What constitutes property when looking at a division of property with your former spouse or partner after separation?
Is a personal injury award likely to be defined as property to then be eligible for division after separation?
These questions are often asked after separation when one party has received a personal injury award or compensation payment.
An award is property as opposed to a right to an award
- Section 4(1) of the Family Law Act 1975 (“the Act”) defines property widely. A personal injury award falls within the definition of property.
- However if you have not yet received an award but have a personal injury claim, your right to bring the claim or sue is of a personal nature which cannot be assigned and is therefore not property under the Act. See Zorbas v Zorbas (1990) FLC 92-160.
How is property divided after separation?
To answer the above questions we first need to look at how a property pool should be divided. The legislation provides a guide that essentially followings a 4 step process as follows:
- Identify and value all property, liabilities and financial resources owned by the parties jointly or in their separate names.
- Determine and assess the contributions both parties have made to the relationship, non-financial and financial contributions are taken into account including contributions made as a stay at home parent or homemaker (s79(4)(a)(b) and (c) of the Act).
- Looking to the future, determine and assess needs the other party may have (S75(2) or s90SF(3) of the Act). Matters that may be taken into account are many and include:
- the age and state of health of each party;
- the income, property and financial resources of each party and the physical and mental capacity of each for appropriate gainful employment;
- whether either party has care or control of the child/ren of the marriage/relationship;
- a standard of living that is reasonable;
- the extent to which the duration of the marriage or relationship has effected a parties earning capacity;
- the need to protect a party who wishes to continue their role as a parent;
- financial circumstances relating to cohabitation with another person;
- any effect or circumstance the Court believes should be taken into account.
- Assess and determine whether the division proposed is just and equitable.
Personal injury awards are financial contributions to a relationship
So, what happens to a personal injury award once you separate?
- This compensation or award has been held to be a contribution to the property pool of the relationship by the person who suffered the injury, whenever the compensation is received, as set out in Aleksovski v Aleksovski (1996) FLC 92-705.
- In the Aleksovski case;
- there were 3 children of the marriage
- the parties were earning similar incomes
- they had a net asset pool of just over $240,000
- during the marriage the wife was injured in a motor vehicle accident and received compensation of $143,000
- $100,000 of her compensation was attributed to her “pain and suffering”
- The trial Judge in Aleksovski provided an adjustment in the wife’s favour as the personal injury award was seen as a financial contribution pursuant to s79 of the Act, in addition he made a further adjustment to the wife pursuant to section 75(2) because of her injuries, she therefore received 77% of the property pool.
- The husband appealed and on appeal the wife’s entitlement was decreased to 62%.
- On appeal their Honours Baker and Rowlend JJ stated at page 83,437:
“In our opinion, in most cases, a damages verdict arising from a personal injury claim, whenever received, is a contribution of the party who suffered the injuries. It should not be considered in isolation for the reason that each and every contribution, which each of the parties makes to the relationship, must be weighed and considered at the same time.”
- They also said with respect to personal injury awards and s75(2) at page 83,435:
“We would have thought that, as the award has vested, with the wife having received the full amount of compensation to which she was entitled, there would have been no further need to consider the circumstances of the award in the context of s75(2), except in relation to any residual disability which the wife may have impacting upon her earning capacity.”
- An adjustment is therefore likely to be made to you on division of your property if you have made a financial contribution in the form of a personal injury award to the property pool.
- Also there may be an adjustment made to you in the division of the property pool if the injury for which you received an award has further impact on you, for example if you can’t work because of your injury.