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Relationship-generated disadvantage and family law

By March 19, 2020February 23rd, 2024No Comments

A professional woman in the UK who took a step back in her career to take the primary child caring role in her marriage was recently awarded a large financial payment over and above an equal property split which had already taken into account her future needs. The case has attracted interest for raising the topic of compensation for a “relationship-generated disadvantage” in family law.

The judge in the private ruling said:

“[The woman] viewed herself as the parent who would take primary responsibility for the children,” he said. “The husband’s career took precedence. I accept that it is unusual to find significant relationship-generated disadvantage that may lead to a claim for compensation but I am clear that this is one such case.”

The case is being described as very unusual because the additional payment was not ordered on needs grounds and because it was termed “compensation” akin to the idea of damages in personal injury. Under family law in the UK though, the concept is not actually about compensating someone for a wrongdoing done to them. Instead it is about making an award beyond meeting needs and beyond sharing matrimonial assets, so that “relationship-generated disadvantage” can be ameliorated.

What exactly is relationship-generated disadvantage?

“Relationship-generated disadvantage” refers to significant future economic disparity sustained by a spouse arising directly from how parties conducted their marriage.

Family law in the UK has always included this principle for financial relief. The concept recognises that one spouse has damaged their own ability to earn money for the greater good of the family. Even if future needs have been generously met in the property settlement, for parties who have given up their own ability to generate an income surplus to their needs, there may be an entitlement to seek a share of the other party’s future surplus income.

But it’s rarely enough seen for the current case to be generating headlines and to be branded a “landmark” case.

Addressing an economic disparity between spouses would normally be expected to be dealt with as part of a property settlement and taking into account future needs. When there are assets surplus to both parties’ needs, the surplus is normally shared in a way that is fair.

In rare cases though, needs-based assessments and/or sharing of surplus assets still does not result in a fair outcome. This may occur in situations where someone had a very successful or rapidly rising career but this was brought to a halt, or their career trajectory was irreversibly impacted, directly due to the need to care for a family. This is not inherently gendered, as it could apply to whichever spouse takes a step back in their career for the sake of family.  However, realistically, it’s still usually the wife who does this.

What about in Australian family law?

Under Australian family law, courts are required to consider the future financial needs of the parties. It is not about awarding compensation for the financially ‘weaker’ party, but about adjusting the division of assets to account for a difference in the future financial needs of the parties to achieve an overall outcome that is “just and equitable”, taking into account all the circumstances.

The factors our courts consider in relation to future needs do take into account the impact of a marriage on spouses’ careers. Adjustments are made for disparities in income and earning capacity, especially where this was caused by one spouse’s commitments to family and homemaking priorities. The courts look at the duration of the marriage and the extent to which it affected a spouse’s earning capacity, such as if a spouse made significant sacrifices in their employment to benefit the other spouse’s career. When assessing future needs, the courts consider whether a spouse can return to a pre-marriage earning capacity and re-establish themselves in the employment market, or whether their career has been essentially stymied due to the marriage.

In terms of the concept of “compensation”, though unrelated to earning capacity questions, Australian courts do have the power to consider adjustments to property settlements based on spousal behaviour. In certain limited circumstances where it is proven that a spouse’s behaviour has directly resulted in wastage of matrimonial assets, the property settlement may see an adjustment in the other spouse’s favour. However, this becomes part of the property settlement as a whole and is not “compensation” per se, that is earmarked separately, over and above the property settlement as has happened in the UK case.

What do you think—should Australian family law reform consider the issue of compensation for relationship-generated disadvantage in property settlements?

Source: The Guardian

If you need family law advice, please contact Canberra family lawyer Cristina Huesch or one of our other experienced solicitors here at Alliance Family Law on (02) 6223 2400.

Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please contact Alliance Family law.

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