Who keeps the farming enterprise and land?

What happens on separation when a husband has been a farmer his entire life and has introduced substantial farming assets into the relationship?  This is not an uncommon scenario for landowning couples trying to divide their property.

Consider, for example, a couple that separated after a relationship of fifteen years and three teenage children:

a) on cohabitation in 2009 the wife had modest means and the husband had considerable farming and other interests:

(i) the wife owned savings and shares valued at $80,000, a vehicle and an interest in a superannuation fund of $24,000.  She was employed full-time at a local business earning $50,000pa; and

(ii) the husband owned a 50% share in a farming partnership with his parents which owned stock, grain, plant, equipment and property plus he owned various properties, cash, a Farm Management Deposit, a vehicle and superannuation in his own right – likely valued at more than $1 million.  His earnings were not extravagant; 

(b) the couple married and had three children;

(c) on the birth of the first child the wife ceased paid employment.  She became the primary parent and homemaker;

(d) the couple established their own partnership and self-managed superannuation fund.  The wife did the bookwork; 

(e) the couple purchased a beach house with joint funds from the partnership;

(f) the children attended boarding school;

(g) after both paternal parents died the husband inherited various properties, a water licence and cash valued at about $4 million;

(h) the farming enterprise was largely debt free; and 

(i) after separation the wife continued to predominantly care for the children. 

How is their property fairly divided? 

The jurisdiction of the Family Law Courts is highly discretionary.  The Court must have regard to multiple factors in the Family Law Act 1975 (Cth).  It can be impossible to be predict a precise outcome because there is no rigid formula.  It comes down to how a Judge will decide to apply the legislative factors to the particular facts of the case.

Among other matters, but most relevantly, it is necessary to:

1.     determine the property pool by identifying the assets, liabilities and superannuation available for distribution between the parties and attributing a value to each item;

2.     consider the financial and non-financial contributions of each party to the property of the relationship and welfare of the family throughout the relationship and since separation;

3.     consider the future needs of each party – which can include the health of the parties, their earning capacities and parenting arrangements; and

4.     determine what division is just and equitable in the overall circumstances of the case. 

In this scenario the property comprised assets valued at $7 million and the superannuation pool was valued at $3 million. 

As to the non-superannuation pool, the husband had clearly made the significantly greater financial contributions.  He had both entered, and inherited during, the relationship markedly more capital when compared with the wife’s modest contributions. 

The non-financial contributions could reasonably be considered different but approximately equal.  The husband had farmed.  The wife had been the primary parent and homemaker.  She had also been a partner in the business and managed the books.  

Based on past contributions there is likely to be a substantial percentage adjustment in favour of the husband.  That adjustment would account for both parties’ diverse contributions while giving weight to the ongoing benefits that flowed throughout the relationship from the husband’s initial, and later inherited, capital contributions. 

As to their future needs, the parties were of similar age, both enjoyed good health and neither had re-partnered.  The wife was the primary carer of the children. 

Without qualifications the wife is likely to only earn a modest income from non-farm sources.  While it may be difficult to assess the husband’s income given the income fluctuations of a farming enterprise, his earning capacity is likely to be greater than that of the wife. 

On that basis, and together with her larger parenting role, the wife’s future needs are greater and there may be some adjustment in her favour.  Nonetheless, that adjustment is likely to still leave the husband with the greater share of the capital assets given his overwhelming capital contributions. 

In relation to the superannuation pool, those funds had largely derived from joint farming earnings.  A fair contribution based entitlement of each party to that fund could be an equal division without further adjustment for future needs.

In considering the justice and equity of a proposed division, a very real consideration is whether the husband can retain the farm intact without the sale of land.  In this case he could raise sufficient borrowings to meet a payment to the wife. 

Very similar facts were considered in the case of Fischer & Fischer [2014] FCCA 1088.  Judge Baumann of the Federal Circuit Court found it was just and equitable for:

 (a)   the wife to receive 28% of the property pool and for the husband to receive 72%; and

 (b)  both parties to receive an equal division of their joint superannuation interests. 

On these facts that approach would result in the wife receiving assets valued at $1.96 million and the husband receiving assets valued at $5.04 million, together with each party receiving superannuation interests valued at $1.5 million. 

In summary, where one party has contributed significant capital both at the outset and during a relationship, consideration of:

(a)   the length of the relationship;

(b)  the extent to which the joint endeavours of the parties have improved the farming enterprise; and

(c)   whether one party will be the primary carer of infant children of the relationship

will have a large impact on the extent of a property settlement for the other party. How these factors play out in order to achieve a just and equitable division in each case is highly dependent on the specific circumstances under consideration.   

At Ballinger Legal we carefully consider your specific circumstances and advise you on a just and equitable division and a strategy to achieve that outcome. Do get in touch if you have any questions.