Massive debts following marriage separation
In a recent case decided in the Family Court of Australia, a spouse was found to be solely responsible for debts she incurred of more than $1,246,000.00 in the 10 years following separation and before a final matrimonial property settlement had been determined.
The facts, in brief, were:
- A 12 year marriage with no children;
- The husband brought in assets worth approximately $800,000.00;
- Following separation the wife sued the husband and 9 other parties in the Supreme Court of Queensland, alleging that a restructuring of a company in which she and her husband were involved was a collusion against the wife’s interests, causing her loss;
- The Supreme Court litigation cost the wife $634,000.00 in legal fees;
- The wife was wholly unsuccessful in the Supreme Court litigation and was also ordered to pay the husband’s costs of $235,000.00 and other parties’ costs of $130,000.00;
- Therefore, the wife had liabilities of about $1,000,000.00 incurred by her as a result of the failed Supreme Court litigation;
- On top of that, the wife also incurred $246,000.00 in credit card debts following separation;
- The Supreme Court action took 10 years and the Family Court property settlement proceedings were not dealt with until after that 10 year period;
- The Family Court found that the entire $1,246,000.00 was the responsibility of the wife and was ignored for the purpose of determining how their other property was to be distributed between them;
- The end result was the husband effectively received 55% of the net assets but this included the ‘asset’ of the $235,000.00 owing by the wife to the husband for his legal fees in the Supreme Court action;
- The Judge then reduced that $235,000.00 debt by about $120,000.00 by ordering all of the wife’s superannuation benefits be split in the husband’s favour;
- The wife foreshadowed a bankruptcy application.
The lessons to be learned from this case are that if you are acting for or advising clients that have recently separated:
- Tell them to be very careful what debts they incur following separation as it by no means certain the responsibility for those debts will be shared with their spouse; and
- Advise them to finalise their financial relations with their spouse as soon as possible to avoid cost, delay and risks.
Ben Farmer is a partner of Clelands Lawyers in Adelaide, South Australia, practising in family law and employment law. Visit us on Facebook.
Clelands Lawyers are one of the most respected Adelaide law firms who practice in family law. For more information our team will be pleased to assist you, contact Ben Farmer, Victoria Treloar or Shelley O'Connell