a separation.
The Facts
- The Husband acquired a part interest in two blocks of land at 12 years of age from his father.
- The Husband and Wife married in 1991 and separated on a final basis in May 2015.
- During the marriage, the Husband sold his half interest in one of the blocks of land which was subdivided. He utilised the proceeds of sale to buy out the other party’s interest in the other large block of land which was not yet subdivided (“Property A”). The parties made no further financial or exceptional non-financial contributions to Property A throughout the marriage.
- In 2010, the property was rezoned from non-urban land into an urban growth zone which permitted the property to be used for residential purposes. At the time of the Court hearing, Property A was valued in excess of $10,000,000.
Primary Decision
The primary issue for determination before the Court was whether the increase in value of Property A could be attributed to the Husband alone given he brought both properties into the relationship, or should it be considered as a joint contribution of both the Husband and Wife.
Of note, at the time of the Hearing, the parties had three adult children. The main asset in the property pool available for distribution was property A. Neither of the parties were high income earners. The parties agreed that their other contributions throughout the marriage were equal.
The Wife’s position was the property pool should be divided on an equal basis. The Husband sought the property pool be divided 70/ 30 to him on the basis that he should receive a significant adjustment in respect of his financial contribution..
The primary judge held that the Husband should receive 66% of the property pool and the Wife 44% on the basis that “the Husband in bringing property A into the relationship has made a significant financial contribution which needs to be appropriately recognised.”
The Wife appealed the decision to the Full Court of the Family Court.
Decision on Appeal
On Appeal, the Full Court overturned the decision of the Trial Judge so that the Wife should receive 47% and the Husband 53%.
The Full Court considered the following in reaching their decision:
- The weight attached to an initial contribution, being Property A, must be assessed against the myriad of other contributions made by the Husband and Wife.
- The rapid acceded value of Property A was the result of fortunate rezoning rather than the efforts of either one of the parties. The increase in value does not favour one party over another.
- The parties decided not to sell Property A at an earlier stage and continued to live a modest lifestyle. This was considered to be a significant contribution on behalf of both parties which allowed them to enjoy the benefit of the increase in the land value.
Key Lesson
Jabour emphasises that careful consideration needs to be given to all contributions made throughout a relationship in determining how those contributions are to be treated in the event of separation.
How we can help
For more information or guidance from our expert Family Law team regarding property settlement, please do not hesitate to contact us.