Separation and divorce - Splitting assets and spousal maintenance

11 May 2022

At the end of a marriage or de facto relationship, parties usually need to sort out how they would like to divide their assets and liabilities, and how they will support themselves following separation.

One way of doing this is by asking a court to make property settlement orders to divide all assets and liabilities presently in existence and owned by both you and your former partner.

Some parties may also ask a court to make spousal maintenance orders. Spousal maintenance is the obligation of a person to financially support their former partner, to the extent that they are able, and to the extent that their former partner is unable to support themselves. You can read more about spousal maintenance in our earlier article 'Tell me about maintenance'.

While the wording of property settlement orders and spousal maintenance orders may look very similar, the ultimate financial obligations for the parties under these two types of orders can be substantially different. Parties need to give thought to the substance of these orders to ensure they obtain the outcome they intend.

The case of Thorpe & Stirling demonstrates the distinction between property settlement orders and spousal maintenance orders.

In this case, the parties entered into consent orders to divide their property pool. One of the orders required the husband to pay all future mortgage repayments and all outgoings for the wife’s property for the indefinite future, regardless of the wife’s future employment and income. The husband initially fulfilled this obligation, however several years later he refused to keep making these payments when the wife remarried.

The husband was of the view that this order was a spousal maintenance order that ceased to operate when the wife remarried. The wife argued that this order was a property settlement order that continued indefinitely regardless of whether she remarried.

The Court looked at the substance of the order as opposed to just the words used or the parties’ intentions at the time. The Court concluded that the order was a spousal maintenance order for the following reasons:

  1. Even though the order stated that the husband must continue mortgage repayments 'notwithstanding the income received by the wife', this was not a decisive factor;1
  2. It is not possible that the order was a just and equitable property settlement order because it created a financial liability for the husband that was greater value than the existing property pool and which could continue for an unknown period of time;2 and
  3. The husband was required to meet his obligations under this order from future financial resources as opposed to property that was in existence at the time.3

As the order was a spousal maintenance order, it ceased to have effect when the wife remarried. Consequently, the husband was no longer required to keep paying the mortgage repayments or outgoings.

How can we help?

This case is a good reminder that, notwithstanding the parties’ intentions and the words used, orders can have differing financial outcomes depending on whether they are inherently property settlement orders or spousal maintenance orders.

Our team of family law experts have the knowledge and experience to provide you with tailored advice about both types of orders and to guide you through your property settlement matters.

If you would like to know more, we invite you to get in touch.

Thorpe & Stirling [2021] FedCFamC1A 86 (15 December 2021)

[1] [46]

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